In 2012, Irrigation Made the Critical Difference in Nebraska

Nebraska Notebook

Dryland corn production suffered with heat, lack of rain.

Published on: May 27, 2013

The differences are stark. It's no surprise that during the blistering temperatures and persistent dryness in 2012 that dryland crop producers in Nebraska farmers didn't fare well. As I drove across much of Nebraska last summer, numerous fields of dryland corn didn't produce enough even for silage.

Contrast that with irrigated crop production in 2012. Producers with access to sufficient irrigation water took advantage of high prices and excellent yields.

As far as farm income is concerned, it was a year of "haves" and "have-nots," points out Tina Barrett, executive director of Nebraska Farm Business Inc. in Lincoln.

Here are some of the key results Barrett found for the 111 producer clients in the annual Nebraska Farm Business analysis.

IRRIGATION SAVES: Groundwater saved crops last year.
IRRIGATION SAVES: Groundwater saved crops last year.

* The irrigation-produced yields combined with high prices led to record-breaking net income per acre for commercial irrigated yellow corn as well as irrigated seed corn.

* For the top 15% of farms in the NFBI analysis, "accrual" net income exceeded $750,000. But for another 15% of farms in the NFBI analysis, income was negative.

* Overall, net farm income in Nebraska fell 8%, but it was still the second highest average on records. Barrett says this is the first time in several years that a significant amount of farms lost money. Many of those farms had a significant livestock operation or dryland crop production. However, she adds that others lost money because of risky marketing strategies that led to big hedge account losses.

* Another group of farms NFBI tracks "as our Top Efficient Farms" set a new high of $527,450 in average net income, $100,000 more than in 2011. The major change for this group is their operating expense ratio, which is just 51.3% vs. 65.1% for the whole group of NFBI producer-clients. Barrett says the ability of the "Top Efficient Group" to consistently control costs, "even when it's not necessary" keeps these farms retaining 16.2% more of every dollar of gross income.

Controlling costs is crucial to a farm's financial success, considering input costs have skyrocketed.

Barrett says the cost per acre to raise corn is more than $730, up $100 from 2011. It cost NFBI clients an average of $3.95 to raise a bushel of corn in 2012, but Barrett says many producers were well above or below that average.

While net farm worth continues to increase, total debt also is going up. From 2011 to 2012, the increase in debt was more than $125,000 per farm. Barrett says higher debt isn't necessarily a bad thing. "But if profits tighten in the future, especially without a drop in family living costs, there will be a major squeeze on the amount available to make the payments on this rapidly increasing level of debt."

Barrett issued this caution: after seven years of great prosperity in Nebraska, the health of the average Nebraska farm has improved. "Hopefully, it has been enough to withstand a few tough years when we're faced with them."

Back to the irrigation scenario.

While Nebraska is blessed with a great supply of groundwater, enough to make it the No. 1 irrigated state in the nation, aquifer declines were considerable in parts of the state last year. And for much of the central and western parts of the state, this spring's precipitation was less than folks in eastern Nebraska realize. So those groundwater declines could well continue.

In parts of Nebraska, the drop in groundwater levels led to water conflicts between irrigators and domestic well owners. Additional regulations on groundwater pumping are not out of the question.