How big is the irrigation industry?

It’s no revelation that irrigation is a big business, encompassing the manufacture of irrigation systems, their installation, maintenance, services and, ultimately, the additional economic value the industry provides in crops, higher property value and aesthetics. As this periodical demonstrates, the industry has an active trade association, manages lobbying efforts, has annual meetings and conducts business comparable to other large industries. So how big is the irrigation industry? No one knows for sure.

In 2010, the Irrigation Association commissioned an economic impact study that estimated annual domestic expenditures for irrigation equipment and services, including installation, totaled a bit over $7.0 billion. This is before the multiplier effects associated with input supply expenditures and their employees’ household spending. I led the consulting team that came up with this number and will confess the study’s results bothered me for the next 10 years because some of the numbers were, effectively, SWAGs. For non-land-grant college graduates, a SWAG is a guess based on scientific judgment, leaving the reader to guess what the letters stand for.

The issue in 2010 was verifying our estimates with reality. Although the irrigation industry is large, it isn’t large enough to have its own industrial reporting classification, or NAICS code, that would have made our job easy. So, we looked at the output of the major manufacturers and distributors to “ballpark” annual expenditures, but a major portion of those are privately held and do not share sales data. Our team’s econometrician, an individual who depends on empirical data, got frustrated and dropped out at this point. Data-wise, on the crop irrigation side of the industry, we were left with the periodic Irrigation Census that provided irrigation-related expenditures, by system type and by function, on a per acre basis. With a lot of supporting assumptions, we could then aggregate expenditure estimates over total irrigated acreage. For the residential and commercial portion of the industry, we had even less and depended upon individuals within the industry to provide their insights about its magnitude.

Regardless, the 2010 study was completed and the results were not uniformly endorsed because it showed that annual expenditures on the residential and commercial side of the industry were greater than those for crop irrigation equipment and services. This was counter-intuitive at the time and probably still is to some extent. The industry was going through some significant recession-induced changes then and has since stabilized on a more steady growth path. In response, the IA, with the Irrigation Innovation Consortium, commissioned an update to the economic impact study that is currently being completed. They have given us another chance to turn these SWAGs into supportable numbers.

The IA, with the Irrigation Innovation Consortium, commissioned an update to the economic impact study that is currently being completed.

For the 2021 study, we started from scratch with the residential and commercial sectors and focused on the influence of the economic drivers of expenditures: commodity prices and residential housing starts. However, the 2010 data limitations haven’t gone away. Regardless, our preliminary findings are that we probably weren’t that far off in 2010, and the industry has grown at a respectable rate since. The initial results also add some fuel to the fire of whether the agricultural or residential-commercial portions of the industry are larger. We’ll save that discussion for next time when the 2021 study has been through more thorough review.

George Oamek, PhD, is an economist with Headwaters Corp. and is also on the staff of the Platte River Recovery Implementation Program’s executive director’s office.