EVALUATING THE DAIRY INDUSTRY’S ECONOMIC CONTRIBUTION AND WATER UTILIZATION IN THE SOUTHERN OGALLALA AQUIFER REGION

The dairy industry in the Southern Ogallala Aquifer Region has continued to grow in the past decades. As dairy cow inventory continues to expand in the region, so do complementary economic sectors. It is essential to understand the dairy industry’s contribution to the regional economy as public concerns grow over the diminishing availability of water. Thus, this research focuses on the dairy industry’s economic contribution in the region as well as the water impact (direct and indirect) on the Ogallala Aquifer. Cows use water both directly and indirectly. Direct water use is water used by cows for drinking and facility maintenance. Indirect water use refers to water used for crop production, which is fed to cattle.
This study analyzed the dairy industry’s contribution to the regional economy for 120 counties that make up the Southern Ogallala Aquifer Region. IMpact analysis for PLANning (IMPLAN) was used to estimate the direct, indirect, and induced economic contribution of the dairy industry in terms of income, economic output, and employment in the region. Direct and indirect water usage were evaluated using an estimated inventory of dairy cows and a representative ration per cow unit for the Texas High Plains, which was assumed for the entire region. Inventory data were estimated from 2000 to 2020 to provide insight into the continued growth in the region. Dairy cow inventory in the Southern Ogallala Aquifer region increased from 156,513 dairy cows in 2000 to 852,841 in 2020, with milk production in 2020 being approximately 19.3 billion pounds. Results indicate that milk production in the Southern Ogallala Aquifer region is valued at $3.4 billion in direct economic output, generating a total regional economic contribution of approximately $7.6 billion. Milk processing has a value of $3.4 billion in direct economic output, generating a total regional economic contribution of $4 billion. Combining production and processing, a total direct economic output of $6.8 billion results in a total economic contribution of $11.6 billion for the dairy industry in 2020. Overall, milk production and milk processing contribute to approximately 10,305 in direct employment, generating 31,431 total jobs in the region. Direct water usage is estimated at 62,095 acre-feet for the area, accounting for 3.3 percent of the overall water used in dairy farms. The majority of the water use is indirect, and a large portion of that is imported virtually through crops from other parts of the country, as the Southern Ogallala Aquifer region demands more feedgrains than the amount of supply that is available locally. However, in this study, all indirect water was accounted for, regardless of the origin, for a total indirect water usage estimate of 1,832,598 acre-feet. Note that this estimate would be much lower if only considering crops grown and fed from within the Southern Ogallala Aquifer Region. Gauging the regional economic contribution for milk production against direct water use results in approximately $121,859 in economic output generated per acre-foot of water, while indirect water use results in approximately $4,129. The value when combining direct and indirect water use is $3,994 in economic output per acre-foot. Water is a vital resource for all agricultural production, and most of the study area solely relies on the Ogallala Aquifer as the primary water source. Estimated water use is increasing, and the Ogallala Aquifer’s withdrawals vastly exceed the recharge rate. Growing concerns about the reduction of water may have people questioning whether the economic benefits of the dairy industry justify the water use. This study provides awareness of the current economic contribution that the dairy industry brings to the regional economy. Overall, this analysis suggests that the dairy industry in the Southern Ogallala Aquifer region increases the economic activity, employment opportunities, and the value of water. The continued growth of the dairy industry may continue to benefit the region because, as water levels decline and irrigated agricultural crop production shifts to dryland, dairies and milk processing facilities are a higher-value use of water than traditional crop production in the region. Processing facilities such as the new Cacique and Hilmar continue to emerge in the region, suggesting that the dairy industry will continue to grow, as will the industry’s economic contribution.