Water Value Adding
Reform in water allocation and pricing in Australia will raise the cost of water for agriculture. This will encourage:
- a shift to crops that need less water.
- increased water efficiency in irrigation practices.
- more value adding to agricultural commodities (local processing of commodities into higher value products) prior to export.
Readings
Adding value to water embodied in agricultural commodities
Value Adding - Albury Wodonga Business
Albury Wodonga leads the nation as a centre for value adding. Meat is turned into pet food, timber into newspaper, grapes into wine, milk and cream into designer cheeses, wool into fine fabric.
Value-Adding to Horticultural Produce - Food Science Australia
From post-harvest practices and processing to recipe development, packaging and consumer acceptability assessment, right through to storage, transport and distribution optimisation, Food Science Australia can provide technical support.
How much value does rice growing add to the water it uses?
Water and our Natural Resources - Rice Growers' Association of Australia
The rice industry recognises that our natural resources are a valuable asset for Australian agriculture. In the past ten years our Australian rice farmers have improved water use efficiency by 60% - this means they now grow more rice and use much less water.
Our Australian rice growers use 50% less water to grow one kilo of rice than the world average.
Kilolitres of water used per kg of rice (Murrumbidgee Valley) |
|
|---|---|
1985 |
2.1 |
2000 |
1.1 |
Kg of rice produced per kilolitre of water |
|
1985 |
0.48 |
2000 |
0.91 |
Water rights trading and leasing will encourage water value adding.
Water revolution creates investment potential - Rod Meyer, The Age, 17 July 2004
Recent water reforms mean farmers can now trade water rights. This should gradually allow the market to allocate water to highest value-added ends, within the bounds of environmental rules keeping irrigation away from degraded or unsuitable areas.
[This] will push water to high value-added crops such as horticulture and away from rice and some pasture irrigation, says Irrigator and businessman John Crosby.
Water allocation cuts will encourage less water intensive agriculture
Support for the Namoi Valley - New England North West Area Consultative Committee
[Reduced water availability in the Namoi Valley will result in:]
- a reduction in the capacity to produce of all irrigated crops and some specialty crops .
- an expansion of dry land crops, mainly wheat and sorghum.
- a small expansion in feedlot cattle and small decline in grazing cattle enterprises.
Waterproofing the Continent
ATSE
Australia is a relatively dry continent in which water scarcity is exacerbated by climate variability. Demand for water is rising, mainly from increasing irrigation activity and in areas of rapid population growth. So too is community insistence on the need to provide more 'natural' river flows for the benefit of the environment. The challenge for industries, governments and water resource managers is to strike a balance between these competing demands.
A more sustainable mix of activities emerges from a scenario involving significant changes to existing institutions for water allocation and technologies of water use. The combined effect of these changes is a transfer of water away from low value-adding water uses, often to higher value-adding uses, enabling some water to be reallocated to the environment without great economic penalty.
A pathway to prosperity
Through its first two scenarios, the study shows that continued growth of the irrigation sector under existing or non-adaptive water-use arrangements compounds stresses on water resources in some regions. A third water-use scenario, the Adaptive Management Scenario, shows how the potential growth of irrigated agriculture can be achieved, despite obvious water constraints.
The Adaptive Management Scenario simulates future water use under a new suite of water allocation polices. They include some irrigation development in new parts of Australia, the move to full recovery of water supply costs accompanied by more sophisticated water markets, and improved efficiency of water use and delivery.
Under this scenario it is assumed that pasture-based industries such as beef and dairy production can continue to grow by substituting other inputs for water. For example, they can buy in dry feed, rather than improve on-farm pasture production through irrigation. It is also assumed that the cotton industry can find adequate land, climatic conditions and water resources in Queensland and Western Australia to support its growth prospects.
The Adaptive Management Scenario estimates national water use in 2020-21 at 27,400 GL, with no increase in use in the Murray-Darling Basin. Regions with a faster-than-trend growth in water use are South Australia, the northern coast of Queensland and the Kimberley region of Western Australia. There is less economic development in the Queensland part of the Murray-Darling Basin, compensated for by additional development of the cotton industry elsewhere in Queensland. The agricultural economies of New South Wales and Victoria continue to grow significantly.
No new inland diversions are needed from rivers in the northern part of coastal New South Wales, although limited diversions occur in northern Queensland. Similarly, there is no need for long-distance pipelines to bring water from the tropical north to parts of Western Australia and South Australia. It is more efficient to locate productive activities where the resource is still abundant, such as in the mid-north of coastal Queensland and tropical parts of Queensland and Western Australia.
The result is that the Australian economy grows at almost the same rate as in the Trend Scenario. Although the regional distribution of activities is different, the share of agriculture in the economy remains much the same.
Redistributing the resource
Australia's sugar industry is expanding into Western Australia's Ord River District, an area with abundant water resources available to meet the needs of agricultural growth. Expansion into the Kimberley region is also a possibility for the cotton industry. Such shifts in the regional distribution of intensive irrigation industries are central to the study's Adaptive Management Scenario. The scenario encourages more efficient water use in existing activities and a comparative shift to more intensive forms of irrigated production where the marginal value of water is higher.
Trading up to a sophisticated water market
Given the high level of commitment of the resource in some major irrigation areas, growth opportunities can be realised only if markets exist to deliver water to the most productive activities.
Water trading is an equitable way of achieving structural adjustment in irrigation regions. Trading exposes the opportunity cost of water, which is its value in alternative uses to all farmers, whether or not they trade. It enables marginal producers who hold significant water entitlements to realise an asset that was previously valueless unless used or sold with the land.
The study shows that there is enough water in the low-to-marginal value end of the irrigation market to supply all the likely long-term growth needs of higher-value intensive irrigation activities in the Murray-Darling Basin.
2006.04.24