From The Grand Junction Daily Sentinel (Dennis Webb):
The secondary economic impacts of paying western Colorado farmers to temporarily fallow fields in times of drought could be similar to the secondary benefits resulting from the spending of those payments, a new study has found.
But BBC Research and Consulting says the dollars from payment spending would flow to different businesses, potentially shifting from smaller, agriculturally focused communities to larger towns and cities.
In addition, the payments would only benefit the regional economy if they come from outside western Colorado, because payments originating on the Western Slope would only result in shifting money around within the region as opposed to creating a new economic benefit, the study says.
The research was commissioned by the Colorado River Water Bank Workgroup, which consists of the Colorado River District, the Southwestern Water Conservation District, The Nature Conservancy, the Tri-State Generation and Transmission Association, the Uncompahgre Valley Water Users Association, the Upper Gunnison River Water Conservancy District and the Grand Valley Water Users Association.
It’s intended to help gauge the impact on local agricultural economies should Western Slope farmers participate in voluntary, temporary, compensated fallowing as part of a demand management program involving Upper Colorado River Basin states including Colorado.
Such a program is being considered as a means for the states to be able to store extra water in Lake Powell so they can continue meeting their water delivery obligations to downstream states in times of drought, and head off potential mandatory curtailment of water uses under an interstate compact…
The study looks at fallowing grass hay, alfalfa and corn. It estimates that regionally it would cost an average of $236 per acre-foot of water involved, or about $470 per fallowed acre, to get farmers to participate. It says producers also may require payments covering direct fallowing costs, such as weed and pest control, and payments also may have to be made to irrigation companies for lost revenues and added management costs.
The study evaluates a moderate, 12,700-acre hypothetical fallowing program involving 25,000 acre-feet of water a year for five years across western Colorado, and a more aggressive, 52,100-acre program that would involve 25,000 acre-feet a year for five years within each of four major Western Slope river basins.
The study finds that the moderate approach would result in a minimum of a $5.7 million annual reduction in crop production, and the aggressive approach, at least a $23.2 million reduction.
Those reductions would result in an estimated loss of at least 64 or 260 on-farm jobs, respectively, although most of those would involve the farmers themselves who are being compensated.
The study estimates that when comparing that compensation to their lost farm income, farmers collectively would come out at least $2.2 million ahead each year in the moderate scenario and $8.6 million ahead in the aggressive approach.
The bigger focus of the study is what secondary effects would result from the fallowing due to impacts on businesses such as farm and ranch suppliers, and businesses providing household goods and services to affected workers.
In the moderate scenario, the study estimates at least 55 secondary jobs would be lost to reduced crop production, while there would be an increase of at least 27 jobs resulting from spending of fallowing payments.
Under the aggressive scenario, at least 236 secondary jobs could be lost from reduced production, compared to at least 109 new jobs being supported related to payment spending.
But the study says there could be a net annual gain of $546,000 in secondary income from the fallowing under the moderate scenario, and $2.4 million under the aggressive one.
Doug Jeavons, managing director at BBC Research and Consulting, said that despite the net job loss, the new jobs that would be created could tend to be in banking and finance, and those could pay more than the lost farm-related jobs.
The fallowing would mean fewer sales of seed, fertilizer, hauling services and labor, but could boost spending in areas such as purchase of vehicles and farm machinery, with some of the fallowing payments also being used for household consumption and reducing debt…
The study also says annual net secondary income also could fall with fallowing, by as much as $393,000 under the moderate scenario and as much as about $1.46 million under the aggressive one.
This could happen if farmers spend less of their fallowing money locally. It also accounts for the possibility that reduced forage production from fallowing could affect the livestock industry, driving up hay prices and causing ranchers to reduce herd sizes.
It says that based on what has been historically seen when it comes to hay production declines in the region, the moderate fallowing approach could result in just over a 0.5% drop in livestock production and a $3 million drop in annual livestock sales, and the aggressive approach, a possible 2.2% production drop and $13.4 million annual revenue loss.
The Colorado River District said in its news release that its board hasn’t weighed whether a fallowing program is good for the Western Slope, but is gathering data through efforts such as the study to determine if it would have negative impacts, and if so, at what scale.
It also said if a demand management program is created in Colorado, Western Slope agriculture would only be part of the solution and Colorado River users in all parts of the state must contribute water to the program. This would include Front Range cities that divert that water across the Continental Divide…
Speaking on a river district webinar Thursday on the study, Sonja Chavez, general manager of the Upper Gunnison River Water Conservancy District, said any Western Slope fallowing program won’t be one-size-fits-all, and would have to be structured to address local concerns such as soil impacts…
One concern in her district is that parts of it may have such shallow soils that they could take three to five years to recover from fallowing.
Another consideration is that some western Colorado basins export substantial amounts of hay to other states, and even other countries.
If fallowing primarily reduced exports, effects on local livestock production might be minimal.
But BBC Research and Consulting’s report notes that hay exporters may be resistant to jeopardize customer relationships by fallowing fields…
BBC Research and Consulting says measures such as split-season versus full-season fallowing could reduce economic impacts from fallowing, and ensuring that participation is spread widely across and within various river basins could spread out the impacts.
Chavez likes the general idea of widely distributing fallowing, but says that could increase costs for monitoring such a program, evaluating results and ensuring that conserved water makes it downstream to be stored rather than being used elsewhere.
The new study may be found at http://www.coloradoriverdistrict.org/supply-planning/studies-reports-2/.
The webinar can be watched at http://www.coloradoriverdistrict.org/annual-seminars.