Economic Value of Water for Agricultural Production in SW Georgia Water Summit XIV Meeting Georgia’s Water Demands in the 21 st Century Albany, GA June 17, 2008 Mark H. Masters ASU Flint River Water Policy Center

Outline What is the economic impact of agriculture to the Lower Flint River Basin and SW GA as a whole? –Farm gate, direct and indirect output/employment What are the potential impacts of reducing irrigated acreage in Spring Creek and Ichaway sub-basins? –Scenarios from EPD planning documents –Assumptions Irrigation and yield data –Basin and region level Farm level impacts of reducing irrigation Recent advances in knowledge base regarding agricultural water use Discussion

Lower Flint-Ochlockonee Planning District 14 Counties All or part of 13 HUC 8 Watersheds Ag irrigation is predominant use of water –658,561 acres Endangered species and critical habitat GA – FLA – AL

Farm Gate Value Lower Flint = $1.820 billion GA = $11.5 billion

Farm Gate Value Row - ForageVegetables% Irrig Rel % Ag Tax Baker$86,979,602$38,298,500$103, %68.0% Calhoun$75,711,348$31,795,329$061.2%43.5% Colquitt$389,231,209$50,013,893$108,046, %15.6% Decatur$206,547,141$50,814,251$79,234, %20.2% Dougherty$52,715,118$9,856,438$ %20.0% Early$88,973,708$55,507,969$058.6%21.4% Grady$143,369,003$16,910,334$4,565, %28.7% Lee$59,348,004$28,627,451$629, %19.1% Miller$78,691,597$48,734,639$5,193, %42.1% Mitchell$266,507,069$57,949,822$35,137, %36.0% Seminole$79,961,262$48,351,178$7,709, %28.7% Terrell$61,448,617$35,020,050$343, %43.8% Thomas$105,775,140$31,006,949$4,435, %25.6% Worth$122,447,414$56,327,671$20,215, %38.4%

Flint River Basin Agriculture and Directly Related Businesses IMPACT Direct $ (millions)Indirect $ (millions) Agriculture + Direct 3, Mining Construction Manufacturing Utilities Trade Fin / Ins / Real Est Services Government Other Total $5.8 Billion – 34.45% of total economy Compiled by UGA Center for Agribusiness & Econ Development, Waters & McKissick, 2004

So what is the regional impact of irrigation?

Concentration of modeling efforts in Ichaway and Spring Creek Sub-basins. EPD surface water models indicate low-flow violations under some conditions –Especially Spring Crk 326,204 permitted irrigated acres in these two basins –153,263 (Ichaway) –172,941 (Spring) –≈ 62% of harvested land

This analysis was limited to all surface water w/drawals and those ground water w/drawals out of the Upper Floridan as determined by EPD This amounts to roughly 241,000 irrigated acres –100,890 in Ichaway –140,130 in Spring Ichaway region includes Terrell, Randolph, Calhoun, and Baker Counties Spring Creek region includes Early, Miller, Seminole, and Decatur counties

Impact Model IMPLAN –IMpact analysis for PLANning –Input–Output model describing commodity flows from producers to final consumers –Driven by purchases for final use or final demand (in our case, lost revenue from not irrigating) Direct effects Indirect Effects –Multipliers –Region specific Base model (2006) or modified

Acreage Reduction by Crop Baseline20%30%40% Ichaway100,890-20,178-30,267-40,356 Peanut-6,053-9,080-12,107 Cotton-9,080-13,620-18,160 Corn-5,044-7,567-10,089 Spring140,130-28,026-42,039-56,052 Peanut-8,408-12,612-16,816 Cotton-12,612-18,916-25,223 Corn-7,007-10,510-14,103 Numbers shown in RED were provided by EPD. Peanut, cotton, and corn acreage is roughly 86% of the total irrigated acreage in these two basins. Assume all reduction from these crops w/ the following distribution: PN (30%), CT (45%), CN (25%)

Crop Assumptions Crop Irrigated Yield a Non-Irrig Yield Irrig (ac/in) $/unit b Peanut5047 lb/ac1105 lb/ac10.5$.225 Cotton1523 lb/ac448 lb/ac11.15$.70 Corn194 bu/ac17 bu/ac14.95$4.50 a Yield and irrigation data collected during CY 2007 from USDA-ARS NPRL Multi-Crop Irrigation Research Farm. b 2007 Estimated Georgia Prices compiled by UGA CAES.

IMPLAN Results Output (1.25)Employment (1.23) DirectTotalDirectTotal Ich – 20%-$20,942,298-$26,248, Ich – 30%-$40,106,216-$50,309, Ich – 40%-$56,503,004-$70,879, Output (1.43)Employment (1.49) DirectTotalDirectTotal Spr – 20%-$22,745,048-$32,536, Spr – 30%-$55,756,953-$78,949, ,001 Spr – 40%-$78,573,824-$111,457,973-1,032-1,408 Multiplier

Ichaway RegionSpring Creek Region OutputEmploymentOutputEmployment Manufacturing-$270,385-$2,082,682-2 Non-Manufact. Mining$00-$4,7120 Construction-$29,6530-$46,296 Trans/Utilities-$352,329-4-$566,119-6 Ret/Whl Trade-$1,826, $2,759, Fin/Ins/Real Est-$1,138,289-8-$1,074,667-6 Services-$728, $1,475, Government-$1,034,006-2-$1,240,668-2 Farm-$20,868, $23,285, TOTAL-$26,248, $32,536, % Reduction in Irrigated Acreage

Ichaway RegionSpring Creek Region OutputEmploymentOutputEmployment Manufacturing-$521,455-3-$4,972,266-5 Non-Manufact. Mining$00-$12,5550 Construction-$56,019-$107,894 Trans/Utilities-$683,384-8-$1,379, Ret/Whl Trade-$2,757, $5,068, Fin/Ins/Real Est-$2,159, $2,600, Services-$1,375, $3,447, Government-$1,966,971-3-$2,971,338-4 Farm-$40,789, $58,389, TOTAL-$50,309, $78,949,839-1,001 30% Reduction in Irrigated Acreage

Ichaway RegionSpring Creek Region OutputEmploymentOutputEmployment Manufacturing-$730,153-4-$7,040,440-7 Non-Manufact. Mining$00-$17,3490 Construction-$79,614-$153,576-2 Trans/Utilities-$957, $1,945, Ret/Whl Trade-$4,328, $7,774, Fin/Ins/Real Est-$3,048, $3,676, Services-$1,947, $4,911, Government-$2,778,407-5-$4,203,855-6 Farm-$57,009, $81,734,512-1,138 TOTAL-$70,879, $111,457,973-1,408 40% Reduction in Irrigated Acreage

Irrigation Reductions Miller County Example

Flint River Drought Protection Act Inaugural auction held March 15, 2001 –33,101 acres retired from irrigated production –Average bid: $136/acre –$4.5 million paid to growers Auction held again in 2002 –40,894 acres retired –Average bid: $128/acre –$5.2 million paid to growers Major changes for Act after Flint River Water Dev. and Conservation Plan passed March 2006

Flint River Drought Protection Act Designation of different “use” areas Ground water now eligible for participation Act may be targeted on smaller watersheds “Partial” buyout of an agricultural permit Involuntary suspension provisions

Farm Gate Value:$78.7 million Cotton (acres):39,022 Peanut (acres)21,744 Corn (acres)5,064 Permitted Acreage 75,279 GW – 1,680 SW “Wetted” Acreage 64,768 GW – 937 SW

Miller County Total 65,705 Irrigated Acres Capacity Use 17,75727% Restricted Use21,15132% Consvn Use26,79741%

Miller County Total -- Within 3 Miles -- 59,370 Acres (90%) Capacity Use 10,35618% Restricted Use21,13435% Consvn Use27,88047%

Illustrative Purposes Only – Of the 10,356 acres within 3 miles of a stream and in Capacity Use Areas, 91% are “Grandfathered” Permits. It is extremely likely these areas could be impacted by a Flint River Drought Auction with economic impacts highly localized.

What about at the farm level?

USDA/ARS National Peanut Research Laboratory Multi-Crop Irrigation Research Farm

100%66%33%Non-irr Gross Revenue ($0.70)$ $889.70$544.60$ Variable Cost$556.81$535.39$484.98$ Irrigation Cost$88.00$58.96$29.04 Total VAR. Cost$644.81$594.35$514.02$ NET > VAR$421.29$295.35$30.58-$68.10 Land($175 irrig - $60/dry) $ $60.00 NET>VAR & Land$246.29$ $ $ CY 2007 Cotton Revenues & Costs CY 2007 Cotton Revenues & Costs Not including returns to management, fixed assets, and overhead.

100%66%33%Non-irr Gross Revenue ($0.70)$970.00$630.00$330.00$85.00 Variable Cost$429.97$418.25$388.13$ Irrigation Cost$108.00$72.36$35.64 Total VAR. Cost$537.97$490.61$423.77$ NET > VAR$432.03$ $93.77-$ Land($175 irrig - $60/dry) $ $60.00 NET>VAR & Land$ $35.61-$ $ CY 2007 Corn Revenues & Costs CY 2007 Corn Revenues & Costs Not including returns to management, fixed assets, and overhead.

100%66%33%Non-irr Gross Revenue ($450/ton) $ $937.80$603.90$ Variable Cost$532.77$521.25$509.52$ Irrigation Cost$77.50$51.93$25.58 Total VAR. Cost$610.27$573.18$535.10$ NET > VAR$525.31$364.62$68.80-$ Land($175 irrig - $60/dry) $ $60.00 NET>VAR & Land$350.31$ $ $ CY 2007 Peanut Revenues & Costs CY 2007 Peanut Revenues & Costs Not including returns to management, fixed assets, and overhead.

$31.18/inch $33.58/inch $57.31/inch Caution: This is an average and irrigation is NOT a linear function

Moving Forward We are better positioned to plan for agricultural water use …kind of –Data collection (revised models) –Outreach –Interaction and compilation of programs –Statutes Conservation –Acceptance of irrigation scheduling, conservation tillage and system upgrade programs –Built-in conservation in the form of energy prices Participation in planning process

Moving Forward We are better positioned to plan for agricultural water use …kind of –Data collection (revised models) –Outreach –Interaction and compilation of programs –Statutes Conservation –Acceptance of irrigation scheduling, conservation tillage and system upgrade programs –Built-in conservation in the form of energy prices Participation in planning process

Mark H. Masters ASU Flint River Water Policy Center x36