NPSI review july 2010

Across Eastern Australia drivers for change in irrigated farm businesses include: reductions in water allocation, increase in allocation variability, high market volatility, increased regulation as a result from competition for water with urban, industrial and environmental use.

So it is interesting that while a number of “macro” variables directly affect the capacity of our farmers to make better choices and medium term plans, most of the work and effort is on managing the short term e.g. improving water productivity at the paddock level.

In addition, many of our best irrigators are already reaching high levels of crop water use efficiency.

The underlying hypothesis in our project is that there are opportunities to increase water productivity in $ of farm income/ML by improving the allocation of resources at the whole farm business level, and this is the focus of this project.

The key research question is then: How to increase returns per ML of water available at the whole farm level?

Here we will talk about three things we are doing to support farmers in answering this question:

The first is to develop the required modelling tools to represent complicated irrigated farm businesses that take into account the availability of land, water, infrastructure, labour, machinery, capital, the farmer and its farm management

Second is that to achieve this we needed to engage farmers to help us identify and understand their issues, constraints and opportunities for improvement in their businesses

And third, is the need to capture the diversity of business types across the different irrigated agro-ecologies by developing a network of real case studies that could help us to scale out learnings across within and across regions.

Let us go into a bit of detail by looking at some examples. (1Mb pdf)

Case Studies

This project makes extensive use of computer models as material for analysis and discussion. These models, intended to mimic "real" farms, are used to evaluate the effect of alternative management practises and business strategies; in the hope that these alternatives can increase profitability in an environment of reduced water availability and high climate and market variability.

Participating farmers provide us with details of their particular farm: its physical structure and their current management strategy. This takes place over a series of interviews where the research team visits the case study farm for a couple of hours, discussing the farm and refining the model to be sensitive to the management questions that emerge. At the same time, a research question of their interest is formed, which will become the basis of further discussion.

During these interviews we develop insights into the drivers behind that particular farm's strategy. We have started 7 case studies across Eastern Australia, and described our initial findings for each (the map below, and on the sidebar). As more discussion takes place, these documents will be extended to include quantifications of management alternatives specific to each farm.

Given that a significant amount of financial data is disclosed, these case study farmers remain anonymous, and we refer to each by location only.

So what have we learned so far? In brief:

• That our participating farmers are generous with information
  
• With the exception of the Emerald farm, all farms are facing declining water allocations.
  
• All are interested in balancing the need for profit against the benefits of crop rotations.
  

View in a larger map.

In the case of cotton, despite its gross margins being higher than most broad acre rainfed crops, farming systems which include high yielding cereals grown on limited water are proving as profitable per megalitre of water (Garcia de Figueiredo and Rodriguez, 2007). This is the reason why more and more growers see themselves as ‘irrigation growers’ rather than as cotton growers, and are interested to identify opportunities that maximize farm profitability. Under this scenario and in view of present and future trends in climate and water availability (IPCC-WGI Fourth Assessment Report, 2007), the greatest threats for irrigators, as identified by the Scoping Study CCC CRC (McRae et al., 2007) are:

• the impact of increased variability and decreased reliability in water supply,
• the lack of capability and guidance on how to transform irrigated farms into profitable and viable irrigation farm businesses,
• the formulation of mitigation policies designed by governments ignoring the economic-social-environmental consequences of alternative policy options.

In addition to present drivers for change, future climate change suggests 16-25% reduction in average Murray-Darling stream-flows by 2050 and 16-48% reduction by 2100 (Pittock 2003; Christensen et al 2007). This is likely to have dramatic implications for irrigation water allocations in the Riverina (Jones and Pittock 2003) and other parts of the Murray-Darling system; for example, Jones and Page (2002) suggested that a 15% drop in annual rainfall by 2030 would mean a 50% reduction in irrigation allocations for the Macquarie catchment. These projections mean that irrigation enterprises might need to implement both adaptive and major transformational changes, i.e. farming practices and farm businesses strategies/re-location, respectively, to ensure the long term viability of their business.

Clearly, increased climatic variability, ongoing structural adjustment, and expected climate change make the increase in preparedness and adaptation to change an urgent and unavoidable task for our irrigation industries. Better prepared (i.e. better informed and capable to act), and adapted (i.e. improved agronomic practice and more resilient farm business designs), are paramount to increase water productivity. We believe that productivity gains need to be found at both the paddock/single enterprise, and the whole farm business levels.

At the paddock level irrigation efficiency (yield/ha) could be improved by:

1. Reducing evaporative water loss through the delivery system to the crop, by changing irrigation systems.
2. Reducing drainage and runoff losses by matching water application rates to crop demand (deficit irrigation) and soil capabilities.
3. Increasing grain yield per unit of applied water, by the strategic use of suboptimal irrigation amounts.

At the whole farm business level irrigation efficiency ($/ML) could be improved by:

1. Designing more resilient and profitable farm businesses, e.g. enterprise mix, resource allocation, scale of the business, reduction in overhead costs, contracting vs. own machinery.
2. Optimising water allocation between alternative enterprises across all sources of water (runoff, river and bore) and soil types.
3. Improving the profitability – risk profile of the farm business by changing cropping intensities and quantifying and improving the management of risks (i.e. climate and economic).