This Insight examines the implications of the Murray-Darling Basin Authority’s draft Basin Plan for irrigation-intensive industries. We illustrate the northern and southern basins’ major systems, their primary irrigation industries, respective water volume reduction levels and gross economic value.
In pursuit of a healthy, sustainable, working Murray-Darling Basin
On 26 November 2011 The Murray-Darling Basin Authority (MDBA) released the draft Basin Plan (the Plan [1]), representing one more step along the complex journey of water management reform in Australia.
The Plan proposes to reallocate 2,750 gigalitres of water per year for environmental use, currently utilised for irrigation and human consumption.
Unsurprisingly, given the multitude and complexity of differing stakeholder interests, the Plan invoked criticism from irrigators and environmentalists. However the fact that no-one is particularly happy suggests that the Plan is working towards achieving a balanced positioning between environmental sustainability and the social and economic prosperity of the affected regions.
Speculation remains around exactly how much water will be available to irrigators after the diversions and whether the reductions will come from government buy-backs or investments in water saving infrastructure.
The Plan represents complex reform and much is at stake in striving to get to a “balanced and adaptive approach to water management” [2]. Eighty-five per cent of all irrigation in Australia takes place in the Murray-Darling Basin, which supports an agricultural industry worth more than $9 billion per annum.
Shared future interests: financiers, irrigators and farmers
The Plan’s proposed water volume reductions emphasise the need for financiers to have surety around the supply of water available to their clients when considering new and existing lending for both fixed and seasonal irrigation activities.
Farmers and irrigators need to consider how to manage their external risks, with the possible need for restructuring of assets, driving on-farm efficiencies and/or investment in water efficient technology and infrastructure. The Plan has the potential to not only ensure a healthy, sustainable working Basin, but to ultimately increase the efficiency of those that rely on the water for irrigation and domestic purposes.
The MDBA invites 20 weeks of public consultation
The draft Plan release initiated the formal 20 week public consultation period during which the MDBA invites submissions from interested persons on the Plan and on the broader strategy for water reform in the Basin by 16 April 2012.
Considerations for key irrigation industries
Cotton
- The cotton industry is likely to incur a 25% reduction in gross value production as a result of the draft plan.
- Cotton growers need to be mindful of securing water, especially if they intend to forward sell part of their crop.
- Whilst investment in new technology is required, pressurized cotton irrigation could potentially be unreliable and costly for farmers.
Dairy
- Dairy farmers seem set to be one of the hardest groups hit, especially in northern Victoria.
- The proposed reductions will alter the capacity of farmers to produce milk by limiting water available for feed purposes. This coupled with ongoing pricing issues will put added stress on farm profit margins.
Rice
- A reduction in gross value of production may be greater than 30% across major rice growing regions such as the Murrumbidgee and Central Murray.
- With low market prices for rice and debt pressures still emanating from the drought conditions of the last decade, a loss of water entitlements will further stress profit margins.
Wine grapes
- Unlike seasonal irrigators who can plan their cropping based on water supply, grape growers need access to water year in year out and as such cuts will lower production.
- Cuts in water could negatively affect the value of vineyard properties as they return to production based assets rather than assets valued on both production and their associated water entitlements.
The proposed Basin Plan: an overview of impacts on catchment areas
The major systems
[1] The Murray-Darling Basin Authority: Draft Basin Plan http://www.mdba.gov.au/draft-basin-plan
[2] Delivering A Healthy Working Basin: About the draft Basin Plan , page IV, Our 10 Key Points
