rabi maskey and rob o’connor
DESCRIPTION
Irrigators’ considerations for investment in farm irrigation systems: learning from farm case studies. Rabi Maskey and Rob O’Connor. Irrigation delivery system. Supply wheel. Upgraded/automated main supply channel. Solar powered control box. Plastic lined main supply channel. - PowerPoint PPT PresentationTRANSCRIPT
Irrigators’ considerations for investment in farm irrigation systems: learning from farm case studies
Rabi Maskey and Rob O’Connor
Irrigation delivery system
Upgraded/automated main supply channel
Plastic lined main supply channel
Solar powered control box
Supply wheel
Farm Water Program– Farm Water Program (also known as On-farm Irrigation Efficiency
Program) is about achieving farm water savings through improved farm irrigation
– The water savings are shared between farmers and the environment, with at least half the water savings transferred to the State or Commonwealth environmental water holders
– Invest over $200 million of government money
– Approximately 400 projects been funded
Farm Water Program– The program assess the water savings – based on
• Soil type• Types of crop grown• Technology to be adopted
– Half of the water savings transferred to government
For example:• Say a landowner saves 100ML• Then he/she will receive (eg. $1800/ML X 50ML= $90K) on transfer
(90 ML)• the balance (eg. up to $1800/ML X 50ML= $90K) after the
completion of the work
On-farm irrigation systemsCentre pivot Pipe and riser
Laser gradingImproved border check irrigation
On-farm irrigation systemsRe-use system
Linear move system Computerised scheduling system
Is the irrigation investment financially viable to my situation?
Outline of presentation– Identify whether or not irrigation investments
are viable from irrigators’ perspective
– Identify the reasons for irrigators’ participation in the Farm Water Program and the learning from it
–How the learnings are shared with other irrigators and the broader industry
Case Study approach– 5 case studies– Examined ‘without’ and ‘with’ project situations– Partial budget analysis & discounted cash flow analysis– Project life 20 years– 7% real discount rate
– Economic criteria used: Net Present Value (NPV) Benefit-Cost Ratio (BCR) Internal Rate of Return (IRR) Period to break-even (years)
– Sensitivity analysis
Summary of five case studies Case Study 1 Case Study 2 Case Study 3 Case Study 4 Case Study 5
Irrigation technology
Improved Border- Check
Irrigation
Automatic Irrigation
Improved Border- Check
Irrigation
Pipes and Risers
Centre Pivot
Industry Dairy Dairy Cropping Cropping Cropping
Project area 24 ha 24 ha 65 ha 109 ha 25 ha
Crops ‘without’ project
Perennial pasture
Perennial pasture
Barley and wheat
Rye grass and oats
Rain-fed wheat
Crops ‘with’ project
Perennial pasture
Perennial pasture
Canola, wheat and lucerne
rotation
Canola, wheat and lucerne
rotation
Canola and wheat rotation
Project costsCosts (per ha)
Irrigation technology
Improved Border Check
Irrigation
Automatic Irrigation
Improved Border Check
Irrigation
Pipes and Risers
Centre Pivot
Industry dairy dairy cropping cropping cropping
Capital cost $2,994 $1,627 $2,700 $3,300 $4,120
Annualised capital cost* $283 $154 $255 $312 $390
Annualised other costs**
$122
- $38 $30 $26
Maintenance cost $60 $98*** $52 $66 $82
Notes: *Assumes 20 year life project with 7% discount rate**Once off decommissioning costs, pasture re-establishment costs, removal of lucerne*** Includes yearly licence fee
Project benefitsImproved
Border Check Irrigation
Automatic Irrigation
Improved Border Check
Irrigation
Pipes and Risers
Centre Pivot
Industry dairy dairy cropping cropping cropping
Production benefits
2 t DM/ha/year No productivity benefits
High value crop mix; increased production
High value crop mix; increased production
High value crop mix; increased production
Water saving benefits
2.4 ML/ha/year 5% of water applied
6ML/irrigation (reduction of leakage in channels) and 20% of the water applied
7ML/irrigation (reduction of leakage in channels) and 20% of the water applied
- Targeted water application possible
- Irrigation complemented the use of increased fertiliser input to increase productivity.
- Pumping cost of $30-$40/ML in addition to the cost of water
Time saving benefits
4 hrs/irrigation
7.5 hrs/irrigation
30 hrs/irrigation
36 hrs/irrigation
Vehicle use benefits
- 36km less travelled/irrigation
60km less travelled/irrigation
70km less travelled/irrigation
Government incentives
$28,700 $18,500 $81,000 $180,000 None
Case Study approach
– 7% discount rate (opportunity cost of capital)
Year 0 1 2 3 4 5…. 20most costs (now)
most benefits
some costs
bring it to today’s $
(Present value of the investment)
Benefit cost analysis with incentiveImproved
Border Check Irrigation
Automatic Irrigation
Improved Border Check
Irrigation
Pipes and Risers
Centre Pivot
Industry dairy dairy cropping cropping cropping
Net Present Value +$90,200 +$5,600 +$266,000 +$545,000
Did not receive incentive
Benefit-Cost Ratio 1.60 1.09 2.2 2.2Internal Rate of Return (%) 14% 8% 27% 30%
Period to break even 8 years 9 years 5 years 4 years
Improved Border Check
Irrigation
Automatic Irrigation
Improved Border Check
Irrigation
Pipes and Risers
Centre Pivot
Industry dairy dairy cropping cropping cropping
Net Present Value +$62,850 -$11,985 +$185,000 +$365,000 +$29,357
Benefit-Cost Ratio 1.42 0.81 1.8 1.8 1.24Internal Rate of Return (%) 10.5% 0.37% 16.5% 16.5% 10.4%
Period to break-even 12 years >20 years 7 years 7 years 12 years
Benefit cost analysis without incentive
Learnings
The key benefits from investments are:• Production benefits
2 t DM/ha/year (dairy) high value crop rotation and increased production
(cropping); • Water savings
↓ 2.0ML/ha/year (dairy) ↓20% of water application (cropping)
• Save time chasing water for both cropping and dairy, i.e. automation of irrigation infrastructure
• Capital costs can range from $1,625 to $4,120 per hectare depending on the type of technologies
• Energy costs could be a significant ongoing operating cost for pressurised irrigation systems. For example, the energy cost for a pipe and riser system is likely to be in the range of $7-10/ML and $25-40/ML for a centre pivot system
• The Farm Water Program provided funds for irrigators to implement irrigation upgrades quicker than would have been possible without these incentives
Learnings
• The size of the productivity improvement is the key to the viability of irrigation infrastructure investment
• Water savings and labour savings only (without productivity increase) are unlikely to make the irrigation infrastructure investment viable
Learnings
Extending the learnings
Farm walks
Irrigation Expo
Workshop for service providers
Publications
Thank you.