Stewart Rogers: The TT Interview

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Stewart Rogers manages a mid-size farm west of Lubbock that has been in his family for five generations. He rents out the land to farmers who grow mostly cotton. Rogers, who is based in Dallas and also teaches at Southern Methodist University's Cox School of Business, offered his thoughts last week about farming practices in the High Plains area, which are under new scrutiny amid tightening regulations of groundwater. This interview has been edited and condensed.

TT: What do you see going on there in the High Plains with these new regulations — a first-ever cap on the amount of water pumped, plus a requirement that farmers put meters on wells? And how people are reacting to them?

Rogers: Well, I think the big issue is nobody likes to be metered, No. 1. Nobody likes any government agency or quasi-government agency metering you. Most Texans in that area, period, don’t want to be metered. You start to see gentlemen around the coffee shop or ladies or anybody saying, "What’s going to happen? Are they eventually going to ratchet us down to a point where we can’t produce?" Secondly, there's the actual cost of putting the meters out. The water’s pretty hard, so how long are meters going to last? That sort of thing. Nobody’s run thousands of meters and thousands of gallons through meters for five or six years to see what’s going to happen. [There's also an issue of the cost of the meter.]

TT: How is the drought of the past year impacted this conversation about regulation?

Rogers: Well, whenever you have a drought, all the farming practices really show their true colors. The good farmers hang on, and the bad farmers — their land even looks worse. If you were squeaking by as a medium-grade farmer, or small farmer, there was nowhere to hide this last year. People were angry that land was blowing. Essentially, they don’t take care of the land enough to keep it from blowing. And so there were parts of our community area in West Texas where it was dangerous to drive across the highway because there was a brownout, with so much dust and dirt and such coming across. Then that becomes the coffee-shop talk. "Why isn’t so-and-so taking care of their land?”

When one neighbor blows, it’s kind of like, if you have a cough and cough on me, I get the flu. It blows out the next guy’s land. ... It affects people around. And anytime you have a drought like that, you’re just watching your crop dry up. You’re watching your livelihood dry up. Even though you have insurance to cover you, I don’t know one farmer who would rather take the insurance than the crop.

TT: What are you seeing for this year in terms of planting this coming season?

Rogers: We’re about a month and half out from starting to plant, and we’ve had some moisture, but not near enough moisture to get a crop started. I’m seeing people put less chemical inputs, fertilizers and the such. There’s some residue left from last year, because you didn’t use the crop. Sometimes you get a benefit if you lose a crop — you don’t have to go back with as much chemicals the next year. But for the first time ever, I paid our bills and there weren’t any chemical bills in a particular month. I don’t know if that’s ever happened. So that tells me that everybody’s waiting and seeing if this drought is another year or not. And if so, I’ve been even thinking about how can I do analysis to short chemical companies.

TT: You’ve been in this business, and managing this business, for a long time. How’ve you seen irrigation practices change over time, and how might they continue to change in terms of water usage and conservation?

Rogers: Twenty years ago you had the water guns — almost like connecting a hose in your front yard to a sprinkler, kind of thing. It’s just a gun that squirts water so many feet. You remember, as a kid, seeing something like that. You’d see the big mist and the rainbows and stuff. ... That all ends up being evaporated water. ... The labor itself was cost-prohibitive at some point for that [because of the work involved in moving pipes], so they went to the pivot irrigations that you see. You fly over in a plane and you see what looks like crop circles. That’s what they are — pivot systems. Those brought the [water] efficiency up into the low 90th percentile. 

We’ve had a huge jump in the last 20 years in just the ability to get the right kind of water down to the crop. On top of that, those pivot irrigation systems, they use something called a wobbler, which creates a water droplet. More water gets to the crop. Instead of having a fine mist hitting it, you have a water drop hit it. There’s less surface evaporation. So that’s a tremendous improvement there.

The next level is drip irrigation. But what I see with drip irrigation is, it’s so expensive that you end up having to use more water because you want to recoup your investment. For instance, under a pivot irrigation you may get up to a thousand pounds of cotton. Under drip irrigation, you could almost double that. But the flip side is that you need double the water also. You get more benefits from each water droplet, so-called “hitting the root” directly, but you also need to run more water. A baby drinks so many liters a water a week, and an adult drinks a lot more. If you’re going to grow that much more of a plant, you’ve got to deal with that.

TT: The state has a regulatory process that designates what it wants a given aquifer to look like in 50 years. And in the High Plains, local authorities want at least half the water [in the Ogallala Aquifer] to be there by 2060. What happens then?

Rogers: If you’re at half the water, maybe more people just say, “Forget it, I don’t have enough water under my land to make it happen.” You look at alternative crops. For instance, in Amarillo you can grow corn, which is a huge, tall crop, so you can imagine the amount of water that takes. In Lubbock, you can’t grow corn because you don’t have enough water. It’s that big of a difference. ... So maybe [in 50 years] they’re growing cotton in Amarillo and not growing anything in Lubbock. You’ll have to go to some sort of alternative crops. ... Cotton’s a slow-growing crop. It takes five months to grow. You’ve got fast-growing, something like sunflower, which takes two months to grow. It’s ironic that sunflowers are almost six feet tall, and yet in two months they can grow. Another one of the issues is that the government doesn’t pay you the same [rate] of crop insurance, and sunflowers [don't get] the same kind of yield that you can get growing cotton. So cotton is your money crop. Everybody tries that first. If it fails, they’ll go back with the secondary crop.

TT: That explains a lot of things.

Rogers: So that’s another kind of issue. When the government says these are the [insurance] pay rates I’m going to pay for these kinds of things you grow, then it drives everybody to want to plant wall-to-wall cotton. And if they’re paying $1.23 in crop insurance, [the high price] last year, and you know it’s a severe drought and you know there’s a good chance you’re not going to even get your crop up, you plant wall-to-wall cotton because the crop insurance is so good. That has driven off what is usually produced in that area. So it becomes kind of a cycle that says, cotton cotton cotton, insurance support, cotton cotton will be better pricing and on and on. And it becomes a tailspin. 

TT: Let’s talk a little more about this insurance. Is it likely that we’re going to see a repeat of this past year in which ... farmers planted, they were hopeful that it would rain, it didn’t rain, and by July they were like, "Okay, this crop isn’t going to grow this year but I need to continue watering until sometime in August in order to recover crop insurance." ... Is that something we could expect again this coming year? 

Rogers: If I were an insurer, I would want you to put water on it, and hopefully you can get some sort of  yields to reduce my payout. I get where they’re coming from. But at some point my solution was, could we reduce the payout of insurance if they would just let you turn off the water? I did a little analysis on that, and I figured that by paying 10 percent less and the farmer turning off the pivot, you’re saving about 8 percent on cost. So what I’m getting at is, if I could have turned off my water and taken 10 percent less in my insurance, my insurance would have had to pay out less, and I would have utilized [less] water.

TT: One thing some people told me is that in fact insurance technically really isn’t supposed to cover drought. It typically covers things like hailstorms and freezes and maybe it can cover wind which maybe how they got into drought. But it’s not explicitly drought and the insurers may, having taken considerable losses this year, crack down more this coming year. Does that sound right?

Rogers: Well what they did last year, which was very interesting, was they asked all the farmers to produce their irrigation bills — which is really their electrical meter bills. They didn’t go so far to track and say, “Okay, this well used this much electricity.” But I think they kind of collected some data just to see if people did turn their irrigation on or not. That makes sense. Nobody likes people saying, "Show me your bills," so to speak, but it does produce a good faith effort to do it.

Now, they don’t cover drought, but they do cover yields, up to a certain point. So drought or wind or hail reduces yields. For instance, if you have an average of 900 pounds an acre, two bales an acre-type of thing, and you come out and have one-third of a bale an acre, it shows up quickly that something went wrong. Now they can walk out there and see. You can tell a crop that’s been water-stressed and a crop that’s been drought-stressed, because a drought-stressed crop won’t even get up, hardly. It’ll look like a Charlie Brown Christmas tree, if you will, versus a crop that does get up, it gets knee-high or ankle-high and it has a bunch of bolls on it and then it just shrivels away. This didn’t even have any fruit on it. It never fruited.

To put it in perspective, a tenant [of mine] that had a 900-pound yield average over the last three of the five years or whatever the scale is they do, was rated at six pounds an acre. From 900 to six pounds. So that tells you that there is nothing. If you delivered [news]papers to 900 houses and all of the sudden you were delivering to six houses — that puts it in perspective. 

TT: So that was a tenant of yours who went from 900 pounds on irrigated land of cotton to six pounds?

Rogers: Yes. ... Year after year he has great cotton.

TT: You have some interesting observations about the oil activity and water use in the area. Would you want to share those?

Rogers: There’s no doubt that it takes water to help drill and frack and maintain oil wells. In time oil wells produce water, but they’re really saline-based, and you couldn’t use it. ... There are companies out there that are actually trying to take that water and clean it up enough to make it used for irrigation. But at the end of the day, a lot of the leases out, at least in my part of the High Plains, were done way before anybody was concerned about water. As a result, the oil companies have unlimited use of your water. Now we just structured a lease in which we gave them a five-year term for water usage. And then we would re-evaluate after five years. It’s the first of its kind that I know where [a farm has] said, "Wait a minute, you don’t have unlimited rights to our water."

TT: Typically, when a company wants to drill on your land, then they’ll also get water from you?

Rogers: Yeah, they’ll drill their own water well. We actually in this last lease said you can only drill in these certain areas and you can only use that water, and we’ll renegotiate after five years. And the reason is, and this is another thing, people just say, "Oh, drill another water well" —  well the wells are so densely populated out there that when you drill a well on one tract, which is 160 acres, you affect tracts around you. It’s that fragile a system now. It used to be — drill a well and you just ran it and no big deal. But you can only put so many straws in a milkshake before it’s sucked dry.

TT: Yes. If I had a dollar every time I heard that analogy, I’d be rich.

Rogers: You just can’t go drill any particular place. I’m looking at hundreds of thousands of dollars under a pivot. A hundred thousand dollars under a pivot, and if the oil company goes and drills next to what’s in a range of my well and drops me from 400 gallons a minute to 300 gallons a minute, it can mean thousands of dollars. Their take is, you’ll make more money in oil. And my take is, it’s still a livelihood. ... It hurts my tenant, and it would be myopic for me to not be concerned about my tenant.

TT: Last thing. Are people there thinking about or concerned about climate change?

Rogers: I would think that most tenants, or most farmers in that area, are not big proponents of climate change. They live in the weather, 365 days a year. The weather, mother nature is their biggest business partner. They see changes in [the weather] — El Niño, La Niña and things like that. And they feel it and see it, but they really don’t say, "Boy, when I was a boy, it dropped down to 65 degrees every night here, and now it drops down to 67 degrees and I see it us losing 7 percent on our crop." Nobody’s thinking like that out there, I don’t see. They are worried about the level of usage of water.

There are really kind of two groups, one what I call the old-timers that say, "Turn on the hose, I don’t care how long it runs." And others are saying, "Let’s be smart about when and how we turn on the hose." Some guys will do 12, 14 revolutions, and some guys will do six or seven revolutions with the pivot. But nobody as a whole is talking about [climate change]. Nobody as a whole is saying, "Boy, we’re in a weird weather pattern and [with] this CO2 ... issue and all that, we’ve really got to wake up, America and the world, and change our habits." It’s not that they don’t want to act — think global, act local. It’s just that they don’t believe it.

Anna Whitney transcribed this interview.

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