Recently, I’ve had the opportunity to work with several investors who were looking at purchasing an irrigated farm in the Midwest. The attraction was multi-faceted… A. The tax benefits of depreciating the equipment; B. Lower real estate taxes stemming from the less productive soils; C. Increased rents and yields; D. The opportunity to grow specialty crops; and E. The abundance of cheap available water. In addition to these benefits, irrigated land has also been appreciating at a rate that matches, if not exceeds, dryland tracts as reported here… Federal Reserve Bank of Minneapolis newsletter.
These benefits are appealing to many farmers and investors, even though most areas of the Midwest have productive soils and enough rainfall to produce good crops without any added water. All that said, in other parts of the country, “water wars” are breaking out. In the western plain states, there’s a fight brewing between landowners in Nebraska and landowners in Kansas over the amount of water that can be pumped. A recent article in the Omaha World Herald (Work Continues on Water Compliance) outlines the problems that landowners face when too much water is taken for irrigation use, thus deplenishing the aquifer that the units source. And worse yet is the tug-of-war in California where agriculture must fight the urban demand for water on a daily basis both in the courtroom and in the field (Water Managers Weigh Implications of Order).
So will irrigation become more popular throughout the Corn Belt? I think it can but farmers and investors need to learn from their western cousins and be prepared for the fresh water fights that may be on the horizon, especially near large cities (think Chicago) where clean water is becoming more scarce. And don’t be surprised when governmental authorities from the local county health department to the Environmental Protection Agency or the Army Corp of Engineers try to take control of this resource. In many parts of the world, water is a more precious commodity than oil. Fortunately, this hasn’t been the norm in the Midwest and with wise use and foresight, it hopefully never will be.
