Department of Economics
Date of this Version
10-2005
Citation
ECONOMIC IMPORTANCE OF IRRIGATED AGRICULTURE 2003 By Charles Lamphear For Nebraska Policy Institute Lincoln, Nebraska October, 2005
Abstract
Just how important is irrigated agriculture to the Nebraska economy? This question was first addressed nearly forty years ago in a study conducted by Drs. Theodore W. Roesler and F. Charles Lamphear, University of Nebraska Department of Economics. This initial study was updated in 1972 and, again, in 1991. The latest update study for 2003 was recently completed by Dr. Charles Lamphear, emeritus professor, University of Nebraska-Lincoln (UN-L). He was assisted by emeritus professors Dr. Roy Frederick, UN-L Department of Agriculture Economics and Dr. Dale Flowerday, UN-L Department of Agronomy and Horticulture, along with several UN-L extension specialists. The results of the 2003 study are summarized in this report. As principal investigator, Dr. Charles Lamphear takes full responsibility for the study's methodology, data, and findings.
The 2003 irrigation study provides an accounting of the total impact that irrigated agriculture has on the Nebraska economy. Economic impact estimates were calculated for two scenarios. The first scenario assumed normal precipitation prior and during the 2003 crop growing season. The second scenario considered the drought conditions that actually occurred prior and during the 2003 growing season. The purpose for the two scenarios was to give a full accounting of irrigated agriculture's importance to the state's economy. For both scenarios, total economic impact was defined to include three economic effects: direct effect, indirect effect, and consumption effect. Direct economic effect was defined as the 2003 value of crop output. Indirect economic effect was defined as the business-to-business purchases/sales generated by crop production activity. The consumption effect was defined as the economic activity generated from the personal spending of earned income. Total economic impact is the sum of direct effect, indirect effect, and consumption effect. The direct effect was measured in terms of the value of crop production for 2003. Total economic impact was measured in four ways: gross output, value added, employment, and earned income. Each of these measures provides an alternative way of expressing total economic impact. Gross output is defined as businesses' sales or receipts plus inventory change. Value-added is defined as gross output minus intermediate inputs (goods and service inputs purchased from suppliers). It represents the value that is added by the application of capital, labor, and management to intermediate inputs in converting those inputs (e.g., fertilizer and fuel) to a finished product (e.g., corn for grain). Employment includes both fUII- and part-time workers. Earned income includes wages and salaries and proprietors' income. Earned income is less than total personal income, since it excludes dividends and interest income and transfer payments, such as Social Security payments. The methodology for measuring the direct effect involved the identification of crops and the estimation of yields for irrigated and equivalent dryland crop production. Irrigated crops included corn for grain, soybeans, grain sorghum, winter wheat, dry edible beans, sugar beets, corn for silage, and alfalfa hay. The equivalent dryland crops included corn for grain, soybeans, grain sorghum, alfalfa hay, corn silage, winter wheat, sunflowers, and summer forage.