IA, IIC study shows crop prices drive equipment demand

In 2010, the Irrigation Association, Fairfax, Virginia, sought to shed light on what was relatively unknown about the irrigation industry. The solution to answer questions regarding the industry’s size and overall magnitude across agriculture and landscape was a first-time economic impact study.

Now, more than 10 years later, the study was continued to re-examine the still mysterious irrigation industry. Released in partnership with the Irrigation Innovation Consortium, Fort Collins, Colorado, on Dec. 2, 2021, the 2020 economic impact study went deeper than its predecessor, this time analyzing economic drivers and other value-added aspects, says the study’s principal researcher, George Oamek, PhD, of Headwaters Corporation located in Kearney, Nebraska.

“At the time the study was done in 2010, the industry was kind of at a low point due to the recession that had occurred recently,” Oamek says. “The question (for the updated study) was, did we catch the industry then at a low point or an average point?”

Completing this new study wasn’t a traditional process of obtaining data and numbers. Oamek explains that because a good chunk of the industry is privately held and companies prefer to stay anonymous, Oamek and his fellow researchers listened to anecdotes from about a dozen of the industry’s leaders. These anecdotes then revealed trends experienced among the industry.

The 2020 survey revealed a healthy 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.

According to Oamek, one of the greatest takeaways on the agriculture side of the study is that demand for irrigation equipment is booming due to high crop prices. The first generation of center pivots are starting to wear out, so farmers are looking at high-tech replacements with remote capabilities.

“The driver for the irrigation equipment for crops is crop prices, and crop prices are on a real high right now,” Oamek says. “There’s a huge pent-up demand for replacement irrigation equipment and new precision irrigation equipment all over, from what I can tell.”

In the Corn Belt, there’s greater demand for equipment for what Oamek calls “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,” Oamek says. “We’re seeing a lot of center pivots going up in the Corn Belt.”

Crop prices pull the strings on the agriculture side of irrigation, Oamek says. From 2012 to 2014, crops saw a surge in prices. This resulted in an increased demand in agriculture equipment. Crop prices tanked following its early 2010s boost, and equipment demand also dropped. But even before the recent resurgence in crop prices, Oamek notes demand for ag equipment was still rising.

“There’s just a lot with replacing the old systems and the higher yields we get now,” Oamek says. “There’s still a lot of demand for replacements even at lower crop prices. The higher crop prices just accelerated that.”

The full study and the executive summary are available for review on the IA’s website.