The Irrigation Association, Fairfax, Virginia, and the Irrigation Innovation Consortium, Fort Collins, Colorado, released the results of its second economic impact study in December 2021.
The 2020 economic impact study, which is available on the Irrigation Association website, revealed a booming agriculture and landscape irrigation industry with an about $9 billion direct economic impact and a $23.3 billion impact when including indirect induced impacts. There are over 70,000 jobs across the industry, which grows to 167,000 jobs when including secondary impacts.
Irrigation Today sought to further understand the study and its findings in a Q&A with the study’s principal researcher, George Oamek, PhD, of Headwaters Corporation located in Kearney, Nebraska.
(Former IA CEO) Deborah Hamlin initiated it in 2010. There was some interest to see the magnitude of the industry and assess its political spot in the sense of how powerful our lobby is. From that point, we learned the nature of the industry didn’t really lend itself to a lot of information sharing.
At the time the first study was done in 2010, the industry was kind of at a low point due to the recession that had occurred recently. The question (for the updated survey) was, did we catch the industry then at a low point or an average point?
It wasn’t traditional, and it required a little more effort on the analyst part. Since a good chunk of the industry is privately held, there’s really no place to get information. You have to use what you know, use what people tell you and try to figure out the rest. We’re free to assume things and we used a lot of anecdotal information.
Economists, we like data and we like to do statistical things with that. There was maybe some opportunity to do that on the agricultural side because you have the Census of Agriculture that has an irrigation component. We knew that we had at least four data points on the ag side, which really isn’t a good lot of data. But we didn’t really have anything on the commercial side, other than who the major players were and a willingness by the major players to talk to us in detail but not really give us a lot in writing.
On the industry side, probably a dozen. Maybe half of those we talked to more than once. If you get a lot of people saying the same thing and they all know what they’re talking about, you believe them. Can we verify the numbers? No. But, I think it reflects the collective wisdom of the major players.
You just can’t put irrigation systems up fast enough. There’s such a demand right now. The driver for the irrigation equipment for crops is crop prices, and crop prices are on a real high right now.
There’s a huge pent-up demand for replacement irrigation equipment and new precision irrigation equipment all over, from what I can tell. The first generation of center pivots are starting to wear out at this point, so we’re looking at a second generation of center pivots. They have technology packages associated with them that have compatibility with remote sensing and other high-tech equipment.
We’re seeing a lot more demand for equipment in the Corn Belt for, I’d call it, “crop insurance purposes.” If you’re getting 240 bushels an acre at $6 a bushel, it doesn’t take too many extra bushels to pay for an irrigation system. We’re seeing a lot of center pivots going up in the Corn Belt.
We had a big surge in crop prices from 2012 to 2014, and we saw a big jump in equipment demand. Then, equipment demand came back down when crop prices tanked until last year. We’re seeing equipment demand take off again now that prices are higher, but it was actually coming back even with the lower crop prices. There’s just a lot with replacing the old systems and the higher yields we get now. There’s still a lot of demand for replacements even at lower crop prices. The higher crop prices just accelerated that.
The IA seemed to receive the study well, and they asked how often we would recommend updating it. My recommendation was five years, not because it’s self-serving, but because five years seems to be a good time where you can work through an economic cycle and it gives you time to really see trends. Anything less than five years, it’d be hard to differentiate your previous results from your current results. Ten years is a little too long, because then you’ve lost the institutional knowledge.
We’d like to get better data on the actual sales volumes and dollars. The U.S. Department of Labor has what they call Standard Industrial Classifications, and irrigation manufacturing does not have its own Standard Industrial Classification; it’s contained in other parts of it or in other “other” classifications. If we could get one classification that just was specific to irrigation equipment, that’d be great. If we could get just better reporting on the Department of Commerce side, that would be great.
We need to find a way to get data from the privately held companies in a way that maintains their anonymity. I think all the companies are curious of the results of this study because they want to know where they fit in the industry. However, they don’t want to share the data that lets us do that for various reasons. It would be nice to have a little more precision and accuracy.
Compared to the non-ag side, we had a lot more ag data as there’s just a lot more people on the ag side than there are on the landscaping side. When you hear irrigation, you think crops. You don’t automatically think landscaping, at least in this part of the country. We got great participation from them.
I think my problem is I didn’t use them enough on the study, because it became so apparent that we were ignoring a good chunk of the industry by not bringing more non-ag people into it. I was scrambling to bring non-ag stuff into it, thinking that if the industry has a value of $9 billion and $6 billion is being accounted for by the non-ag side, I’d better pay a lot of attention to those guys.