THE ECONOMICS OF EFFICIENT IRRIGATION SYSTEMS

by
Dr. Stephen H. Amosson
Associate Professor and
Extension Economist-Management

High labor cost and the cost-price squeeze created by the 1990 farm bill has renewed irrigated producers' interest in alternative irrigation systems to lower operating costs and improved efficiency. In addition, this interest has been heightened by an increasing demand for the water by a growing urban population. For example, according to the Texas Water Development Board the population of Texas is projected to more than double in the next 50 years. Correspondingly, water use is expected to increase from about 14 million acre-feet per year to as much as 21 million acrefeet by 2040.

A producer's decision to invest in an alternative irrigation system is an expensive and a complex one. A myriad of f actors influence the decision such as; application efficiency, discharge pressure, financing, evaporation-transpiration, pumping lift, energy source, energy price, crop mix, labor availability and price, etc. This study provides an evaluation, methodology and data to assist producers in making that decision.

METHODOLOGY

Six irrigation systems were evaluated; gated pipe, surge flow, side roll, high pressure center pivot, low pressure center pivot and low energy precision application (LEPA) center pivot. Investment costs, application efficiencies, discharge pressures,, labor and repair rates were identified for each system. The change in net investment per acre was calculated from gated pipe to the five alternative systems. In calculating the net investment per acre the salvage value of the gated pipe system and the alternative system, as well as, the tax savings were considered. Tax savings were brought back to current dollars using a discount rate of 7.25 percent.

Annual irrigation savings consisted of reduced pumping costs and field operations. Savings were calculated for each alternative system based on three seasonal watering regimes; low, intermediate and high, typifying watering requirements under furrow irrigation of various crops in Texas. The water applied through the alternative irrigation systems was calculated by indexing their application efficiencies. While each irrigation system applied differing amounts of water, the effective amount of water applied was the same and crop yields were assumed to be constant under each irrigation system. Annual irrigation savings were brought back to current dollars utilizing a discount rate of 7.25 percent.

Natural gas at $3.00/MC was assumed to be the energy source in the base scenario. conversion f rom furrow or surge to sprinkler irrigation was assumed to save two field operations at the low water requirement (example - cotton) and three at the intermediate and high water requirements (sorghum and corn). Sensitivity analysis was performed on alternative labor rates of $5.50 and $8.00 per hour and pumping lifts of 250 and 350 feet. In addition, operating fuel costs are compared between three alternative fuel sources; electricity, diesel and natural gas.

RESULTS

Savings generated by the alternative irrigation systems were not significant enough to offset the investment cost in the low labor cost ($5.50/hr), low lift (250 ft) and low water requirement scenario. However, when labor cost was increased the investment in LEPA irrigation turned marginally positive ($11.91/acre). As lift also increased to 350 feet, only the conversion to surge irrigation, as well as, LEPA yielded positive returns ($19.15 and $39.65 per acre, respectively).

Water requirements were a major determinant in the feasibility of alternative efficient irrigation systems. Surge, low pressure center pivot and LEPA center pivot all yielded positive returns at the intermediate and high water requirements with LEPA having the largest returns. These three technologies dominated side roll and high pressure center pivot irrigation technologies in all scenarios. The conversion of high and low pressure center pivots to LEPA was feasible under all levels of water requirements at an assumed conversion cost of $6000 per quarter mile system.

BASIC PRODUCER CONSIDERATIONS

Financing of a system must be examined closely. Many times a center pivot may be profitable when evaluated over the life of the system (20 - 25 years). However, financial institutions sometimes limit financing to a shorter time frame creating a potential cash flow problem. To properly evaluate the decision to purchase a center pivot requires time and study. Producers must evaluate the potential benefits in application efficiency, labor savings, field operations, yield increases, chemigation/herbigation savings and energy savings versus the cost of the system. Each producer's situation is different and needs to be penciled closely.