By: Steve Amosson, Regents Fellow, Professor and AgriLife Extension Economist–Management; Bridget Guerrero, Assistant Professor, West Texas A&M University; Hope Graham, Graduate Assistant, West Texas A&M University;Texas A&M AgriLife Extension Service The Texas A&M System
Feed grain production has been a part of agricultural operations since the first pioneers settled the Southern Ogallala Region. Early settlers produced enough feed grains to support the livestock grown on their farm, including cattle, hogs, and chickens. Feed grain production increased substantially in the 1940s with the discovery of groundwater supplies predominately from the Ogallala Aquifer and the development of irrigation equipment, allowing cropland to be irrigated in the semiarid region. On average, more than 75 percent of the feed grains produced are irrigated. The availability of feed grains due to irrigation, in turn, led to the development of confined livestock feeding operations in the region.
The nature of farming has changed, with farms becoming larger to take advantage of economies of scale in production. In addition, advances in delivery systems have increased irrigation efficiency as well as production per acre. Even though current farming operations are more labor-efficient, many new satellite industries have developed that provide economic activity and employment opportunities. Multiple sectors in the economy provide inputs to agricultural production as well as purchase feed grains for further processing or animal feeding.
Feed grain production is an important part of the agricultural industry in the Southern Ogallala Region. Virtually all of the corn, corn silage and sorghum silage, and a majority of the sorghum produced are consumed by the confined livestock operations in the area. There are more than 4.9 million fed cattle, 3.4 million hogs, and 450,000 dairy cows in the region. Because of the demand from confined livestock operations and ethanol plants for feed grains, corn produced in the area receives up to a 50-cent higher price per bushel compared to grain grown in the Midwest. These price premiums have contributed to the overall profitability of feed grains, resulting in approximately 6.3 million acres of feed grains and more than 510,000 acres of silage production in the region.
The primary water source in the region is the Ogallala Aquifer, which is declining as withdrawals largely exceed recharge. Irrigated feed grain production on approximately 3.5 million acres has led to this industry being the largest single user of water from the region. The feed grain industry’s demand for water has local leaders concerned about whether feed grain production in the region is an appropriate use of these scarce water resources. This study evaluates the feed grain industry in terms of water use and its contribution to the regional economy.
The High Plains is a semiarid region and depends on the Ogallala Aquifer for water. The aquifer stretches from the Dakotas to the southern plains of Texas and comprises approximately 174,000 square miles. The aquifer averages 200 feet of saturated thickness, ranging from less than 1 foot to 1,300 feet, depending on the location. The Southern Ogallala Region is defined in this study as the 97,000 square miles of the aquifer from the northern border of Kansas to just north of the Midland-Odessa area of Texas (Fig. 1).
Livestock operations are a major driver in the regional economy. The area is home to large cow-calf and stocker operations. Historically, the number of beef cows has been stable and totaled 1.1 million head in 2010 (Fig. 2). Stocker cattle inventories fluctuate somewhat more than beef cows, depending on conditions in the region. Summer stockers graze on rangeland and pasture, while winter stockers typically graze irrigated and dryland wheat. The estimated stocker inventory totaled 2.6 million head in 2010.
Sparse population, availability of feed grains, and favorable environmental conditions have made the region a popular place for confined livestock operations (CLOs). Cattle feedlots first appeared in the 1960s and grew steadily until inventories stabilized over the last decade. In 2010, cattle on feed topped 4.9 million head (Fig. 2).
The same conditions that attracted feedlots have more recently drawn swine operations, dairies, and associated businesses to the region. The swine industry had 338,000 head in 1989 and grew rapidly in the 1990s. Hog numbers were relatively stable from 1975 through the early 1990s, with a low inventory of 338,350 head in 1989. Beginning in the mid-1990s, inventories grew rapidly, corresponding with the opening of the Seaboard Foods processing facility in Guymon, Oklahoma. Inventories peaked at 3.9 million head in 2007. In 2010, the number of hogs in the region was estimated to be 3.4 million (Fig. 2).
Dairy cows in the Southern Ogallala Region increased more than 11-fold, from 41,500 head in 1990 to 466,000 head in 2009. The growth in the region’s dairy industry coincides with cheese manufacturing plants built in Clovis, New Mexico, in 2005 and Dalhart, Texas, in 2007. Inventories declined in 2009 due to low milk prices and profitability. In 2010, inventory stood at 453,200 head (Fig. 2). The industry recovered in 2011 based on milk production data. Recently completed expansions of Southwest Cheese and Hilmar Cheese plants, as well as planned future developments, suggest the dairy industry will resume growth in the near future.
The region consists of 19.7 million acres of cropland and more than 6.4 million acres enrolled in the Conservation Reserve Program (CRP); the rest is pastureland. Of the cropland, 12.4 million acres are dryland and 7.3 million acres are irrigated (Fig. 3). Dryland crop acreage in the study area reached a high of 15.1 million acres in 1982 before falling off to current levels. The decrease can be traced directly to the implementation of the CRP, which retired millions of acres from production. Major dryland crops are:
- wheat—7.4 million acres
- cotton—2 million acres
- corn—1.6 million acres
- sorghum—1.5 million acres
Although wheat has decreased from a high of 10.6 million acres in 1983, it still dominates dryland production, accounting for 59 percent of the acreage. Dryland corn production, basically nonexistent 20 years ago, reached 1.6 million acres in 2010 due to improved varieties, management, and profitability.
Irrigated crops accounted for 7.3 million acres of the total cropland in 2010. The primary irrigated crops are:
- corn—2.8 million acres
- cotton—1.8 million acres
- wheat—1.7 million acres
- sorghum—0.3 million acres
Other irrigated crops include alfalfa and silage to support the livestock industry.
Feed grains, including corn and sorghum, represented almost half (48.4 percent) of the irrigated crop acreage in the region in 2010 (Fig. 4). Corn and corn silage accounted for the majority of this portion at 42.5 percent of irrigated acreage. Sorghum and sorghum silage accounted for the remaining 5.9 percent of irrigated acreage.
Irrigated corn acreage peaked in 1977 with more than 3.1 million planted acres (Fig. 4). A significant dip in irrigated corn acreage occurred in the early 1980s along with many of the other irrigated crops in the region. In 1983, corn acreage was at a low of 1.3 million acres. Corn acreage began to increase in the late 1980s as fed beef inventories continued to increase and swine and dairy operations developed in the region. This trend continued until acreage reached 3.1 million acres in 1998. Since that time, irrigated corn acreage has fluctuated somewhat with commodity prices; however, it has remained relatively stable since 2007 at around 3 million acres. In 2012, irrigated corn acreage was approximately 2.6 million acres.
Irrigated sorghum acreage began at 2.3 million acres in 1975 and has been on a decreasing trend since then. Sorghum is typically planted at higher levels during years with less rainfall, either as a catch crop, which is planted after failed wheat or cotton, or in place of other irrigated crops that require more water. Irrigated sorghum acreage has averaged 580,000 over the past five years. In 2012, irrigated sorghum acreage was 576,607.
Irrigated feed grain acreage totaled 3.5 million acres in the region during 2012. Corn and corn silage accounted for the vast majority at 83.5 percent of the total irrigated acreage planted (Fig. 5). Corn harvested for grain was 72.9 percent while corn silage was an additional 10.6 percent. Sorghum planted for grain or silage production accounted for 16.5 percent of the total irrigated feed grain acreage—13.6 percent planted in sorghum grain and 2.9 percent in sorghum silage.
Water Use in the Feed Grain Industry
As they plan for the future of the Ogallala Aquifer, local leaders are concerned about the demand for water by agricultural sectors. There are many methods for applying water to irrigated crop acres, and the overall efficiency of those methods has increased over time. Flood or furrow irrigation, the first type of irrigation used in the region, has an average water-use efficiency of 60 percent. The actual water-use efficiency for furrow irrigation varies considerably depending on soil type, slope, and whether tail water recirculation is used.
The introduction of center pivot technology increased application efficiency by approximately 20 percent or more over furrow irrigation. Currently, the most efficient center pivot system is low energy precision application (LEPA), with an application efficiency of approximately 95 percent. More recently, subsurface drip irrigation (SDI), the most water-efficient irrigation system available with application efficiency estimated at 97 percent, has been introduced in the region. In this study, it is assumed that center pivots are used for crop water application on all irrigated acreage.
Irrigated feed grain water use was estimated by using information from the 2012 Texas Crop and Livestock Enterprise Budgets regarding yields and irrigation applied per acre. These budgets are developed pro forma, assuming average rainfall will occur. The crop yield was divided by the irrigation applied to estimate the average production per acre-inch of water applied. Total water applied was estimated by dividing the irrigated crop production by the respective production per acre-inch. Total irrigated feed grain production was 394 million bushels of corn, 6 million tons of corn silage, 26 million bushels of sorghum, and 1.7 million tons of sorghum silage (Table 1). This production resulted in total water use by the feed grain industry of 3.9 million acre-feet.
The estimated water use by the feed grain industry varies by state (Table 2), largely because of the amount of land located over the Southern Ogallala Region within the respective states. Southwest Kansas accounts for 43.6 percent of the total estimated water use, followed by the Texas High Plains at 33.4 percent, Colorado at 16.1 percent, Oklahoma at 4.6 percent, and New Mexico at 2.3 percent.
The proportion of the region’s water needed to support the feed grain industry is illustrated in Figure 6. In 2010, irrigated crop production accounted for 98.2 percent of water use, while the remaining 1.8 percent was used directly by livestock operations. Over half (approximately 54.7 percent) of the water use was for irrigated corn grain and corn silage. Irrigated sorghum grain and sorghum silage accounted for 3.5 percent of total water use by agriculture, while other irrigated crops use approximately 40 percent.
Major expansion of the feed grain industry in the region is not expected. Irrigated acreage may fluctuate with commodity prices and weather conditions; however, total irrigated cropland is not expected to increase overall due to declining underground water supplies. Any expansion of CLOs over current levels may increase the demand for local silage and result in additional grain requirements, which, for the most part, will be filled by imports from other areas of the country due to the grain-deficit nature of the region.
Regional Economic Impacts
The feed grain industry has always been an important component of the regional economy. The development and expansion of confined livestock operations, as well as the addition of other processing facilities for chip, tortilla, and ethanol production among other uses, has made it even more significant. A computer analysis program, IMPLAN (IMpact analysis for PLANning), was used to estimate the feed grain industry’s economic contribution to the Southern Ogallala Region as well as the ripple effects on economic sectors directly and indirectly related to the feed grain industry.
The IMPLAN model estimates direct, indirect, and induced effects. The direct effects of the feed grain industry are the sales, income, and employment generated by the farming operations that produce corn, corn silage, sorghum, and sorghum silage. The indirect effects include the purchase of inputs such as seed, chemical, energy, and machinery to produce feed grains. Induced effects occur when employees of feed grain operations and input suppliers use their income to buy goods and services from businesses such as grocery stores, restaurants, and department stores.
These effects are captured for three different economic measures:
- Industry output—the total economic activity that occurs within a region
- Value added—the income or wealth portion of industry output that includes employee compensation, proprietary income, other property income, and indirect business taxes
- Employment—the number of jobs created and/or supported
Agricultural commodities undergo further feeding, processing, and warehousing past the farm gate, which can have significant additional economic contributions to the region. The economic contribution of the production sectors was estimated separately from the processing and animal feeding sectors. Specific industries in the study area that purchase or handle local crops were identified and the amount of output from those industries attributable to local crop production was estimated. Payments to previous stages of production were excluded in each processing sector in order to avoid double-counting contributions.
Feed grain production in 2012 is shown in Table 3. Dryland feed grain production was included in the analysis as it also contributes to the regional economy without affecting water use from the Ogallala Aquifer in the region. Corn and corn silage production was approximately 416 million bushels and 6 million tons, respectively. Total sorghum production was estimated at more than 58 million bushels, while sorghum silage was 1.7 million tons.
The direct value (gross sales) of feed grain production in the region during 2012 was estimated by using the production by crop and applying a 5-year average price. The value of production was estimated to be $2.5 billion for corn and corn silage and $359 million for sorghum and sorghum silage (Table 4). The resulting total value of feed grain production was $2.8 billion. Kansas and Texas, which have the largest areas among the five states overlying the Southern Ogallala, also had the most sales in the feed grain production sectors. Combined, Texas and Kansas accounted for 77.9 percent of the estimated 2012 sales from the feed grains industry.
Major feed grain purchasers in the region include elevators, CLOs, ethanol plants, and other processing operations. CLOs that purchase feed grains include cattle, dairy, poultry, and swine facilities. Ethanol plants also require grains for production. Most of these plants are located in Kansas or Texas. The region is also home to Azteca Milling in Plainview, Texas. This plant produces masa flour, which is used in the production of tortilla products. In 2009, it was estimated that the plant processes 5.5 million bushels of corn annually. Other processors in the region include animal food manufacturing, milling, oilseed processing, and food manufacturing. All of these operations are forward-linkages to feed grain production, which add value to the product.
In total, the processing sectors accounted for approximately $2.8 billion in sales during 2012 (Table 5). Combining the processing sales with production sales ($2.8 billion) results in a total direct output for the feed grain industry of approximately $5.6 billion. These values were used to estimate the regional economic contribution of the industry.
Results of the IMPLAN analysis for the feed grain production sectors are shown in Table 6.
Corn grain and silage production had the largest economic contribution with over $4.5 billion in industry output, supporting more than 26,000 jobs. The sorghum grain and silage sectors generated a combined $716 million in output and more than 4,800 jobs. The total economic contribution of the feed grain production sectors was $5.3 billion in output and 31,000 jobs.
The feed grain processing sectors add substantial value to the industry in the region, contributing more than $4 billion and supporting 16,600 jobs (Table 7). The total direct output of the feed grain industry, including production and processing, was $5.6 billion in 2012. Including the impact of the indirect and induced effects, the total regional economic output generated by the feed grain industry was estimated to be $9.4 billion. Of this total, $3.2 billion was value added or wealth generated in the economy. Employment supported by the feed grain industry, including direct, indirect, and induced effects, was estimated at 47,500 jobs.
The economic impact of the feed grain industry to the Southern Ogallala Region varies considerably by state, (Fig. 7), largely because of the amount of land located over the Southern Ogallala Region within the respective states. Kansas contributes 40.1 percent of the economic impacts as a result of having the largest portion of corn production in the region. The Texas High Plains accounts for 39.2 percent of the total impact, while Colorado contributes 11 percent. Oklahoma and New Mexico contribute 4.9 and 4.8 percent, respectively, of the total regional impact. Detailed results by state are presented in the Appendix.
As the regions’ leaders plan for water conservation, they will consider the economic return on different types of water use. The regional economic impact of irrigated feed grains represents $8.6 billion of the total $9.4 billion for the feed grains industry. This economic impact gauged against water use of 3,891,188 acre-feet yields an estimated value of water used by the feed grains sector. Irrigated feed grains production alone generates approximately $1,225 per acre-foot. The value when combining both production and processing sectors is $2,201 per acre-foot.
The importance of feed grain production in the region cannot be understated. Numerous businesses, jobs, and various industries are dependent on agricultural crop production, and many rural areas depend almost entirely on it to remain viable.
Summary and Conclusions
Water use in the Southern Ogallala Region has greatly exceeded the recharge rate for the past several decades, leading to a steady decline in the aquifer. Agriculture accounts for more than 90 percent of the water use in the region each year. The declining aquifer and water use in the agricultural sector has many stakeholders questioning whether the economic benefits to the regional economy from agricultural operations justify their water use.
Feed grain production has long been a part of the agricultural landscape in the Southern Ogallala Region. In 2012, more than 474 million bushels of feed grains were produced as well as 7.7 million tons of silage. This industry helps maintain feed levels for CLOs and production requirements for ethanol plants and other processors in the region.
Water used by irrigated feed grain operations accounted for 58.2 percent of agricultural water use within the region in 2010. The remaining 41.8 percent of agricultural water use was attributed to other irrigated crop production (40 percent) and livestock use (1.8 percent). In 2012, water use for the feed grain industry was approximately 3.9 million acre-feet. It should be noted that actual water use for the industry varies from year to year, depending on climatic conditions and acreage planted.
The feed grain industry, including production and processing sectors, generates $9.4 billion in annual economic output and 47,500 jobs in the regional economy. Feed grain production accounts for $5.3 billion of the total, supporting 31,000 jobs. Feed grains generate $1,225 per acre-foot of water when considering only the economic impacts of production, or $2,201 per acre-foot of water use with both the production and processing sectors included.
Great strides have been made in increasing production of feed grains per acre-inch of water applied over time, especially during the past 20 years. Producers have and continue to adopt conservation tillage methods, more efficient delivery systems, irrigation scheduling to optimize water application, and drought-tolerant varieties to improve wateruse efficiency. While it is expected that irrigated feed grain acreage will gradually shift to dryland as a result of aquifer depletion, overall production may be stable to increasing as production per acreinch of water improves.
Irrigated feed grain production exists in the region because of the profit opportunity it presents. If there were a more economically viable alternative for the water used by this industry, these water resources would naturally move to that use. With virtually all of the feed grains produced being consumed within the area, the economic contribution of that production to the regional economy is amplified substantially.
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