Irrigators pursue highest-value crops to survive boom and bust

Southern Basin irrigators pursue highest-value crops to survive boom and bust

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Water demand for cotton and almonds has increased by around 400GL each in the Southern Basin. Irrigators are adapting to the 'boom and bust' of the water market by moving towards high-value crops.

Water demand for cotton and almonds has increased by around 400GL each in the Southern Basin. Irrigators are adapting to the 'boom and bust' of the water market by moving towards high-value crops.

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Water market volatility is forcing irrigators to forgo a set rotation.

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When it comes to water availability, irrigators in the Southern Basin are experiencing a 'boom and bust' pattern more commonly associated with their counterparts in the north.

The pattern has led to a volatility in the water market, with prices ranging from $50 to $1000 a megalitre year-to-year.

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Summit Ag consultant Emma Ayliffe, Griffith, who spoke about the emerging pattern at River Reflections, a conference Murray Darling Basin Authority held last week, said irrigators were adapting to the fluctuations by discarding agronomic rotations to focus on high-value crop opportunities.

"Looking at all the forecasts around climate change, this kind of boom, bust cycle is going to become common," Ms Ayliffe said.

"We're seeing a lot of our annual croppers change the way they operate as a business.

"If there's plenty of water we will go hard and grow 80 to 100 per cent of their farm with the most valuable crop, in terms of return per megalitre, to really capitalise on the years that we do have water available.

"Then growers will scratch in some dryland cereals in the years where water prices are prohibitive to growing a crop."

"They're the ones we're at risk of losing because they don't have megs of water to sell in a dry time, they really do have to diversify." - Emma Ayliffe, Summit Ag

Ms Ayliffe said cotton was generally always up there when it came to picking a high-value annual crop, while rice could be competitive in good years and durum wheat had offered top returns in the past.

"There's also few opportunistic crops that if you get them right you make good money out of," Ms Ayliffe said.

"This year was a prime example, we had a lot of water allocated at the end of October and November, which is too late to grow cotton, so we saw some guys swing to grow mung beans and sunflowers which worked out to be not a bad return on investment."

At the mercy of erratic temporary market

For growers who own permanent water entitlements, riding the highs and lows is possible, as they are able to sell their allocation to the highest bidder when the water market is too high to warrant growing an irrigated crop.

But water recovery efforts, including buybacks, has led to a proportion of irrigators no longer owning water entitlements, or relying solely on general security allocations, putting them at the mercy of an erratic temporary water market.

"They're the ones we're at risk of losing because they don't have megs of water to sell in a dry time, they really do have to diversify," Ms Ayliffe said.

Some industries like dairy have already been largely pushed out of irrigation, replaced by higher value crops such as cotton and almonds.

ABARES found in the Southern Basin there was an increase in demand of around 400 gigalitres each for cotton and almonds, for water at a fixed price of $200/ML in 2018/19 compared to 2005/06.

ABARES found in the Southern Basin there was an increase in demand of around 400 gigalitres each for cotton and almonds, for water at a fixed price of $200/ML in 2018/19 compared to 2005/06.

ABARES found in the Southern Basin there was an increase in demand of around 400 gigalitres each for cotton and almonds (for water at a fixed price of $200/ML in 2018/19 compared to 2005/06), while there was a decrease of 500GL in demand from the dairy sector.

The growth in demand for almonds and cotton outweighed the drop in demand from the dairy sector and there was increased demand of around 200GL across all irrigation activities.

Ms Ayliffe said five years ago they wouldn't have had any almond crops on their books, but now they looked after several growers and 40 per cent of their research now came from permanent plantation crops.

"People are looking at high value crops like almonds, where they can afford to play the water market when it is at $1000/ML," Ms Ayliffe said.

Almonds - cause and effect of price increases

The increase in almond plantations is not only an effect of the volatile water market, but a cause of it.

ABARES assistant secretary David Galeano, who also spoke at the MDBA conference, said they had found that current almond demand (relative to 2005-06 demand) had increased allocation prices by $25/ML.

"It's a significant amount but perhaps not as much as some people would think," Mr Galeano said.

"It's also well and truly swamped by whatever the prevailing seasons are, in a dry year prices could go up to $800/ML, compared to a wet year where water is $50 or $100/ML."

Victorian Water Minister Lisa Neville restricted new irrigation extraction licences in the lower Murray region in a bid to curb horticulture development and its impact on the rising water market in 2019, as called for by the Almond Board of Australia, but her NSW and South Australian counterparts did not follow suit.

The impact of almond expansion compares to ABARES estimate that water recovery through the Murray Darling Basin Plan has increased allocation prices by an average of $72/ML across a mix of 'dry', 'typical' and 'wet' years.

This year, the Southern Basin is riding a high, with an opening allocation of more than 20pc expected for Murrumbidgee general security water users and many irrigators are also starting with a significant carryover allocation in the bank.

"The talk is that the forecast water price will probably be around $125 to $150/ML which makes cotton and rice crops quite viable and profitable," Ms Ayliffe said.

"We're seeing guys swinging pretty hard to get as much summer crop in as they can."

Irrigators and the services that support them working hard to make the most of the opportunity - armed with the knowledge that the only thing that will follow a boom, is a bust.

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