Analysis erindustry Effects of a slining Groundwater Supply Southern High Plains of Texas a AGRICULTURAL EXPERIMENT STATION /J. E. Miller, Director, College Station, Texas / Texas A&M University Contents Summary ............................................................................................ ............................... Introduction ........................................................................................................................ Objectives ............................................................................................................................ Study Area ........................................................................................................................... .' Historical Perspective ................................................................... .............................. .._5i Interindustry Analysis .................................................................. ..:..J':' ............................. General Procedures ........................................................................................................... .- Purchases by the Agricultural Sectors of Subarea A ......................................... Types of Purchases by Major Crop Sectors ................................................ Estimation of Total Output ............................................................................ Taxes and the Educational Sectors ........................................................................... Sources of Feed Grains for the Feedlot Livestock Sector ....................................... Results .................................................................................................................................. Total Output .............................................................................................................. Interindustry Effects .................................................................................................. .._* Multipliers .................................................................................................................... Economic Activity Associated With Crop Producing Sectors ............................. Economic Benefits ...................................................................................................... .4 Direct Benefits .................................................................................................... Indirect Benefits .................................................................................................. Stemming-From Benefits .................................................................................... .. Total Benefits ...................................................................................................... Benefit Multipliers .............................................................................................. References ............................................................................................................................ Appendix A .............................................................................................. ........................ .. ‘p. Summary The adjustments in the economy of a 56-county area in the Texas High Pla“ sulting from the depletion of groundwater used for irrigation in the Southern High f; were determined. The evaluation of economic adjustments was based on the results of an earlier programing study which estimated effects on producers for each year from 1966 l‘ ‘2015 and on an interindustry study for the study area. The years 1967, 1970, 1990, 2000, 2010 and 2015 were selected for the study. The expenditures for inputs fr U; linear programing study were delineated to be comparable to the economic sectofi the interindustry model. The interindustry model had 14 processing sectors, four fi ments sectors and seven final demand sectors. Agricultural production was maintained at the 1967 level for 35 of the 56 coun‘ the study area. The effects of the depleting groundwater in the remaining 21 coun the study area were determined. The study area contained 9.6 million acres of cro number of irrigated acres declined from 5.7 million acres in 1967 to 2.4 million 2015. The value of all crop production was estimated to decrease by 39.9 perce f 19o? to 2015. Direct benefits associated with irrigation were $433.5 million in 1967, whic 68 percent of the total output of the Irrigated Crops Sector and 55.7 percent o, output of all crops. Indirect benefits decreased from $776.7 million in 1967tto million in 2015. Stemming-from benefits were $536.5 million in 1.967 and decref 35.8 percent from 1967 to 2015. The ratio of direct benefits to total benefits fro ' gation was 4.03 in 1967. This means that an increase of $1 in direct benefits put associated with irrigation) would generate $4.03 in economic activity for cessin g. . t if“ 'c growth and development in the Texas High been primarily based on natural resources U ' fuel and groundwater. These resources p le and nonrenewable. If the region cannot r implement proposals to reverse the economic i l»; of the declining resources, the area will ing economic growth. water is the major source of water for irri- tithe Texas High Plains. The groundwater lated from major sources of recharge. Gross I by production of food and fiber has exceeded the aquifer in recent years. The effects of - between withdrawal and recharge to the f resulting in the depletion and ultimate ex- the aquifer in the foreseeable future. __-- production, in contrast to dryland pro- similar acreages, results in greater per acre ' ated cotton yields in the Texas High Plains ately twice as high as yields of dryland ' ar acres. Irrigation and complementary ve resulted in approximately six times more production under dryland conditions for and irrigated wheat yields are usually tithe level of production under dryland in the Plains (5). In addition to increasing yields, opposed to dryland production, tends to , uction from year to year. tt- professor, Department of Agricultural Eco- I s Tech University and Texas A&M Univer- " Tech University Cooperative Research Unit, .-r research assistant, Texas A&M University a - ~ University Cooperative Research Unit, Economic Analysis Interinclustry Effects of a Declining Groundwater Supply Southern High Plains of Texas J. E. Osborn and T. R. Harris* The benefits from irrigation are dispersed through- out the economic activity in the region. With increased incomes, producers will purchase additional resources that are complementary to irrigation in the production of food and fiber. Irrigated production has been a basis for increased aggregate demand and supply of the region and has provided an incentive for regional economic growth. Returning to dryland production of food and fiber will result in significant declines in production and in- creased variation in production from year to year. As dryland production becomes the major technique for producing food and fiber, the demand for agricultural inputs complementary to irrigated production will dimin- ish, and total sales by agricultural input suppliers will decrease. Reduced sales by agricultural input suppliers will lower their realized net revenues. Declining net in- I comes for agricultural producers and agricultural input suppliers will result in reduced purchases by these sectors of nonagricultural goods and services. This will create lower trade activity in the region between public and/ or industrial consumers and industrial suppliers and adversely affect regional economic growth. In short, the ultimate economic effects on the Texas High Plains economy of a shift from irrigated to dryland production will affect a number of sectors directly and indirectly related to agriculture. Interindustry relationships between different indus- trial sectors and agriculture can be depicted through interindustry analysis. The relationships that are esti- mated through an interindustry analysis can be used to 3 evaluate the impact on the regional economy of the de- in the Southern High Plains in the agricul it clining groundwater resource in the Southern High Plains producing, processing and input supply of Texas. of the Texas High Plains economy. Objectives C. To determine economic adjustments in non The overall objective of this study was to determine cultural sectors in the Texas High Plains the adjustments in the economy of the Texas High Plains omy necessitated by the declining groundw, resulting from the depletion of groundwater used for resource in the Southerni High Plains. irrigation in the Southern High Plains. The specific objectives were study Area The study area included 56 counties in West f Northwest Texas (Region 2 in Figure 1) cont ' ‘i, 59,768 square miles and a population of 960,47 A. To assemble information concerning the rate of groundwater depletion of the Ogallala formation m the Southern Hlgh Plams of Texas‘ 1970 (17). The four Standard Metropolitan Statis B. To determine the economic adjustments required Areas (Amarillo, Lubbock, Midland and Odessa) ini’ to cope with the declining groundwater resource study area had a total population of 408,929 (50.1 uiuu mum owuwn ocmmu IIPKOIO a uumr neon wrium noum mumm um ‘uw m," “m, w. m“... TEXAS lNPUT-OUTPUT REG|QN$ OIAIIOAIM uunu nu bounv $23?" snows nun cuno 1m unto! mu nunmnu Illllv ll“. l. JQYU MOIUV (Oflll rem . “nA‘ I") llVll ‘QCNILUI K061i" \\.‘°(l (IQSUI Q|QIIIII KING m} COOK. nuva "ll" °“" ‘uwm wen omvou coruu w," mm,“ Efnm Tim‘ YQIKUI YIIIY \"* ‘l-I‘ KIN‘ l'llwl\l Klu|\\ _’— ‘ A ‘_______ -‘1'“ w“ m." urmul “mm ‘\- omnu onwou 00mm xunv nun Wu“ sumo“ "m "u" l “u” “urn V "mm" % l0!!! rum: 1 m u". g l ‘Imnu \ mm‘ m" unwll l '”'°“ menus nnvm noun: nmoim noun un n mum "n" ‘olfg n“ t nut ~‘V".° ANBIIKON (UIIUKI w|\\' l’: ""‘° mouse vumulc nun: ammo II!!!‘ can “mm mum” no“ ‘°"‘"“"‘ “m” "mm" uAtot, —:-~,,- nuuuou nfltmm unwou g mmmx zunumu “l. "M. m“, mum“ , Z ‘an (cum "o" "W" w“ In“ Inca w" “M” couzno “m an MPIIIIIDCI ‘m ‘A.‘ ll“'llll .I\‘I .°‘l.“» ~‘n“°“ \‘ ltlltlltllll “lull” 'u$“ IRAN WAKKII “f _ 4/ "<0! Inlet __ _,. , "”'"" uoum "W" '~l*"° - wilunuovr emu: v " I .> ""1 IIHI\I lu-luo“ M “‘.“m’ m: nmcc "H" l" Asuncion UlllTY t _ r ""'"‘ umor f"; ~_ 11mm». muuo lawn" nu ma“ '“" H" mum 7: Mum $77775“ luvmn vn vmn Con“ umvvm H l Gunnu" town“ veulmn Mu w,‘ mu“ mum [AVACA o“ \ "W" "n" nulom vnuow LG fld ' - "m" ucnou IQYIxIDQ mo nmzou nun vmom oonu 1. Upper Rio Grande ‘ 2. High Plains ‘"5" 3. Low Rolling Plains * “I 4. North Central ____ W '""' 5. Northeast 7 6. South Central _ 7. Lower Rio Grande w“ ~~~- "w" o 2° 4° so ,0 8. Houston - "ll. willlz‘ 9. Southeast WM uunou Figure l. Texas input-output regions; study area includes the 56 counties of region 2. Irrigated acres harvested ATED AND DRYLAND CROP ACREAGE IN SUBAREA A COMPARED TO TOTAL STUDY AREA, TEXAS HIGH PLAINS, 1970 Dryland acres harvested Percent in Percent in Study area Subarea A subarea A Study area Subarea A subarea A 1,485,280 1,172,880 79.0 880,050 878,800 42.8 532,750 245,750 46.1 734,850 248,680 33.8 1,640,800 1,157,800 70.6 1,237,400 665,800 53.8 3,658,830 2,576,380 70.4 7,852,300 1,291,080 45.2 area population) in 1970 residing in five ). graphy of the area is nearly level with .reaks.” Elevation ranges from 2,500 feet - counties to 4,000 feet in the northern . The length of the growing season ranges s in Dallam County to 226 days in Reeves types range from coarse-textured soils in area to fine-textured soils in the northern page annual rainfall is less than 21 inches as 8 inches in the southern counties (3). jor industries are agriculture, manufacturing, id trade. Extensive petroleum production thorn portion of the area. Manufacturing are centered in Amarillo, Lubbock, T- Odessa. Agricultural activity is located fin the northern two-thirds of the area. , value of all agricultural products sold in in 1970 was $1.0 billion (16). Crops I. or 48.2 percent of the agricultural items; grain sorghum were grown extensively in l,‘ regions. F urthe-r north the growing season id the soil type changes from coarse-textured tsouth to fine-textured soils in the north. The 3- the extreme northern part of the region --~ production—major crops are grain sor- heat. g ranches are located throughout the study feeding operations have developed in recent .970, 2.3 million cattle were marketed from ). A 21-county area (Subarea A)1 within i : includes approximately 6.9 million acres for a large portion of the agricultural pro- - region (Figure 2) . However, agricultural fin subarea A is highly dependent upon from a declining aquifer. jority of irrigated acres in the study area ea A, and a majority of receipts from the _'g and government payments are received _ in Subarea A (Tables 1 and 2). Total j from marketing and government payments i‘ ty area will be denoted as Subarea A; the ties of the study will be referred to as in the study area were $1.3 billion of which 64.6 percent or $867.2 million were received in Subarea A ( 16). Also, Subarea A accounted for 79 percent of irrigated cotton acres, 416.1 percent of irrigated wheat acres and 70.6 percent of irrigated grain sorghum acres harvested. Hughes and Harman (8) estimated the aggregate adjustments by agricultural producers to the declining groundwater resource in Subarea A? To estimate the impact of declining groundwater supplies on the agri- cultural producers, Subarea A was delineated into 80 hydrological subareas to reflect groundwater conditions. Linear programing was used to determine the annual withdrawal of groundwater from 1966 to 2015. As areas were dewatered, the irrigated land was returned to dryland conditions. Hughes and Harman (8) provided estimates of the effects of declining groundwater supplies on the agricul- tural industry. However, nonagricultural sectors also receive benefits from irrigated agriculture. Since interindustry analysis (input-output) is an appropriate technique for use in evaluating the nonagri- cultural effects of the declining resource, the results of the linear programing study were delineated into eco- nomic sectors which were comparable to the sectors for the interindustry model. The interindustry effects were estimated for the declining groundwater resource for 1967, 1970, 1980, 1990, 2000, 2010 and 2015 by use of the interindustry model. I ‘A linear programing analysis of the 21-county area was not part of this study; however, results and procedures of ' the linear programing study were sufficiently important to warrant discussion. TABLE 2. CASH RECEIPTS IN STUDY AREA AND SUBAREA A, TEXAS HIGH PLAINS, 1970 Study Subarea Percent in Item area A subarea A —— ($1,000,000) - AII crops 502.8 341.7 68.0 Livestock and livestock products 540.0 326.2 60.4 Total crops and livestock 1,042.8 667.9 60.5 Government payments 303.6 199.2 65.6 Total farm marketing and government payments 1,346.4 867.2 64.4 Source: (16). Oldham NM Potter Farming area D \/ < Deaf Smith Randall \ Armstrong Excluded area K/ Parmer " Z\Swisher ) a \Lamb i \»\ Farming area B c:> Q $1 Briscoe \ % _, é‘ a Floyd > Farming areaA\ \_/ x HockIBY \/~ Cochran Lu bbock§3 Crosby Yoakum Terry Garza Figure 2. Suboreo forming areas deli Historical Perspective Interindustry analysis was developed in the early thirties by Wassily W. Leontief. Leontief determined a national model of the United States which determined national input patterns (10). Models of regional econ- omies in the United States were developed from Leon- tief’s national model. However, regional input patterns may he different than national patterns. Moore and Peterson (13) and Hirsch (6) developed procedures for deriving coefficients to reflect regional input patterns. In an interindustry study for the Texas High Plains area completed in 1972, Osborn and McCray (14,) esti- 6 mated direct, indirect and “stemming-from” eff wk irrigation for the Texas High Plains economy. if one-half of the total indirect benefits to the p‘ economy from irrigated production were associa i the Irrigated Feed Grains Sector (15). l interindustry Analysis _ An interindustry study is based on the tr for economic sectors in an economy; that is, H“ of inputs and sales of outputs (Figure 3). Tr can he delineated into four major classificatio Quadrant I is the processing section which r y’ Output ¢> Input Purchasing Sectors Quadrant ll (Final Demand Section) Quadrant I (Processing Section) , Selling Sectors i" classification Total Gross Output Quadrant lll Quadrant IV (Final Payments Section) (Final Demand-Final Payments Section) Total Gross Input iservices; (b) Quadrant II includes sales of rvices to final demand sectors——final demand be net inventory change, exports, govern- ~-< capital formulation and purchases by (c) Quadrant III includes purchases from ts sectors which may contain imports, gov- " Oreciations and households; (d) Quadrant IV _;;-'rect inputs of goods and services to final ' u’ v are not produced by industries in the proc- n. Recent publications present more detailed (10, 12, 14) . actions include the costs and revenues for ‘ sector. First, transactions show the inputs will be required by a purchasing sector ‘(from the other sectors to produce its output. ictions will give the distribution for sales by a sector (sector i) to all other sectors. interindustry model was used for this f included 15 processing sectors, four final tors and seven final demand sectors (Appen- i-- 1). A “closed” model includes a nonproc- in the model. The Households Sector was the processing section to determine the inter- z of economic sectors. coefficients were computed from the (the processing section. The inversion of the ~ 'x was used to determine the interindustry i) Interindustry coefficients measure the extent "onships between different processing sectors. 5% r General Procedures Total cropland acres for the Irrigated Crops Sector and the Dryland Crops Sector for Subarea A of the study area were determined from results of the linear program- ing study by Hughes and Harman (7). The cropland acres for Subarea B were estimated by subtracting the cropland acres for Subarea A for 1967 from the crop- land acres in the study area. Cropland acres for the Irrigated Crops Sector and the Dryland Crops Sector for 1967, 1970, 1980, 1990, 2000, 2010 and 2015 were determined by aggregating the respective irrigated and dryland acres for Subarea A and Subarea B. Output for the Irrigated Crops Sector and Dryland Crops Sector for Subarea B was constant at the level in 1967. Purchases by the Agricultural Sectors of Subarea A Purchase of inputs by the Irrigated Crops Sector and Dryland Crops Sector in Subarea A for each of the selected years was determined from the linear program- ing tableau and the acres for each crop sector in the study by Hughes and Harman (8). The per acre costs (8) were multiplied by the respective acres to derive specific purchases. Types of Purchases by Major Crop Sectors: Purchase by agricultural producers in Subarea A were classified as Operating Expenses, Miscellaneous Overhead, Irrigated Machinery Overhead, Dryland Ma- chinery Overhead, Irrigated Operating Expense, Irrigated Overhead Expense and Labor in the linear programing 7 study. Ratios were developed from secondary sources to delineate these costs into sectors included in the inter- industry study. Ratios for Operating Expenses and Mis- cellaneous Overhead were developed from studies by Foote and Osborn (2, 15). Ratios for Irrigated Oper- ating Expense were developed to delineate the sources of fuel for pumping and for other related economic sec- tors (9). Overhead Expense was composed of deprecia- tion and interest charges for which ratios were developed for delineation into economic sectors (15). Adjustments were made in the column vectors to account for changes in the source of energy as the ground- water declined. Adjustments were made in the respec- tive input vectors to account for the shift from natural gas to electrical power. Estimation of Total Output: The value of production in Subarea A was determined by multiplying the yields in a selected year by the commodity price in 1967. Government payments for Subarea A were received by cotton producers, while other enterprises produced for ‘open market. After the value of output in each selected year was estimated for Subarea A, it was added to total output for Subarea B to determine total output for each agricultural sector in the selected year for the study area. Taxes and the Educational Sectors Final payments to government sectors and purchases from educational sectors were based on the 1967 per acre expenditure for the Irrigated Crops Sector and the Dryland Crops Sector. The per acre amounts were esti- mated from the 1967 interindustry study (14). Total purchases from the educational sectors as well as pay- ments to the government sectors were determined by multiplying the appropriate acres of the respective sector in Subarea A by the per acre amount for each selected year. Sources of Feed Grains for the Feedlot Livestock Sector The purchase of feed grains by feedlots was main- tained at the 1967 level for each of the selected years. With decreases in production of irrigated feed grains, other sources of feed grains were needed to fulfill the TABLE 3. PLANTED ACRES FOR EACH CROP PRODUCING SECTOR FOR SELECTED YEARS, TEXAS HIGH VPLAINS‘ ' for $637.2 million, while the Dryland Crops Sec ~- requirements of feedlots. The decreases in i i production were satisfied initially by decreasing of irrigated feed grains. If this nonexported =. not sufficient to satisfy the requirements of dryland exports of feed grains were used. How the total nonexports of both irrigated and dryl i grains were not sufficient to satisfy the requirem regional feedlots, feed grains were imported. I Results _, The estimated planted acres of crops in 196., 9.6 million (Table 3). An estimated 5.7 milli 3.9 million acres were included in the Irrigated- Sector and Dryland Crops Sector, respectively. p mated acres of the Irrigated Crops Sector decre percent from 1967 to 1970. The greatest per decrease in the irrigated acreage, 22.7 percent, Q jected in the decade from 1970 to 1980. Altho irrigated acreage was estimated to decrease by percent from 1967 to 2015, dryland crop acr' creased by 86.3 percent. It was possible for total acres to vary because the acres were determined p’ with linear programing and because various = i planting patterns for cotton were included. Total Output Total output was estimated to be $778.1 u I 1967 (Table 4). The Irrigated Crops Sector if an output of $140.9 million in 1967. Total ou the Irrigated Crop Sector decreased by 61.6 y from 1967 to 2015 to $244.6 million. The output Dryland Crops Sector increased by 63.8 percent? 1967 to 2015. Although the output for theil Crops Sector would decrease by 61.6 percent fro, to 2015, total output for both sectors would decr _ only 39.1 percent. That is, increased output fr I‘; Dryland Crops Sector compensated for 22.5 percent decrease in output of the Irrigated Crops Sector. i Interindustry Effects 3 Selected Interindustry effects are discussed f0 1990 and 2010. The interindustry coefficients for! 1980, 2000 and 2015 are presented in App t; Irrigated Crops Sector Dryland Crops Sector Total of Crops Sector Acres Percent Acres Percent Acres Perce Year (1,000) of 1967 (1,000) of 1967 (1,000) of 1967 5,682.9 100.0 3,930 100.0 9 613 1 100. 1970 5,430.3 95.6 4 193 106.7 9,623 4 100.}. 1980 4,195.2 73.8 5,476. 139.3 9,671.9 100. 1990 3,331.3 58.6 6,327. 161.0 9,658.9 100. “ 2000 2,743.0 48.3 6,966 177.2 9,709.6 101. 2010 2,537.5 44.6 7,196 183.1 9,734 2 101 fgf 2015 2,413.7 42.5 7 323 186.3 9,737 3 101. ._ ‘Does not include nonplanted acres for skip-row planting pattern for cotton. g Irrigated Crops Sector Dryland Crops Sector Al. OUTPUT FOR EACH CROP PRODUCING SECTOR FOR SELECTED YEARS, TEXAS HIGH PLAINS‘ Total Crops Sector Total output Percent Total output Percent Total output Percent ($1,000,000) of 1967 ($1,000,000) of 1967 ($1,000,000) of 1967 637.2 100.0 140.9 100.0 778.1 100.0 606.0 95.1 151.2 107.8 752.2 97.3 462.8 72.6 181.8 129.7 644.6 82.8 351.8 55.2 203.2 144.9 555.0 71.3 288.2 45.3 218.9 156.1 507.1 65.2 260.0 40.8 224.5 160.1 484.5 62.2 244.6 39.4 229.6 163.8 474.2 60.9 ment payments. ilhe interindustry coefficients were adjusted '3 purchases; that is, purchases by a sector - ustry coefficients were relatively stable for lelected years for the crops sectors for many sectors. The interindustry coefficient ‘ted Crops Sector for the Utilities Sector in- $0.072 per dollar of output in 1970 to I10; this reflects the increased costs of pro- 1 for irrigation (Table 5). The interindustry the Irrigated Crops Sector for the Serv- (creased from $0.119 per dollar of output in f 7 in 2010. if,“ the output interindustry coefficients indi- jwve effects per dollar of output from ground- 'gation, the total interindustry effect was by multiplying the output of the appropriate its output interindustry coefficient (Table consists of computer printouts, Tables 1, 2 " = are available from the senior author, Office College of Agricultural Sciences, Texas Tech 3 f .0. Box 4169, Lubbock, Texas 79409. ms‘ 6). The estimated decline in the requirements by the Irrigated Crops Sector from the Trade Sector was $87.8 million from 1970 to 2010, that is from $153.3 million in 1970 to $65.5 million in 2010. However, the increased interindustry effects of the Dryland Crops Sector from the Trade Sector was $18.2 million from 1970 to 2010 which resulted in an estimated net decline in total inter- industry transactions of $69.6 million from 1970 to 2010. Multipliers The sum of the interindustry coefficients for a proc- essing sector is called the final demand multiplier. This multiplier is an estimate of the economic activity that would be generated with an increase in sales of $1 to final demand by the appropriate sector. For example, it was estimated that an increase in sales of $1 to final demand by the Irrigated Crops Sector in 1980 would generate $2.85 of economic activity in the processing sectors in the regional economy (Table 7 and Appendix B Table 34) . The multipliers are relatively stable for the Irrigated Crops Sector and the Dryland Crops Sector. ‘See footnote 3. RINDUSTRY COEFFICIENTS ADJUSTED BY INTRASECTORAL PURCHASES FOR THE CROP SECTORS FOR 1970, 1990 AND 2010, "5 Year 1970 1990 2010 " Irrigated Dryland Irrigated Dryland Irrigated Dryland I -r number Crops Crops Crops Crops Crops Crops - name Sector Sector Sector Sector Sector Sector {crops 1.000 0.021 1.000 0.021 1.000 0.020 j - s 0.002 1.000 0.002 1.000 0.003 1.000 510ml livestock products 0.004 0.004 0.004 0.004 0.004 0.004 compressing and ral services 0.048 0.065 0.050 0.069 0.051 0.070 I 0.089 0.057 0.090 0.058 0.090 0.058 0.028 0.028 0.028 0.028 0.029 0.028 s 0.007 0.008 0.007 0.008 0.007 0.008 -* s 0.006 0.007 0.006 0.007 0.006 0.007 ' facturing 0.154 0.093 0.142 0.098 0.131 0.100 on and '8' (cation 0.042 0.045 0.042 0.044 0.042 0.044 I 0.072 0.048 0.079 0.047 0.083 0.047 r 0.253 0.264 0.251 0.260 0.252 0.259 ivnce and real estate 0.090 0.064 0.097 0.070 0.098 0.072 . 0.119 0.121 0.122 0.120 0.127 0.120 0.880 1.000 0.858 0.977 0.863 0.970 2.795 2.825 2.780 2.814 2.787 2.806 (“clement in a column was divided by the respective intraindustry coefficients to obtain "output“ interindustry coefficien-ts. TABLE 6. INTERINDUSTRY EFFECTS FOR SELECTED SECTORS FOR 1970, 1990 AND 2010, TEXAS HIGH PLAINS Year ‘ 1970 1990 _ 2010 I Irrigated Dryland Irrigated Dryland Irrigated Dryland l Sector number Crops Crops Crops Crops Crops Crops j and name Sector Sector Total Sector Sector Total Sector Sector T ' _ _ _ _ _ _ _ _ - --$1,000,000----__-_---- 1 Irrigated crops 606.0 3.2 609.2 351.8 4.3 356.1 260.0 4.5 2 2 Dryland crops 1.2 151.2 152.4 0.7 203.2 203.9 0.8 224.5 22 j 9 Other manufacturing 93.3 14.1 107.4 50.0 19.9 69.9 34.1 22.2 56- 11 Utilities 43.6 7.2 50.8 27.8 9.6 37.4 21.6 10.6 3 12 Trade 153.3 39.9 193.2 88.3 52.8 141.1 65.5 58.1 12 14 Services 72.1 18.3 90.4 42.9 24.4 67.3 33.0 26.9 5 15 Households 532.7 151.2 683.9 301.8 198.5 500.3 224.4 217.8 This was expected for the Dryland Crops Sector. How- ever, the input vector for the Irrigated Crops Sector was changed each decade to account for projected changes in sources of fuel to pump irrigation water. The changes in the configuration of the input vector for the Irrigated Crops Sector were expected to affect signifi- cantly the final demand multiplier which decreased from 2.88 in 1967 to 2.85 in 2015 (not monotonically), 0.01 percent. The output multipliers for the sectors were more stable for the Irrigated Crops Sector than for the Dry- land Crops Sector (Table 7). The output multiplier is an estimate of the economic activity that would be generated with an increase in output of $1 by the appro- priate sector. It is determined by dividing the final TABLE 7. FINAL DEMAND AND OUTPUT MULTIPLIERS FOR SELECTED YEARS FOR EACH CROP PRODUCING SECTOR, TEXAS HIGH PLAINS‘ Irrigated Crop Sector Dryland Crops Sector demand multiplier for a sector by its intrasectoral cient. For the Irrigated Crops Sector in 1967, estimated that $2.80 of economic activity would erated in the processing sectors in the regional - y by increasing its output by $1. Economic Activity Associated With Crop Producing Sectors The economic activity associated with ea V producing sector was estimated by multiplying w] j ected output of the respective crop sector in each year (Table 4.‘) by its output multiplier (Table ' example, the economic activity associated with the of $606 million of the Irrigated Crops Sector w) was estimated to be $1.69 billion (Table 8). Economic activity associated with the I V Crops Sector declined from $1.78 billion in 1967 - billion in 2015 or 61.8 percent (Table 8). The ;; decline for one decade was $0.41 billion from 1980 or 24.3 percent. The decrease in this peri a I Final demand Output Final demand Input t9 1980) was 37-3 Percent of the total amo "_' Year multiplier multiplier multiplier multiplier 1967 to 2Q15_ 1987 2.88 2.80 2.88 2.8a The Dryland Crops Sector had an increase _( 1x8 nomic activity from $0.4- billion in 1967 to $0.641: 1990 2.86 2.78 2.86 2.81 in 2015 or 60 percent. The greatest increase w, 3898 gig? gig 3:2? 32g? from 1970 to 1980 as the irrigated acreage rev 2015 2.85 2.79 2.85 2.81 dryland production. The increase in economic A) 1R ded d I Th l I d f 1h associated with the Dryland Crops Sector from p oun to two ecima s. e mu tip iers are estimate rom e . . a dosed modeL 1980 was $80 million or 18.6 percent. In 205 TABLE 8. ECONOMIC ACTIVITY ASSOCIATED WITH EACH CROP PRODUCING SECTOR FOR SELECTED YEARS, TEXAS HIGH PLAINS Irrigated Crops Sector Drylands Crops Sector Total for all c -l Economic Economic Economic activi Percent activity Percent activity p Year (billion dollars) of 1967 (billion dollars) of 1967 (billion dollars) 1967 1.78 100.0 0.40 100.0 2.18 1970 1.69 94.9 0.43 101.8 2.12 1980 1.28 71.9 0.51 127.5 1.79 1990 0.98 55.0 0.57 127.5 1.55 2000 0.80 44.9 0.61 152.5 1.41 2010 0.72 40.4 0.63 157.5 1.35 2015 0.68 38.2 0.64 160.0 1.32 10 ' i, economic activity associated with the Irri- Sector ($680 million) and the Dryland ($640 million) was only $40 million, while put of the respective sectors differed by g nomic activity associated with the crop w: from $2.18 billion in 1967 to $1.32 15. The decline in economic activity asso- ‘the output of the Irrigated Crops Sector of flwas partially offset with a $0.24 billion in- omic activity associated with the Dryland The net overall decrease was $0.86 billion. nefits jj-t ific types of benefits were delineated to i) ges in economic activity associated with xfrect, indirect and “stemming-from.” enefits: Direct benefits are defined as the '_ crop production derived from irrigation; additional output in the Irrigated Crops dryland crop production on similar acres. ‘its were $433.5 million in 1967 which was ‘(of the total output 0f the Irrigated Crops 7 percent of total output of all crops (Table benefits declined to $169.0 million in 2015 _ of 61 percent from 1967. The greatest ecline in direct benefits was estimated to I 980 to 1990 although the greatest decline _ ion from 1970 to 1980. ' _ Benefits: Indirect benefits are defined as ‘n of increased economic activity associated I t benefits from irrigated crop production. p1.» efits include cumulative effects of employ- ultural inputs and purchases of nonagricul- i d services to provide inputs for the irrigated .-= s. i‘ benefits were greater than direct benefits. direct benefits were greater than total out- gated Crops Sector for each selected year A e indirect benefits declined by 61 percent " 2015. In 1967, the benefits were I8 fr than the total output of the Irrigated I The benefits were 99.8 percent of the ‘ ns FROM THE NET INCREASE m CROP PRODUCTION f;- TEXAS HIGH PLAINS Yec r 1970 11980 1990 2000 2010 2015 5- __ _ __ ($1,000,000) _ - - -- - 410.1 323.5 244.8 202.0 180.8 169.0 730.1 566.7 432.8 360.8 321.6 301.5 p 521.8 484.7 426.5 384.7 360.6 344.2 .- f.s . '.71,662.01,374.91,103.5 947.5 863.0 814.7 TABLE 10. BENEFIT MULTIPLIERS PER DOLLAR OF NET INCREASE IN CROP PRODUCTION FROM IRRIGATION, TEXAS HIGH PLAINS Year Type of benefit 1967 I970 1980 1990 2000 2010 2015 Indirect 1.79 1.78 1.75 1.77 1.79 1.78 1.78 Stemming- from 1.24 1.27 1.50 1.74 1.90 1.99 2.04 Total 4.03 4.05 4.25 4.51 4.69 4.77 4.82 total value of crop production in 1967 but decreased to 63.6 percent in 2015. Stemming-From Benefits: These benefits are de- fined as the increases in output of sectors through proc- essing of the net increase in crop production from irriga- tion. The benefits were based on sales to final demand by the Livestock and Livestock Products Sector, the Meat Products Sector and the Crop Products Sector. Stemming-from benefits were less than indirect ben- efits prior to the year 2000. However, the stemming- from benefits were greater than indirect benefits from 2000 to 2015. The stemming-from benefits were greater than direct benefits for all selected years. Stemming-from benefits decreased by 35.8 percent from 1967 to 2015. This decrease was less than for the other types of benefits (Table 9). The benefits were less than total output of the Irrigated Crops Sector prior to I980. After 1970, the benefits were greater than total output of the Irrigated Crops Sector, although the bene- fits declined monotonically. Total Benefits: The summation of direct benefits, indirect benefits and stemming-from benefits were called total benefits. Total benefits decreased from $1.7 billion in 1967 to $0.8 billion in 2015, or 53.4 percent (Table 9). In 1967, total benefits were 63.5 percent greater than total output of the Irrigated Crops Sector. Benefit Multipliers: The indirect benefits, stem- ming-from benefits and total benefits were divided by direct benefits to estimate benefit multipliers. The multi- pliers show the ratio of total benefits generated with the net increase (direct benefits) in production from irriga- tion. The indirect benefits multiplier ranged from 1.75 in 1980 to 1.79 in 1967 and 2000 (Table I0). That is, with a $1 increase in direct benefits, $1.78 of indirect benefits would be generated in the processing sectors in 1970. The ratio for stemming-from benefits increased from 1.24 in 1967 to 2.04 in 2015. With a $1 increase in direct benefits, stemming-from benefits would increase by $1.74 in 1990 to the processing sectors. The total benefits multiplier (includes the direct benefit of one dollar) ranged from 4.03 in 1967 to 4.82 in 2015. If the direct benefits would increase by $1 in I970, total benefits generated in the processing sectors in the regional economy would increase by $4.05. ll The total of the multipliers tended to increase as the groundwater declined for irrigation crops from 1967 to 2015. The total benefits, however, declined from $1.7 billion in 1967 t0 $0.8 billion in 2015. This type of result is expected as resources become relatively more restricting in an economy. That is, the efficiency of resource use generally increases as the absolute supply is relatively more limiting. 10. 11. 12. 13. 14. l2 References Bodkin, A. W. Temporal Allocation for Maximum Value of Underground Water in Agricultural Uses! Texas High Plains. Unpublished Master’s Thesis, Department of Agricultural Economics, Texas Tech University, Lubbock, Texas, May 1964. Foote, Richard J. A Series of Releases on Calcula- tions of Agricultural Coefficients from June 26, 1969, through June, 1971. Division of Planning Coordina- tion, Office of the Governor, Texas. Godfrey, Curtis L., Clarence R. Carter and Gordon S. McGee. Resource Areas o_f Texas. Texas Agricul- tural Experiment Station Bulletin 1070. Grubb, Herbert W. Importance of Irrigation Water to the Economy of the Texas High Plains. Texas Development Board Report 11, January, 1966. Grubb, Herbert W., and Ronald D. Lacewell. Eco- nomic Evaluation of Alternative Temporal Water Use Plans on Cotton-Grain Sorghum Farms in the Fine- Textured Soils of the Texas High Plains. Texas Agricultural Experiment Station Technical Report Number 70-3, May 1970. Hirsch, Werner Z. “Interindustry Relations of a Metropolitan Area.” The Review of Economics and Statistics, Vol. 41, No. 4, November 1959, pp. 360-369. Hughes, William F., and Wyatte L. Harman. Net Returns Maximizing Irrigation Programs. Texas Ag- ricultural Experiment Station. Unpublished Data. Hughes, William F., and Wyatte L. Hartman. Pro- jected Economic Life of Water Resources, Subdivision Number 1 High Plains Underground Water Resource. Texas Agricultural Experiment Station Monograph 6, December 1969. Jones, Lonnie L. “Budgets for Irrigated and Dry- land Cotton, Feed Grains, and Wheat.” Regional and State Input-Output Models, Division of Planning Coordination, Governor’s Office, Texas, July 1970. Leontief, Wassily W. “The Structure of the U.S. Economy.” Scientific American, Vol. 212, No. 4, April 1965, pp. 25-35. Martin, William E., and Harold O. Carter. A Cali- fornia Interindustry Analysis Emphasizing Agricul- ture, Part I! The Input-Output Models and Results. California Agricultural Experiment Station, Giannini Foundation of Agricultural Economics, Giannini Foundation Research Report Number 250, February 1962. Miernyk, William H. The Elements of Input-Output Analysis. New York: Random House Company, 1965. Moore, Frederick T., and James W. Petersen. “Re- gional Analysis: An Interindustry Model of Utah.” The Review of Economics and Statistics, Vol. 41, No. 4, November 1959, pp. 360-369. Osborn, James E., and William C. McCray. An Inter- industry Analysis of the Texas High Plains, Part I. Texas Tech University College of Agricultural Sci- ences, Technical Publication T-1-102, April 1972. 15. Osborn, James E., Donald S. Moore and Don ridge. Expected Production Requirements, C N‘ Returns for Major Crops; Medium-Textured Texas High Plains. Texas Agricultural Ex Station MP-922, August 1969. '~ Texas Department of Agriculture, Texas Com!’ 16. tistics. Texas Crop and Livestock Reporting g 1970. X f 17. U. S. Department of Commerce, Census of '9 tion. Bureau of Census. Washington, D. C., _ Appendix A: Interindustry Model Sector Qode Standard industri, number Sector name classification compo _ Processing 1 Irrigated Crops Irrigated part of 0112, P1 0119, 0122 and 0123 Dryland part of 0112, 0119, 0122 and 0123 1' 2 Dryland Crops 3 Livestock and ._ Livestock Products 0132, 0134 through 0136§ 4 Ginning, Compressing and Agricultural Services 0712, 0713 and 0731 5 Mining 1011 through 1099, 131 1321, 1381 through 138 and 1411 through 1499 1511, 1611 and 1621 as "i as special trade contra 2011 through 2026 6 Construction 7 Meat Products 8 Crop Products 2031 through 2099 and through 2399 9 Other ,; Manufacturing 2411 through 3231 and '0 through 3999 ,1 10 Transportation and Communication 4011 through 4172, 421 4231, 4511 through 471 ‘x 4742 through 4789, 481 through 4899 ~. 11 Utilities 4911 through 492s and - of 4931 through 4953 , 12 Trade 4221, 4731, 9012 throu i 5022 through 5089, 50 through 5099, 5211 th ., 5311, 5331, 5399 throu A and 7531 through 7539 13 Fire, Insurance and Real Estate 14 Services 6011 through 6799 7011 through 7319, 733 through 7525, 7622 thr_ 8911 and 8931 through I» Final Payments "A 15 Households 16 Government 17 Imports 18 Depreciation Final Demand 19 Households 20 Net Change in Inventory 21 Federal Government 22 State Government 23 Local Government 24 Exports 25 Capital Formation