Economic Evaluation of Stockwater Developments Used in Saline County, Kansas
Authors:   , Northup Brian 
Published: February 2023

Economic analyses were conducted on six of the most popular kinds of stockwater developments constructed in Saline County, Kansas, from 1978-85. Included were spring box and riser-flush valve spring developments, wet pit and dry pit ponds, and small and medium-sized embankment ponds. Data pertaining to county, wide development costs, lease rates for rangeland, potential increases in carrying capacity following construction of developments, and interest rates were collected from records of government conservation agencies, livestock producers who constructed developments, lease rates consigned, and local lending institutions for the relevant time period, respectively. Nominal costs of developments and lease rates were adjusted for inflation to determine their real costs (1982 dollars). Nominal interest rates were adjusted for inflation and risk premiums to calculate the mean real rate of interest for the time period. The economic viability of water developments with and without inclusion of cost-share assistance were tested. Minimal, mean, and maximal values of costs and lease rates were used to calculate the range of returns to investment, throughout the range of potential development cost*lease rate combinations that existed in Saline County from 1978-85. Break-even points were computed in animal unit months (AUM) required to pay for total net present value (NPV) of development costs. Internal rates of return (IRR) and net present values (NPV) were calculated for investment in developments at levels of returns related to 6 and 18 AUM potential increases in carrying capacity. The mean real interest rate (1.64%) was used in discounting calculations, and for comparing IRR. Development costs and lease rates of AUM possessed large inherent variabilities. Costs and lease rates used were representative of ranges of potential values commanded by these commodities in local markets. The mail survey failed to produce definitive information about livestock production in Saline County; only 28% of the surveys were returned. Production functions used in this study might not be representative for all ranches in Saline County. At full investment costs minimal cost options of smaller developments, combined with mean to maximal lease rates, produced positive investment criteria with a 6 AUM increase. Most minimal and mean cost options of developments produced positive NPV and IRR at the 18 AUM increase in carrying capacity. Cost-share payments reduced investment costs 70%, creating positive investment criteria for most cost*lease rate combinations. Medium-sized embankment ponds were the exceptions, in both instances. NPV of total costs and break-even points were reduced 46 to 50% with inclusion of cost-share assistance. This study indicates that lower cost options of the smaller types of water developments used in Saline County could yield positive economic returns with relatively low increases in carrying capacities, particularly if cost-share assistance can be obtained. The large inherent variabilities in development costs and lease rates, and the shortage of definitive data about Saline county livestock production, limits the population of inference applicable to this study. Results should be used with some caution.