28 September 2007

Colorado Agriculture Irrelevant

Farming and ranching account for just 0.6% of Colorado personal income. Most of the decline took place between 1973, when it made up 7%, and 1978, when it dropped to about 1.5%. Agriculture peaked again, around 1990 at about 3% of the state economy, but has dropped more or less steadily since then to its current levels.

The state, which has a population of roughly 4.6 million people, had 31,000 farms in 2005 with an average 1,007 acres. Nationally, a quarter of people in farm occupations account for about 97% of U.S. farm production, although it is hard to tell if Colorado is representative in this respect. Moreover, as technology grows more sophisticated, the productivity of farmers goes up, which leads to bigger farms with fewer farmers and fewer farm voters.

Almost according to forecasts from the state demographer, every rural front range county except Morgan (county seat Fort Morgan) and Logan (county seat Sterling) will see its share of the state's population decline in the census in 2010, 2020 and 2030. The same forecast applies to most of the San Luis Valley. Most of the state's growth is expected to occur in the I-25 corridor (although Denver, Jefferson County, Boulder and Arapahoe County, all home to many landlocked central cities and first ring suburbs, will also decline in their share of the state's population), and in countries with tourism and mining driven economies.

"Hunting, fishing and wildlife watching generated $2.4 billion in revenue in Colorado in 2006, according to a recent U.S. Fish and Wildlife Service survey."

In 2004, crops generated $1.3 billion in revenues in the state (roughly the same as 2003), while livestock generated $4.2 billion in revenues ($3.6 billion in 2003). Corn is the state's leading crop (as opposed to livestock product) in revenue terms, producing $316 million of revenue from 950,000 acres planted in corn in 2005.

Colorado farmers and ranchers combined had $1.3 billion in net income in 2004 ($0.85 billion in 2003), and in 2004, $221 million of that came from government payments.

The decline of agriculture in economic clout has a number of consequences. One is that in battles between tourism uses of water and agricultural uses, tourism is gaining the upper hand. Another is that it is just a matter of time before agriculture gives way to development in the West. As I noted at dkospedia, citing figures from sources current when I wrote it in October of 2004:

Urban users of water pay tens times a much per gallon as agricultural water users for water. . . . [I]n Colorado, 90% of water goes to agriculture, 7% to residential users, 2% to industrial uses, 1% to "stock water" and less than 0.5% to commercial users. . . . The two biggest demands that municipal water users in the arid West place on water are lawn watering (54% of residential water use goes towards landscaping) and watering golf courses (1 golf course used the same amount of water as 750 residential households, which is more than 2,000 people). Major industrial and commercial users (factories and car washes mostly) use a significant share of the rest of urban water. Other domestic and commercial uses (dish washing, showers, drinking, toilets, etc.) are a fairly small share of total water use in urban areas in the arid West. . . . [I]n many Western states the tourism value of fishing and canoeing exceeds the economic contribution to the state that comes from irrigated farming, the dominant use of water in the West. For example, in Colorado, agriculture contributes $700 million of net income each year to the state's economy, while boating, fishing and hunting contribute $1,050 million of net income each year to the state's economy.

Thus, there is considerable room for Colorado to develop recreational water uses and urban growth at the expense of agriculture, blue grass lawns and golf. If almost all Colorado water were used for urban uses, and landscaping were dramatically cut back, Colorado has enough water to support about 80-90 million residents, and if Colorado's urban development continued at that breakneck pace (which few people believe that it will for reasons unrelated to water), the economic clout of the urban economy would be more than sufficient to buy out agricultural water users.

Even without population growth, urban water users are increasingly going to grow tired of scrimping on their water use with low flow toilets and buckets to reuse shower water to water their house plants, when none of those sacrifices would be necessary if agricultural water users could make their irrigation operations just 5% more efficient. The state constitution protects rural water user rights, but farmers don't have the votes to win an urban v. rural ballot issue battle, if the state constitution became a barrier, and the federal constitution, while it protects contract and property rights against arbitrary state action, is hardly an ironclad defense against regulation of those rights.

Various other factors also don't bode well for the future of crop farming in Colorado. Farm subsidies are growing increasingly unpopular. Global warming means that Colorado's farm country is likely to grow more arid. Rising oil prices make fertilizer and fuel and lubricants for farm operations more costly. Colorado's recent crack down of immigration may not have reduced public expenditures any, but they appear to have put pressure on the agricultural labor force. Rising crop prices driven by ethanol production are the only saving grace in the agriculture sector's future.

Also, government payments to farmers for select cash crops are the most obvious form of government subsidy to farmers, and Colorado, generally speaking, has a pretty small share of them, because neither livestock nor fruits and vegetables, both of which make up fairly large shares of the Colorado agricultural economy, receive direct subsidies of this kind. Corn is the main crop that generates direct crop payments in the state. But, there are other less direct government subsidies for the rural economy. At the federal level, BLM grazing permits are made available at probably less than a fair market rate and livestock indirectly benefit from crop payments through cattle feed. At the state level, there are large per student state subsidies of many rural schools (more than double what Denver receives in some cases), favored treatment of agriculture for the purposes of sales taxes and property taxes, state expenditures for water projects that largely benefit rural users, subsidies for rural health care, and state funding for the rural road system are among the subsidies. There is no organized campaign to dismantle the web of programs put in place in an age when agriculture was more central to Colorado's economy, but it also have increasingly few political defenders.

Nobody denies that food as a necessary part of any economy. But, the question is whether Colorado's arid plains are a sensible place to grow it with irrigated agriculture. Increasingly, agriculture is looking like an area where the state is competitively disadvantaged.

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