Transcript Economic Impacts of Water

Broader Economic Impacts of
Reduced Irrigated Acres:
Colorado’s South Platte River Basin
Jenny Thorvaldson and James Pritchett
Dept. of Agricultural and Resource Economics
Colorado State University
[email protected]
The Presentation's Path

Economic Baseline of South Platte Basin and Lower
South Platte Sub-Basin
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
Impact Study
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Broad description
Economic base
Agricultural sector
Relative water supply and demand amounts
Effects of reduced irrigated cropland
General Overview
IMPLAN
Preliminary results for East South Platte Basin
Ongoing Research at CSU
South Platte Basin


Comprised of 14
counties in the
northeastern corner of
the state (making up
20% of the state’s total
land area).
The population of the
Basin has increased by
34% since 1990, to
3,031,824, and now
accounts for 69% of the
state’s total population.
The population of this
basin is expected to
increase by another
65% by 2030.
Economic Demographics of the
South Platte Basin
Value of Sales (million $)
Percent of
Total
$251,465
100.00%
Manufacturing
$32,035
12.74%
Information
$31,580
12.56%
Government and non-NAICs
$23,913
9.51%
Real estate and rental
$21,626
8.60%
Construction
$20,502
8.15%
Finance and insurance
$20,315
8.08%
Professional-science and
technical services
$17,848
7.10%
Wholesale trade
$13,197
5.25%
Retail trade
$11,938
4.75%
Health and social services
$11,779
4.68%
Industry
Total
Notable Contributors
(Sectors)
Economic Demographics of the
Lower South Platte Basin
Value of Sales
(million $)
Percent of
Total
$3,310.13
100.00%
Animal, except poultry, slaughtering
$678.01
20.48%
Cattle ranching and farming
$596.47
18.02%
Cheese manufacturing
$212.89
6.43%
Owner-occupied dwellings
$110.27
3.33%
State & Local Education
$109.13
3.30%
Power generation and supply
$90.12
2.72%
Grain farming
$79.58
2.40%
Wholesale trade
$72.47
2.19%
Hospitals
$64.49
1.95%
New residential 1-unit structures, non-farm
$64.12
1.94%
Industry
Total
Notable Contributors (Sectors)
Lower South Platte Land
Disposition
2,500,000
2,350,336
2,143,324
2,000,000
1,139,118
1,500,000
1,000,000
155,841
500,000
0
983,277
Total
Land in Cropland Irrigated Dryland
Land AreaFarm and
(Ac)
Ranch
Cropland
Value of Sales by Irrigated Crop
for Lower South Platte Basin
Value of
Irrigated Crop
Sales (million $)
Percent of
Total
$89,323,719
100.00%
23,190,000
$53,568,900
59.97%
139,025
$12,512,250
14.01%
Potatoes (cwt)
1,187,500
$11,043,750
12.36%
Corn Silage (ton)
480,000
$9,840,000
11.02%
All Wheat (bu)
322,500
$993,300
1.11%
Crops
Total Production
of Irrigated Crops
Total
Notable Contributors
Corn Grain (bu)
Hay (ton)
Water Use in the South Platte Basin
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
Agriculture is the
predominant water use,
with ~2.2 million AF per
year used for irrigation
of 1.1 million acres.
An additional 880,000
AF per year of
groundwater is applied
for irrigation and
100,000 AF per year of
groundwater is used for
other purposes.
Water Use, Cont’d.
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The South Platte Basin is Colorado’s most populous,
diverse, and industrialized basin, and the South Platte
River is arguably the most developed and
over-appropriated of Colorado’s major streams.
The basin contains both the major population of the
state and its most productive irrigated agricultural lands,
yet has only 12% of the state’s water supply.
The basin is projected to experience the largest increase
in M&I and SSI water demand by 2030 (nearly 2/3 of
the total increase in the state gross demand).
2 million additional residents projected to live in the
South Platte Basin by 2030, and these additional
residents need ~ 400,000 AF of water to meet demand.
Water Use, cont’d.
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
New water storage projects are needed,
but there are still existing water rights
that need to be filled (i.e. agricultural).
Demands for water in the South Platte
River Basin are the most intense in
Colorado and are creating contentious
debates over water use.
Trends in Irrigated Agriculture
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75% of the total value of Colorado crops is derived
from the irrigated sector, highlighting the
importance of, and dependence on, a secure water
supply.
Although agriculture is still the dominant water use,
rapid changes are occurring and the impacts to rural
communities are a key concern.
Understanding the impact of these changes on rural
Colorado economies, and the effect on the open
space provided by farms and ranches, is a key
challenge for all Coloradoans.
SWSI Projections of Reduced
Irrigated Cropland
Source
# irrigated acres lost
Transfers
40,000-79,000
Urbanization
(development)
Other Reasons
38,000-57,000
Total
133,000-226,000 (29%-49% of
total irrigated acres in Eastern
South Platte Basin)
55,000-90,000
Potential Scenarios
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All acres taken out of
irrigation converted to
grassland (i.e., taken out
of production),
maintaining original cropmix with remaining acres
All acres taken out of
irrigation converted to
dryland farming (which
crops?)
Other ideas???
Farmer survey
Economic Impact Analysis
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
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Industries produce goods and services for
households and other final users (final demand) as
well as for other producers to use as inputs
(intermediate demand).
Whenever one of these inputs (e.g., irrigation
water) becomes unavailable, or one sector (e.g.,
irrigated agriculture) is unable to produce its
established products, the impact ripples through
the other sectors of the economy, reducing
demand for their output too, and reducing
employment and income in the region.
Economic impact analysis examines the effects of
such a change on an entire economy.
Impact Analysis Diagram
Feed Lot
Corn Farmer
Seed Company
Fertilizer Company
Irrigation Company
Input-Output Models
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I-O models describe commodity flows from
producers to intermediate and final consumers.
Can then be used to calculate the resulting output
reduction in the total economy (impact analysis).
I-O Models measure 3 types of effects
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Direct (lost sales)
Indirect (support industry losses)
Imputed (lost wages and reduced household spending)
Resulting multipliers measure the amount that a
decrease in activity of a given local industry causes
additional decreases in purchases from other local
industries
IMPLAN
1.
2.
(IMpact Analysis for PLANning)
Combine selected counties to create regional study area
Imports estimated from Regional Purchase Coefficients
 RPC’s represent proportion of local demand for a good/service
that is provided by local producers (an RPC=1 means that 100%
of that good is purchased locally)
3.
4.
5.
Local demands multiplied by RPC’s to create set of net
local demands (total demand minus imports)
Domestic exports = total production minus local
consumption
Result is a balanced set of regional economic accounts
and multipliers
Impacts When All Lost Acres
Converted to Grassland in
East South Platte

Total: -$77,948,551
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Direct: -$61,984,519
Indirect: -$12,372,933
Imputed: -$3,591,098
Proportions
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0.08% of overall GDP of region
4.09% of total ag sales
26.43% of total crop sales
Impacts When All Lost Acres
Converted to Grassland in
East South Platte

Output Multiplier = 1.26
Only margin lost, not entire value of crop
(many inputs purchased from outside of
study area)
 Multiplier increasing as move east (fewer
base sectors in Lower South Platte so
multiplier likely to be higher)

Impacts by Sector
Direct
Indirect
Induced
Total
-$42,174,507
-$575,521
-$401,605
-$43,151,633
Wholesale trade
$0
-$8,809,051
-$759,688
-$9,568,739
Machinery & equipment
rental/leasing
$0
-$4,550,087
-$19,892
-$4,569,979
Commercial machinery repair
and maintenance
$0
-$2,123,600
-$13,693
-$2,137,293
Scientific research and
development
$0
-$2,070,535
-$10,080
-$2,080,615
Ag and forestry support
activities
$0
-$1,994,511
-$2,955
-$1,997,466
Real estate
$0
-$1,395,902
-$588,505
-$1,984,406
Petroleum refineries
$0
-$1,708,752
-$153,730
-$1,862,483
Owner-occupied dwellings
$0
$0
-$1,524,105
-$1,524,105
Warehousing and storage
$0
-$902,440
-$22,165
-$924,606
-$61,984,519
-$36,958,492
-$11,122,950
-$110,065,962
Irrigated Crop Sales
Total
Limitations of Current Study
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Instantaneous (not dynamic)
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No Downstream Effects
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Local Effects vs. Global Effects
What if the reserve acres were clustered
together?
Distributional Effects
Ongoing CSU Research

Irrigation Optimization Study
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Farmer Survey
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Farming systems with limited irrigation water
Net Return Comparison
Investment Analysis
Predominant cropping systems
results by March 15th
5 Regional Economic Analyses
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4 Basins + Lower South Platte sub-basin
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Input-Output Models
• Preliminary results in February
• Final results in April