The Impact of the Swine Industry in the Southern Ogallala Aquifer

By: Bridget Guerrero and Steve Amosson

Swine production has been a part of agricultural operations since the first pioneers settled the Southern Ogallala Region Most early settlers maintained small hog herds to provide a food source for their families and surrounding communities primarily through on-farm slaughter. Hog numbers in the late 1800s were actually larger than current inventories in many areas of the region. Farm size increased in the mid-1900s because of the specialization and mechanization of the agriculture industry. During this period, farm slaughter decreased and hog inventories in the region declined as swine production shifted toward areas of the country with surplus feed production. This trend continued until hog numbers in the region stabilized in the 1970s. Sparse population, the availability of feed grains due to irrigation, and favorable environmental conditions led to a renewed interest in swine production. However, the lack of processing facilities limited the interest in expanding hog production in the region since slaughter hogs had to be shipped back to the Midwest to be processed. In the mid-1990s, Seaboard Foods opened a facility in Guymon, Oklahoma that is capable of processing 5.5 million head a year. Currently, 5.3 percent of the swine produced annually in the United States comes from the region. In 2010, swine sales exceeded $1 billion, with approximately 10.6 million head being marketed.

The nature of hog production has changed dramatically since the early pioneers raised a few hogs to supply their needs. Similar to cattle feeding and dairy operations, the size of hog operations has grown to take advantage of economies of scale in production. Current swine operations are large, capital-intensive, and labor-efficient. A typical 1,200-sow farrow-to-finish swine operation requires eight full-time employees, but direct employment represents only a small portion of the economic impact. Satellite industries such as slaughtering and processing industries, consulting services, feed companies, and transportation firms have developed or expanded to support the industry and provide even more economic activity and employment opportunities. In addition, farming operations benefit from higher prices resulting from the swine operations’ increased demand for grains and other feedstuffs.

The primary water source in the region is the Ogallala Aquifer, which is declining as withdrawals exceed recharge. This has led to increased emphasis on water conservation planning efforts in many areas of the Southern Ogallala. While modern swine operations use the latest technologies in water conservation, the sheer size and concentration of these operations have water planners concerned about whether swine production in the region is an appropriate use of these scarce water resources. This study evaluates the swine industry in terms of water use and its contribution to the regional economy.

Study Area

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).

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, 7.3 million acres are irrigated and 12.4 million acres are dryland (Fig. 2).

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.

Dryland crop acreage in the study area stood at 12.4 million acres in 2010, down significantly from the high of 15.1 million acres in 1982. 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.

Hog inventories by state have been reported since 1867. However, it wasn’t until the 1970s that the National Agricultural Statistics Service could geographically delineate estimates sufficiently to determine inventories specific to the Southern Ogallala Region. Hog numbers were relatively stable from 1975 through the early 1990s, with a low inventory of 338,350 head in 1989 (Fig. 3). Inventories grew rapidly starting in the mid-1990s, corresponding to 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.

The recent decline in regional hog inventories is due to several factors. First, economic conditions such as high feed prices have caused a relative decline in profitability. Second, production has exceeded processing capacity in the region, forcing some operations to transport feeder hogs closer to areas with processors for finishing or transport finished pigs further for processing. The excess production capacity was created under the assumption that a second processing facility would be built in Hereford or Dumas, Texas. However, the proposed processing plant did not materialize. The combination of these factors has resulted in a downsizing of some of the hog operations within the region.

The growth in the region’s swine industry has been geographically uneven. The epicenter of the growth has been the Seaboard Foods processing facility in the Oklahoma Panhandle. The facility processes approximately 5.5 million hogs annually. Seaboard Foods production facilities in the region provide more than 4.3 million hogs to the processing.

plant each year. Swine inventory in the Oklahoma Panhandle went from 8,000 in 1992 to 1.6 million in 2004 and maintained that approximate level through 2010 (Fig. 4). The contiguous areas to the Oklahoma Panhandle, Southwest Kansas, and the northern Texas Panhandle have also experienced exponential growth in hog inventories. Kansas inventories increased more than four-fold from 1992 to 2005 and have remained relatively stable since then at 1.2 million head. Inventory in the Texas High Plains grew from 84,000 in 1992 to a peak exceeding 1 million head in 2007, but fell to 618,300 in 2010 because of the temporary closure of one hog operation and a reduction in size of another. Neither of these hog operations was directly associated with Seaboard Foods.

Water Use in the Swine Industry

The swine industry’s growing demand for water has local leaders concerned about the future of the Ogallala Aquifer. Swine operations use water directly for drinking, feed processing, and facility maintenance, and indirectly to grow the feedstuffs that support the industry.

In balance, the amount of water swine operations use directly has to be offset by an equivalent decrease in the amount of water used for irrigation. This decrease is partially achieved when acreage is retired from irrigated production to build facilities that house hogs and store feed.

The indirect water use for swine operations depends on the type of feed produced. There is not enough grain produced in the region to meet the demands of swine operations along with the beef and dairy industries, making it necessary to import grain from other parts of the country.

The region has been grain deficit (using more than it produces) since the late 1970s because of the development of the fed beef industry and, later, swine and dairy operations (Fig. 5). Irrigated grain acreage to support these industries peaked from the 1970s through the early 1980s, but has remained stable since 1990 (Fig. 2). At the same time, production has doubled due to better technologies and management. However, the increase has not been enough to satisfy the growing demand for grains in livestock rations.

The expansive feedlot and swine industries, coupled with growing dairy inventories and the recent development of the ethanol industry, have continued to escalate the demand in the region for feed grains. Feed grain imports have provided 35 percent of feed grain needs, on average, over the last decade. The region’s declining aquifer and grain- deficit nature suggest that any additional indirect water use by the swine industry because of the need for feed grains will have to be provided through increases in imports rather than pumping more water from the aquifer. This study estimates the potential draw on the aquifer from indirect water use by hog operations in the study region, assuming that all required feed comes from irrigated acreage within the study area. Then, a regional estimate of indirect water use is made, considering only the percentage of locally available feed supplies.

Direct Water Use

The amount of water a swine facility uses for drinking, cleaning, feed processing, and maintenance varies by operation. Almost all swine operations in the region are very water efficient, recycling effluent for flushing purposes to minimize using fresh water. Industry specialists estimate the average direct water use for each sow in the Texas High Plains is 11 gallons per day. Nursery operations, which grow piglets to feeders (60 pounds), require about 2 gallons per pig per day while finishing operations use 4.4 gallons per pig per day in direct water use. These water requirements are assumed to be typical across the entire study region.

The direct water use from 1975 to 2010 is illustrated in Figure 6. Direct water use was less than 2,600 acre-feet in 1975 and reached a peak of 19,850 acre- feet in 2007. In 2010, direct water use was 17,417 acre-feet.

The amount of direct water that swine operations use affects the rest of the region’s agricultural sector. In general, water that swine operations use is offset by a decrease in irrigated acreage. Irrigated water use varies considerably across the region and by crop. An average of 15 acre-inches (or 1.25 acre-feet) per acre was assumed in this study to illustrate the impact of direct water use by swine operations on irrigated acreage.

The estimated reduction in irrigated acreage is shown in Table 1. A total of 13,934 irrigated acres would need to be taken out of production to offset the direct water requirements in 2010. The reduction represents less than 0.2 percent of the 7.3 million irrigated acres in the region. Oklahoma was estimated to have the largest reduction of irrigated acreage (7,070 acres), followed by Kansas (4,481 acres).

Indirect Water Use

Indirect water use refers to the water used to produce feedstuffs required for swine operations. The primary ingredients in swine rations include corn, sorghum, soybean meal, and distillers grains as well as “other ingredients” such as vitamins, minerals, and trace minerals. Wheat is used on occasion as a substitute for feed grains, depending on price relationships.

An estimate of the industry’s feed requirements helps to understand the potential impact of indirect water use by swine operations. Example rations per head per day for the various types of swine operations are presented in Table 2. On average, each head requires 6.06, 1.48, and 5.07 pounds of feed per day on an as-fed basis for the farrowing, nursery, and finishing stages, respectively.

The estimated regional demand for feed based on the 2010 swine inventory equals:

• 1,240,327 tons of corn grain
• 413,442 tons of sorghum
• 402,657 tons of soybean meal
• 370,927 tons of DDGS
• 92,038 tons of other ingredients

Thus, the total feed requirement for swine operations in 2010 was estimated to be slightly more than 2.5 million tons (Table 2). This is an approximation, whereas actual swine rations are determined on a least-cost basis and are subject to ingredient availability.

The potential draw on the aquifer from indirect water use by swine is estimated in Table 3. This extreme case assumes that all required feed grains come from irrigated acreage within the study area. Then, the amount of indirect water use from within the region is estimated, considering the amount of feed grains available locally. In reality, some of the feed grains will come from dryland production. Since there is very little soybean production in the region and what does exist is exported to other areas for processing, it is assumed that water required for soybeans to produce soybean meal comes from outside the region.

Indirect water use was estimated by transforming the feed requirements into acres of production and applying the typical irrigation water use by crop. The total indirect water use was 750,550 acre-feet, which accounts for 97.7 percent of the total water use of the swine industry in 2010; direct water use (17,416 acre-feet) makes up the other 2.3 percent. However, only 46 percent of the indirect water comes from within the region. The resultant regional indirect water use, which accounts for only locally grown crops, was 346,348 acre-feet. The estimated total water use of the swine industry from 1975–2010 mirrors the growth of swine inventory (Fig. 6).

The amount of indirect water supplied locally depends on the characteristics of the study area. The Southern Ogallala Region has been grain deficit since the mid-70s and faces reduced water availability due to a declining aquifer. Imports of feed grains are required because there are not enough local supplies to meet demand. These characteristics imply indirect water demand for new swine operations will have relatively small impact on the aquifer and that the primary effect will be an increase in grain importation.

The proportion of the region’s water needed to support the swine industry is illustrated in Figure 7. Agricultural enterprises required an estimated 10.8 million acre-feet in 2010. Irrigated crop production accounted for 98.6 percent of agricultural water use, while the remaining 1.4 percent was used directly by all livestock sectors, with swine operations using 0.2 percent. Approximately 13.5 percent of agricultural water use is for locally produced irrigated crops fed to hogs (swine indirect water use). Using this crop production in area swine operations increases crop profitability and adds to the regional economy. The swine industry ranks third in indirect water use among the livestock sectors in the region, behind beef and dairy operations. In total, the swine industry accounts for 13.7 percent of agricultural water use in the region. The remaining 86.3 percent of agricultural water use is attributed to other irrigated crop production (85.1 percent) and other direct livestock use (1.2 percent).

 

The expansion of any industry, including confined livestock operations, will result in a relative increase in water usage despite declining water availability. The value of water rises with the resultant increase in demand. Areas of the region that stopped irrigating due to increased pumping costs as the aquifer declined may resume pumping when the value of water rises above the cost of extraction.

Regional Economic Impacts

The swine industry is an important component of the regional economy and the development of the swine industry over the last two decades has made it even more significant. A computer analysis program, IMPLAN (IMpact analysis for PLANning), was used to estimate the swine industry’s economic contribution to the Southern Ogallala Region including the ripple effects on economic sectors directly and indirectly related to the swine industry.

The IMPLAN model estimates the direct, indirect, and induced effects. The direct effects of the swine industry are the sales, income, and employment that operations producing swine products generate. The indirect effects include the purchase of inputs such as feed, veterinary services, energy, and transportation services to produce and deliver swine products. Induced effects occur when employees of swine 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.

The swine industry produces and processes hogs for consumption. The different stages of production (farrowing, nursery, and finishing) and processing are modeled separately (Fig. 8). There are several different types of swine production operations including farrow-to-weaned, farrow-to-finish, and wean-to-finish, and hogs are sold at different times throughout the production process. Thus, regional economic results were aggregated for all of the production sectors. Payments to previous stages of production were excluded in each forward-linked sector in order to avoid double-counting contributions.

The direct value (gross sales) of swine production in the region during 2010 was estimated to be $1.1 billion (Table 4). Oklahoma, Kansas, and Texas accounted for approximately 53 percent, 33 percent, and 14 percent of sales, respectively.

Currently, hog production in Colorado is minimal while New Mexico does not have any significant hog production or processing.

Processors in the region include swine slaughtering and processing plants. The largest slaughtering plant is Seaboard Foods located in the Oklahoma Panhandle. These operations are forward-linkages to swine production, which add value to the product through processing and packaging meats to be sold at local grocery stores and/or served in restaurants. In total, the region’s swine-processing sector accounted for more than $1.3 billion in sales during 2010 (Table 4). Combining the processing sales with production sales ($1.1 billion) results in a total direct output for the swine industry of approximately $2.4 billion. These values were used to estimate the regional economic contribution of the industry.

Results of the IMPLAN analysis for the swine production and processing sectors (Table 5) show that swine production generated an economic contribution of $2 billion in industry output. For everyone directly employed with a swine operation, an additional 1.5 jobs were created within the region to support the swine industry through indirect and induced effects. A total of 17,459 jobs are supported by the swine production sector. The swine-processing sector adds substantial value to the swine industry in the region, contributing $1.7 billion and supporting 5,337 jobs.

The total direct output of the swine industry, including swine production and processing, was $2.4 billion in 2010. Including the impact of the indirect and induced effects, the total regional economic output generated by the swine industry was estimated to be $3.7 billion. Of this total,

$1.1 billion was value added or wealth generated in the economy. Total employment supported by the swine industry, including direct, indirect, and induced effects, was estimated at 22,796 jobs.

The economic impact of the swine industry to the Southern Ogallala Region varies considerably by state (Fig. 9), largely due to the location of processing facilities. The Oklahoma Panhandle contributes 71 percent of the economic impacts as a result of having the largest swine inventory and also the largest processor. Kansas accounts for 19.4 percent of the total impact, while Texas and Colorado contribute 9 percent and 0.6 percent, respectively. 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. Swine production’s $2 billion economic contribution gauged against direct water use of 17,416 acre-feet and indirect water use of 750,550 acre-feet yields an estimated value of water used by the swine production sector. Direct water use alone generates $114,478 per acre-foot.

The value when combining direct and indirect water use is $2,596 per acre-foot. These values are relatively high compared to other industries. In assessing the economic contribution of swine production, note that a portion of the indirect water used comes from outside the region in the form of imported grain and not from the Ogallala Aquifer. When accounting for only the direct and regional indirect water used, swine operations generate $5,481 per acre-foot.

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 justify the agricultural operations water use.

Swine production has long been a part of the Southern Ogallala Region, producing more than 5.3 percent of United States swine production annually. The importance of swine production to the area has grown dramatically since the establishment of a processing facility in the 1990s. In 2010, more than 10.6 million hogs were marketed.

Swine operations use water directly for drinking, feed processing, and facility maintenance, and indirectly through grains grown to support the feeding operation. The direct water used by swine operations accounts for only 0.2 percent of agricultural water use within the region. Indirect water use totals 750,550 acre-feet annually. However, 36 percent of indirect water use is virtual water, which is imported in the form of feed grains and is not pumped from the Ogallala Aquifer. In total, the direct and regional indirect water use of the swine industry accounts for 13.7 percent of the agricultural water usage. The remaining 86.3 percent of agricultural water use is attributed to other irrigated crop production (85.1 percent) and other direct livestock use (1.2 percent).

The swine industry, including production and processing sectors, has a regional economic contribution of $3.7 billion in annual economic output and 22,796 jobs. Swine production accounts for $2 billion of the total, supporting 17,459 jobs. Swine production creates a relatively high economic value per unit of water pumped from the aquifer, generating $114,478 per acre-foot of direct water use (17,416 acre-feet) or $5,481 per acre-foot of direct and indirect water use (363,764 acre-feet) from the aquifer. Economic values may be underestimated since all feedstock in this analysis is assumed to originate from irrigated production.

Study results suggest that any expansion of the swine industry in the Southern Ogallala Region will have minimal impact on water resources while increasing economic activity and employment opportunities. New or expanding operations will increase localized water use or result in a decline in irrigated acreage to account for the direct water use. More importantly, additional indirect water usage would come primarily in the form of virtual water, imported through feed grains, since the region is already grain deficit. Increased economic activity from further expansion of swine operations in the region may help offset eventual losses resulting from irrigated crop production shifting to dryland due to aquifer depletion.

References

1. Amosson, S. 2012. Personal Communication. 2008–2010 Value Added and Price Estimates for Livestock. Texas A&M AgriLife Extension Service.
2. Amosson, S., L. Almas, F. Bretz, D. Jones, P. Warminski, and J. Planchon. 2009. Texas Crop and Livestock Enterprise Budgets, Texas High Plains, Projected for 2010. Texas A&M AgriLife Extension Service, Texas A&M University System. College Station, Texas.
3. Dhuyvetter, K., G. Tonsor, M. Tokach, S. Dritz, and J. DeRouchey. 2012a. Farrow-to-Weaned Pig Cost-Return Budget. Kansas State University Agricultural Experiment Station and Cooperative Extension Service, Department of Agricultural Economics. December 2012, p. 4. www. agmanager.info.
4. —. 2012b. Feeder Pig Nursery Cost-Return Budget. Kansas State University Agricultural Experiment Station and Cooperative Extension Service, Department of Agricultural Economics. December 2012, p. 4. www.agmanager.info.
5. —. 2012c. Swine Finishing Cost-Return Budget. Kansas State University Agricultural Experiment Station and Cooperative Extension Service, Department of Agricultural Economics. December 2012, p. 4. www.agmanager.info.
6. Farm Service Agency. 2010. Conservation Reserve Program Acreage by County. US Department of Agriculture, Management Services Division, Kansas City, Missouri. College Station, Texas.
7. Freese and Nichols Inc. 2010. Initially Prepared Regional Water Plan for the Panhandle Water Planning Area (Region A). Panhandle Regional Planning Commission, Amarillo, Texas. March 2010. http://www.panhandlewater.org/.
8. Guerrero, B., S. Amosson, J. Johnson, B. Golden, and L. Almas. 2010. The Impact of Ethanol in the Southern High Plains of Texas. Texas A&M AgriLife Extension Service, p. 8.
9. Guerrero, B., S. Amosson, and E. Jordan. 2012. The Impact of the Dairy Industry in the Southern Ogallala Region. Texas A&M AgriLife Extension Service. October 2012, p. 15.
10. Guru, M. and J. Horne. 2000. The Ogallala Aquifer. The Kerr Center for Sustainable Agriculture, Inc. July 2000, p. 35.
11. MIG. 2009. IMPLAN Professional Version 3.0. Stillwater, Minnesota.
12. National Agricultural Statistics Service. 2011a. Harvested Irrigated and Dryland Crop Acreages by NASS District. US Department of Agriculture. http://www.nass.usda.gov/. Accessed August 8, 2011.
13. —. 2011b. Cattle on Feed, Milk Cow, and Hog Inventory. http://www.nass.usda.gov/. Accessed August 8, 2011.
14. Seaboard Corporation. 2013. Seaboard Foods. http://www.seaboardcorp.com/our-companies/ seaboard-foods/. Accessed April 10, 2013.
15. US Census Bureau. 2010. Annual Survey of Manufacturers. http://www.census.gov/manufacturing/ asm/index.html.

Appendix

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