Strategy Memo on Water Rights and Usage

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Memorandum

To: James Sterns AEB4325

From:Anthony Alberts
Manager Director Progress Milling

Date:1/29/2013

Re:Strategy Memo on Water rights and usage

Water rights and usage

As a manager of a privately owned milling company and privately owned corn farmer, I would conduct a SWOT analysis of how this trend could affect the competitive market of agribusiness firms as well as internally with my company.

1. How could Ag water rights and water usage alter the competitive environment of agribusiness firms?

Strengths:
* A common argument against permanent and long-term water transfers is that it gives farmers an advantage since they pay a mere $500 per acre-foot compared with the district’s selling price of $5,850 per acre-foot. Making the water readily available at a subsidized cost. * Progress mills could sell property with water rights, because the water rights could increase property values 5–10 times the original price. Water can enable the production of agricultural crops worth up to thousands of dollars per acre on land where nothing at all could be profitably grown without it. This will make it more difficult for competitors to enter the market because of high start up costs of purchasing lands with water rights. * Water rights can be sold, transferred or modified even though water rights are attached to the land, a water right can be legally transferred from one piece of land to another. Therefore making the competition field much tougher if we own the majority of the water in the area. Driving water prices up.

Weakness:
* You can lose your existing water rights if a water right is idle and isn’t put to “beneficial use” at least once every five years, that water right will be lost or “relinquished” and go back to the state. * Indirectly the competition can strengthen by solely selling water for a season or two during a drought and the water price will skyrocket and they will not suffer as much once they...
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