Stretching the Ogallala - 6

By Emily Garnett
DTN News Intern

OMAHA (DTN) -- One sector of agriculture thrived last year as a record-setting drought scorched crops and drained wells.

Companies such as Valmont Industries and Lindsay Corp. -- two of the world's leading irrigation companies -- posted record revenues for 2012 and have seen unprecedented levels of irrigation sales continue into 2013.

"Our business has really blossomed," said Randy Wood, the vice president of sales and marketing for Lindsay's irrigation sector.

Healthy farm incomes, high commodity prices, soaring land prices and an unusually widespread drought last year have pressured farmers to squeeze every last possible dollar out of their land, irrigation company representatives told DTN. Farmers who never considered irrigation to be a cost-effective or a necessary investment are now scrambling to add irrigation systems. Moreover, concerns about the depletion of water supplies spurred some states to establish limits on water use, sending farmers in search of ever more efficient irrigation options, often with the help of state and federal cost-share programs.

The result has been booming irrigation sales in a previously untapped market -- the Eastern Corn Belt. There has also been steady growth in the semi-arid Great Plains, long a reliable market for irrigation, where every inch of water counts for farmers.

"IRRIGATION MAKES IT ALL POSSIBLE"

Irrigation company representatives characterized the drought as an eye-opening experience for farmers. "The drought raised awareness that irrigation can pay off in just one year sometimes," Aaron Schapper, Valley Irrigation's vice president and general manager of international irrigation, told DTN.

Pivots are cropping up in untapped lands, in part thanks to the eastward creep of last year's drought and steadily high farm incomes. "We're seeing a lot of first-time irrigators right now, and that's resulting from the growth we're seeing in the Eastern Corn Belt," Wood told DTN. Dryland sales -- company lingo for converting non-irrigated acres to irrigation--used to only make up a third of Lindsay's sales. Replacement sales and switching from one type of irrigation to another made up the rest. Now converting dryland to irrigation supplies 40% to 50% of Lindsay's annual irrigation sales, Wood said.

Bill Taylor, a farmer in eastern Nebraska, estimates he has steadily added four to five pivots a year to his land over the past decade. "We've been converting about 400 dryland acres to pivots just about every year for the past 10 to 12 years," he told DTN at a Valley Irrigation Field Day held at his farm near Ames, Neb.

With help from underground water supplies, farmers have increasingly embraced water-hungry crops like corn. "Growing corn without (irrigation) would be profitable, but not as consistent," Taylor said. He estimated that irrigation on his Nebraska corn acres increases their profitability by 30% and has allowed the farm to expand steadily for nearly two decades. "Irrigation makes it all possible with the steady income it gives you," he said.

TURNING DOWN THE SPIGOT

In the Lower Platte North Natural Resource District where Taylor farms, officials are busy certifying all existing irrigated acres, in anticipation of the state shutting down any irrigation expansion there. "We've known for 20 to 25 years that they would someday put a stop to irrigation. We knew it was coming," Taylor said.

Irrigation companies have made the pleasant discovery that such state and federal intervention to turn down the spigot doesn't necessarily hurt their sales. States like Colorado, Kansas, Nebraska, Texas and Utah have increasingly moved to limit the amount of water farmers can pump, by setting well moratoriums or water allocations.

"That really sounds like it should be bad for our business," Wood explained. "But in some ways it's positive. As growers need to use water more efficiently because their allocation is being cut, switching from furrow or flood irrigation to center pivot irrigation results in significant water savings."

Irrigation companies have also found an ally in federal financial assistance programs like Environmental Quality Incentive Programs and the Ogallala Aquifer Initiative. These federal programs are authorized to write checks for up around 30% of the installation costs of new irrigation systems for a grower, such as pivots or sub-surface drip irrigation.

Brad Sonckson, the assistant state conservationist for the Natural Resources Conservation Service in Nebraska, said these financial assistance programs are usually not designed or authorized to police water use after farmers install the new irrigation system, so actual water savings are dependent on state regulation.

"We're working on an individual producer basis, and we don't have authority to determine what a producer grows -- what crop they grow or where they grow it or how much they grow," Sonckson said. "It's up to the regulatory agencies to determine if there's regulations in place as far as can they expand their irrigated acres or can they pump more water."

Wood used the phrase "core markets" to describe the area of Nebraska, Kansas and down into the plains of Texas. These regions are all places where DTN has chronicled agriculture grappling with increasingly tight or non-existent water supplies earlier in this series, but Wood declined to comment on any possible connection between irrigation and water depletion.

Valley Irrigation's National Sales Manager Doug Dale said he doesn't consider shrinking water reserves to be an industry responsibility. "We're all concerned about it as individuals, but I don't know what the industry can do to change it," he told DTN.

Schapper said the issue belongs in the hands of governments, not irrigation companies. "Governments have to step in and help regulate," he told DTN. "Farmers will always do what's in their best interest, moneywise. Governments right now don't realize water is a scarce resource."

He said irrigation companies actually perform better where governments intercede and regulate farmers' water usage. "We want water management, and we want government to place a real value on water," Schapper said.

LOOKING AHEAD

At one point during the Valley Irrigation field day, Taylor found himself surrounded by a cluster of international visitors from Ukraine, Russia, Ghana, and the Democratic Republic of the Congo. With the help of translators, they peppered him with questions about irrigation and American cropping practices. As dryland conversion picks up speed in the U.S., companies are looking overseas, where population growth and rising middle classes have driven the demand for large-scale agriculture.

Valley Irrigation, for example, does a healthy business in large crop-producing countries like Brazil and Argentina, and its annual report identified Africa, Russia and Eastern Europe as potential major future markets. Lindsay Corporation is also looking overseas, with sales in South America, the Middle East, Russia, and China.

Even if domestic dryland dwindles, U.S. farmland will still have plenty of growth to offer, just a different kind of growth. "The market over time migrates to a replacement market, because the majority of ground that is eligible for dryland conversion becomes converted over time," Wood explained.

Taylor estimated that in another two years, irrigation purchases for his eastern Nebraska cornfields would start transitioning entirely from new pivots to replacement machines.

Emily Garnett can be reached at Emily.garnett@telventdtn.com

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