Study: Irrigation boosts western Kansas land values by $3.8B

By Pat Melgares, K-State Research and Extension news service 
Manhattan, KS– A recent report of the value of water in western Kansas by two Kansas State University agricultural economists has concluded that land values in that part of the state are $3.8 billion greater today than they otherwise would be without access to the Ogallala Aquifer.
 
“It’s a large, substantial number and it provides evidence of just how valuable irrigation is in western Kansas,” said Gabe Sampson, an associate professor in K-State’s Department of Agricultural Economics.
 
The study takes a look at ways water is captured in order to make a judgment on its value. In this case, farmers draw water from the aquifer to irrigate farm crops and raise livestock; in 2013, the USDA’s National Agricultural Statistics Service listed sales from eight western Kansas counties overlying the aquifer at $4.7 billion, or about one-third of total agriculture revenue in the entire state.
 
“Putting a value on water is a challenge because with other commodities, we have a price for those,” said Nathan Hendricks, a professor of agricultural economics. “If you want to know the value of corn or wheat, those are traded and we have a price to assess their value.
 
“Water is not traded, per se, because it’s very difficult to make trades, so there’s not a well-functioning market for water in western Kansas. It makes it more difficult to place a value.”
 
The two economists studied the value of land in western Kansas counties overlying a portion of Ogallala Aquifer, also known as the High Plains Aquifer. In a 2019 study, they reported a difference of 53% in price between non-irrigated and irrigated land.
 
They arrived at the $3.8 billion added value on irrigated land by assuming an average price of $1,662 per acre on non-irrigated land, and approximately 2.57 million acres irrigated in Kansas counties overlying the aquifer.
 
“Any premium the irrigated land has over otherwise similar non-irrigated land provides evidence to the value that buyers and sellers put on irrigation production,” Sampson said.
 
The Ogallala Aquifer in western Kansas is considered North America’s largest aquifer, stretching more than 175,000 square miles under eight states. Farmers’ ability to pump water from the Ogallala – which has been going on for nearly 100 years — is considered a major reason for the transformation of a dry wasteland into America’s breadbasket.
 
The resource, however, is finite. And in another part of their study, Hendricks and Sampson were able to determine a market value for water coming out of the aquifer.
 
“One concern with the aquifer is depletion over time,” Sampson said. “The best way to look at the valuation that depletion has is to look at small changes in water stocks over time. What we look at is what’s called saturated thickness, which is a common measure of groundwater stock. We looked at the difference in irrigated land values between parcels that differ only in their groundwater stock under the parcel.”
 
What they found is that a one foot change in the groundwater stock is associated with a change between $3-$15 per acre in the value of irrigated land.
 
Calculated over 2.57 million acres, the market valuation associated with a uniform one foot increase in saturated thickness of the aquifer is between $8-$41 million.
 
“Hydrologists have created predictions of what saturated thickness is likely going to do leading up to the year 2050, assuming no other measures are taken and that we continue on the path that we are on,” Hendricks said.
 
“Under that simulation, we expect that in Kansas, the returns to land are expected to decrease by $34.1 million annually by 2050, compared to what those are today, because we are going to have less saturated thickness in 2050.”
 
Hendricks added that the situation may differ across parts of Kansas, but “those places that are already significantly depleted is where they are going to feel the hardest impacts of continuing depletion.”
 
The two agricultural economists also compared the impact of water availability on livestock production in western Kansas, looking at counties inside the aquifer against those just outside it. One measure indicated that having access to the aquifer increased animal sales by $2.4 billion annually in Kansas, and increased the number of cattle on feed by 2.4 million head.
 
“From a policy perspective, it’s useful to understand the value of water because we can balance that against investments made for water conservation strategies,” Sampson said. “And again, recognizing these numbers provides evidence that it’s important to recognize the value of irrigation accessibility in Kansas.”
 
The full report, titled Value of Groundwater in the High Plains Aquifer of Western Kansas, is available online at AgManager.info.