Either or both can occur, depending on the situation.  Land can be abused to the point where recovery is difficult, and runoff, erosion and gulling leave much of landscape in poor condition.  A case study of this is presented in a book by Dr. Stanley Trimble concering the South Carolina Piedmont from 1700-1970.  

Many areas of western USA were overgrazed and the native prarie grasses were lost.  The ability of the soil to store water for plants reduced.  

Water resources can be affected by not only land use, but irrigation and other water withdrawals.  Sustainable agriculture and water resources benefits from conservation practices and planning, and severely affected lands may need restoration techniques for recovery.  

The use of ground water for irrigation can deplete the aquifer source for the water. This has happened in many areas. As William Hanse has stressed many areas have degraded soils and there is loss of agriculture land from urbanization. With proper management degraded lands can be regenerated. 

Decline in agricultural land (not agricultural production) and utilizable water resources is happening all over the world due to growing population, Industrialization and urbanization. Precisely because of this reason now a days more stress is given to water conservation and management, as the unit of water on earth is almost constant. Water supply is now more a demand based or need based. There are hi-tech agricultural practices in terms of water input efficiency (drip irrigation; sprinkler irrigation; plastics in agriculture to manage seepage and evaporation losses; etc; ) hybrid plant varieties for higher yields. Due to Industries and agricultural activities (application of fertilizers and pesticides), even the available water is getting polluted, adding to the existing water scarcity.

For sustainable water management, more attention should be given to protect and conserve and if possible enhance the existing natural water resources and reduce demand & losses. Other than these, the water management should adopt concepts of water reuse, artificial groundwater recharge, desalination and rainfall harvesting. Human activities affect the water cycle in many ways, which needs to be understood and quantified to manage water resources responsibly and sustainably. If we conserve and preserve the water resources, automatically it will take care of agricultural needs/ requirements, thereby food security.