Economics of Irrigation in the Texas Drought of 2011

Transcription

1 Economics of Irrigation in the Texas Drought of 2011 Jay Yates Extension Program Specialist III Risk Management Co-authors Jackie Smith Jeff Pate Texas AgriLife Extension Service Lubbock, TX Wayne Keeling Jim Bordovsky Texas AgriLife Research Lubbock, TX

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3 Discussion Points Review of past research Update results Observations from 2011 Options for 2012

4 Texas Southern High Plains Irrigation Situation Declining capacity Increased efficiency Increasing energy costs Varieties with higher potential yields This is the exact same slide that I presented at the 2006 Beltwide Cotton Conference

5 2006 Beltwide Cotton Conference Looked at the following cotton alternatives: Fully irrigate a 120 acre pivot with 300 gpm Irrigate 1/2 pivot, treat the rest as dryland Irrigate 2/3 pivot, treat the rest as dryland Irrigate 1/2 pivot, plant the rest as irrigated wheat for grain Irrigate 2/3 pivot, plant the rest as irrigated wheat for grain Irrigate 1/2 pivot, plant the rest as irrigated wheat grazing Irrigate 2/3 pivot, plant the rest as irrigated wheat grazing

6 2006 Conclusions Least favorable - Fully irrigate 1/2 of each pivot, remainder treated as dryland. Most favorable - Irrigate to 75% ET replacement on 2/3 of each pivot, remainder treated as dryland. Is this still the case?

7 Updated Results Updated to current cost/price/yield scenario Interviewed area farmers Collected data from AgriLife Research & Extension Projects Only looked at all cotton alternatives Added the alternative of drilling 8 new wells to bring pivot capacity back to 5 gpm/acre

8 Updated Results % Change in Real Net Worth from 2012 to 2021 Baseline Water whole pivots with 300 gpm per pivot % Alternative 1 Water half pivots, plant the rest to dryland cotton % Alternative 2 Water two-thirds pivots, plant the rest to dryland cotton % Alternative 3 Drill new wells to fully irrigate entire pivots 600 gpm %

9 Updated Results Average Net Farm Profit Baseline Water whole pivots with 300 gpm per pivot 187,730 Alternative 1 Water half pivots, plant the rest to dryland cotton 216,480 Alternative 2 Water two-thirds pivots, plant the rest to dryland cotton 205,580 Alternative 3 Drill new wells to fully irrigate entire pivots 600 gpm 301,380

10 Updated Results Average Probability of Cash Reserve < 0 Baseline Water whole pivots with 300 gpm per pivot 10.6% Alternative 1 Water half pivots, plant the rest to dryland cotton 8.2% Alternative 2 Water two-thirds pivots, plant the rest to dryland cotton 9.5% Alternative 3 Drill new wells to fully irrigate entire pivots 600 gpm 8.4%

11 Projected Variability in Net Farm Income

12 Updated Results Ending Cash Reserves and Probability of Having to Refinance $1,000 %

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14 Observations From 2011 TTU Lubbock Mesonet Site Cumulative Reference ET from 4/15 9/ Rainfall during the same period 98 days of 95 degrees or more 58 days of 100 degrees or more Official Lubbock record of 48 breaks old record from 1934 of 29 3 bale cotton in 2011 took from ac/in with 4-5 gpm per acre capacity Well irrigated pivots and drip had significantly higher net returns

15 Petersburg, Texas Dryland planted May 4 Picture taken August 25, 2011

16 Shallowater, Texas Pre-watered Only Planted May 4 Picture taken August 25, 2011

17 North of Petersburg, Texas Yield.9 BPA Sub-Surface Drip, 1.5 GPM per acre Picture taken August 25, 2011

18 Petersburg, Texas Yield 1.5 BPA Sub-Surface Drip, 2.5 GPM per acre Picture taken August 25, 2011

19 Lubbock, Texas Yield 3.3 BPA Sub-Surface Drip, 4.1 GPM per acre Picture taken August 25, 2011

20 Sandhill, Texas Yield 3.5 BPA Sub-Surface Drip, 4.5 GPM per acre Picture taken August 25, 2011

21 South of Shallowater, Texas Yield 3.95 BPA Sub-Surface Drip, 6 GPM per acre Picture taken August 25, 2011

22 The Study Group 31 Farm Sites 17 Sub-Surface Drip (all on 80 centers) 13 Center Pivots 2 MESA 1 LESA 10 LEPA 1 Furrow GPM/Acre ranging from 1.5 to 6.0

23 2011 Cotton Yields vs. Water Applied Cotton Yield lbs/acre Inches of Water Applied per Acre

24 Returns Above Direct Costs 2011 Returns Above Direct Costs at $0.90/lb vs. Water Applied at $9/in Inches of Water Applied per Acre

25 Returns Above Direct Costs 2011 Cotton Net Profit at $0.90/lb vs. Water Applied at $9/in Inches of Water Applied per Acre

26 Returns Above Direct Costs 2011 Returns Above Direct Costs at $0.52/lb vs. Water Applied at $9/in Inches of Water Applied per Acre

27 Returns Above Direct Costs 2011 Cotton Net Profit at $0.52/lb vs. Water Applied at $9/in Inches of Water Applied per Acre

28 2011 Returns Above Direct Costs at $0.90/lb vs. Water Applied at $15/in Returns Above Direct Costs Inches of Water Applied per Acre

29 Returns Above Direct Costs 2011 Cotton Net Profit at $0.90/lb vs. Water Applied at $15/in Inches of Water Applied per Acre

30 What Does It Take To Apply Inches of Irrigation? GPM* GPM/Acre Inches/Acre/Day Inches/Acre/ Season (24/7)* * Assumes 125 acre pivot and irrigating season from April 15 to September 15

31 Irrigation Strategy for 2012 No rain, dust in seed, collect insurance check for dryland Insurance Price $1.23 $0.85 Insurance Guarantee $218 $157 List $9 $9 Plant $7 $7 Disc $8 $8 Spray $13 $13 Insurance Premium $29 $17 Return Above Direct Costs $152 $103

32 Irrigation Strategy for 2012 Fully irrigate what you have enough water to cover* Cotton Price $0.85 $0.75 Gross Revenue (1500 lb) $1,320 $1,155 Seed $70 $70 Fertilizer $86 $86 Chemicals $76 $76 Irrigation (22 ) $200 $200 Field Operations $60 $60 Harvest $120 $120 Insurance Premium $80 $56 Return Above Direct Costs $628 $487 *Assuming average rainfall

33 Conclusions In 2011 with virtually no sub-soil moisture or rainfall during the growing season, it took at least 4 gpm/acre to make a profitable cotton crop. Long term analysis shows that systems with the ability to deliver less than 3 gpm/acre would be more profitable cutting irrigated acreage back to that level. Irrigation profitability is more sensitive to low cotton prices than high energy prices. Expected price level for 2012 would indicate that profitable irrigated yields are attainable.

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35 Jay Yates Extension Program Specialist III Risk Management FARM Assistance Analyst Contact Information: Texas AgriLife Research and Extension Center 1102 East FM 1294 Lubbock, TX South Plains Cotton Update every Thursday at 12:30 2:00 p.m. during Ag Talk on (806) Improving Lives. Improving Texas.