My last Economy column focused on a 2010 economic impact study of the irrigation industry and the anticipated results of its a reevaluation. The recent study results will be the focus here, but prior to this, a quick update on my personal attempt to bring new land under irrigation. My well guy, who was intending to install a new pump and a backbone water supply line fell victim to the COVID pandemic over the summer, and we didn’t get the system installed. Fortunately, he is recovering, and missing a year’s irrigation is a small price to pay in return for his good health. So, despite this new report stating that COVID’s impact was minimal to the irrigation equipment industry, I’m living proof there are still examples of how it had an effect.
Summarizing the 2020 Economic Impact of the Irrigation Equipment and Services Industry study defies this column’s space limits, but here are some of the interesting highlights:
- Numbers-wise, annual sales of irrigation equipment and services are estimated to be about $8.9 billion, up from an estimated $7.1 billion in 2010. This translates to an annual growth of about 2.3%, about matching the overall national economy. When the multiplier effects for input suppliers and their households are also considered, this figure increases to $23.3 billion and about 168,000 jobs.
- Contrary to my ag-centric notions, crop irrigation is conspicuous but does not necessarily drive the industry. It was concluded that overall equipment sales for landscape irrigation are about equal to those of crop irrigation. Add in the wholesale, retail and installation “channel to market” that landscaping equipment passes through after its manufacture and it appears that the residential-commercial side of the industry accounts for more dollars than the crop irrigation side.
- The diversity of purposes of irrigation between crop and landscape irrigation gives resilience to the industry. Irrigation equipment sales are driven by crop prices and landscape sales by housing starts and larger macroeconomic trends. These factors move independently and reduce overall industry volatility.
- The current study’s beginning coincided with the COVID-19 outbreak, which was fully expected to adversely impact the industry. Despite associated supply chain issues and my own personal experience, there is little evidence the pandemic hurt the industry. Demand for equipment increased due to higher crop prices and, anecdotally, homeowners having more discretionary time to work on their landscaping.
- The quantitative results developed in the study belie that data was still hard to obtain and qualitative discussions with industry participants were necessary. The combination of the industry’s competitive nature and presence of several large privately held firms dampen information flow. Therefore, many of the study’s results are based on these discussions rather than verifiable data, particularly on the residential and commercial side. It is recommended that some form of data collection and/or sharing across the industry take place before conducting further updates to this study. Ideally, a process can be developed that maintains manufacturer anonymity while still providing useful data. It is difficult for prospective investors in the industry to make decisions when the overall size of the industry, and the market share of the prospective products under consideration, are so uncertain.
Numbers-wise, annual sales of irrigation equipment and services are estimated to be about $8.9 billion, up from an estimated $7.1 billion in 2010.
The full study and the executive summary are available for review online at www.irrigation.org/economic-impact-study.
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.