Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
Snapshot of the Upper Ringarooma
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Land capability 3 Geology and Soils 4 Understanding land capability and potential irrigable land 5 Enterprise prospects 6 Indicative margins and returns
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Additional resources 12 Disclaimer 12 Industry Information 12 Contact 12
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Snapshot of the Upper Ringarooma
The Upper Ringarooma catchment is a highly productive and reliable agricultural district in north-east Tasmania. With a favourable climate – mean annual rainfall is approximately 1,200 mm at Ringarooma township increasing in the upper reaches of the catchment – the predominant land use is pasture for dairying, beef and sheep, followed by potatoes and alkaloid poppies. The Ringarooma catchment is right in the middle of the traditional north east dairy region based on red soils in the vicinity of Scottsdale through to Winnaleah, and the clay loams and alluvial soils at Pyenganna near St Helens. The main centre of Scottsdale – population 1,900 – is close by2. The privately-owned Pyengana Dairy, which is famous for its award-winning cheddar cheeses, is nearby in the hills behind the coastal town of St Helens.
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The new Upper Ringarooma Irrigation Scheme (URIS) will deliver an additional 5,700 megalitres (ML) over a nominal 120-day summer irrigation season (December to April) with the certainty of 95% reliability3. The combination of new high security irrigation water and approximately 9,000 ha of potential irrigable land, one-third of which is prime agricultural land, provides a significant opportunity to diversify and expand agricultural production in the Ringarooma catchment.
Current irrigation is based on taking water from local streams and rivers under licence. Historical irrigation water use in the catchment will soon be regulated by a Catchment Water Management Plan – a statutory water-sharing plan. It is likely that limits will be placed on new summer water licences, water access and summer take allocations. Agriculture in the Upper Ringarooma catchment – reliability, productive soils, high rainfall and irrigation.
1 Unless otherwise stated adapted from Marsden Jacob Associates 2012. Upper Ringarooma Irrigation Scheme Business Case – 5,700 ML scheme. Final report. Tasmanian Irrigation. 2 http://www.intodairy.com.au/index.php/dairy-regions-in-tasmania/15-northern-dairy-region accessed 13-9-12 3 Average reliability is defined as the sum of the actual volume of water available for supply each season for the total period assessed, divided by the sum of the annual volume of water committed for sale for the same total period (assuming the scheme continues to operate as originally designed and that original maximum supply volumes are not exceeded) and is expressed as a percentage.
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
2 Figure 1 Map of the Upper Ringarooma Irrigation Scheme
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
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Land capability
An initial land capability assessment in the wider Ringarooma catchment identified approximately 10,170 ha of potentially irrigable land. Land capability was divided relatively evenly between land capability classes 3, 4 and 5, meaning one-third was classed as “prime” land.5 Table 1 outlines the land capability of the potentially irrigable land within the proposed new Ringarooma Irrigation District. Once the formal irrigation district boundary is gazetted the actual irrigable land area may change, however the relative proportion of land capability classes will remain consistent. Land capability and potential irrigable land are explained in more detail below.
Current area under irrigation is approximately 4,000 ha, or less than half of the potential irrigable area.5 All the potential irrigable land is suited for pasture production with irrigated dairying currently the main use of water. Maps of land capability and the potentially irrigable land within the proposed new irrigation district are available from the URIS section on the Tasmanian Irrigation website: www.tasmanianirrigation.com.au.
Table 1: Land capability of potential irrigable land in the Upper Ringarooma Irrigation Scheme Land Capability Class
Proposed Formal Irrigation District (ha)
3
3,042
4
2,868
5
2,886
Potential irrigable land
8,797
Total area (irrigation district)
15,372
Note: A formal irrigation district boundary and area is yet to be declared under the Irrigation Clauses Act 1973.
4 RMCG 2010. Land capability and water demand assessment for the proposed Upper Ringarooma Irrigation Scheme. Final report. 5 RMCG 2011. Land capability and water demand assessment for the proposed Upper Ringarooma Irrigation Scheme: addendum to the assessment report dated October 2010.
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
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Geology and Soils Geology The soils in northeast Tasmania, including the Ringarooma area, are derived from Ordovician to Devonian Sedimentary Rocks, which are 380-510 million years old. During the Ordovician to Devonian period, sediments eroded from Gondwana were deposited in ocean basins off the super continent’s coast. These formed the “Mathinna Beds” of northeast Tasmania and are mainly comprised of metamorphosed sandstones and siltstones. Some smaller areas are characterised by basalt geology. Soil types The soils developed on sandstone and mudstone are varied. In the (Ringarooma) study area they mostly consist of sandy clay loams, mainly Dermosols# but also Kurosols# (mottled, grey yellowish brown gradational soils). Some soils derived from basalt (Ferrosols#) also occur in the region. (Source: RMCG 2010. Land capability and water demand assessment for the proposed Upper Ringarooma Irrigation Scheme. Final report.) #For more information on soil types refer to Isbell, R.F. 2002. The Australian Soil Classification. Revised Edition. CSIRO Publishing.
A presentation on the Climate, soils and advantages of north east Tasmania for irrigated agriculture is available from the URIS section of the Tasmanian Irrigation website: www.tasmanianirrigation.com.au
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
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Understanding land capability and potential irrigable land Land capability is an internationally recognised means of classification, used to evaluate the capability of land to support a range of uses, on a long-term sustainable basis. The classification system comprises seven classes ranked in order of increasing degree of limitation in relation to agricultural use and decreasing order of agricultural versatility. Class 1 is the best land and Class 7 the poorest. Classes 1-3 are considered “prime agricultural land” suitable for intensive cropping and more frequent cultivation. Class 4 is considered marginal for cropping activities and Class 5 suited to grazing and very limited cultivation. Generally Class 6 is considered marginal for grazing. Land capability at a particular site and hence potential land use is influenced by a range of physical characteristics, as well as the management practices employed. Complex map units are recorded when two land capability classes are identified in an area and occur in such a pattern that it is not possible to separate them at the scale of mapping being undertaken. For a complex map unit to be mapped each land class must occupy at least 40% of the map unit. In such cases the dominant land class is recorded first, followed by the subdominant land class – i.e. Class 3+2. For further information refer to the Department of Primary Industries, Parks, Water and Environment website www.dpipwe.tas.gov.au.
Potential irrigable land is the total area that may be irrigated under the proposed scheme based on land that is available for irrigation and which can be irrigated sustainably based on land capability. It is calculated from an assessment of land capability (largely land classes 3, 4 & 5), with allowances for topography, unsuitable land uses (e.g. forest reserves) and infrastructure limitations.
(Source: RMCG 2010. Land capability and water demand assessment for the proposed Upper Ringarooma Irrigation Scheme. Final report.)
The presence of threatened native vegetation and species may also affect the potential irrigable area. Refer to the Tasmanian Forest Practices Authority www.fpa.tas.gov.au and Department of Primary Industries, Parks, Water and Environment www.dpipwe.tas.gov.au for further information regarding Tasmanian legislation and policies on the protection of native vegetation and natural values.
Note: The land assessment information presented here and in any supporting maps published by Tasmanian Irrigation Pty Ltd only takes into account the physical soil, topographic, and related constraints, and does not include other parameters or any legislative, regulatory and/or policy requirements of Federal, State or Local Governments that apply to the land in question and/or which could affect a proposed land use or agricultural enterprise.
(Source: Grose C (Ed) 1999. Land Capability Handbook – Guidelines for the classification of agricultural land in Tasmania. Department of Primary Industries, Water and Environment.)
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
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Enterprise prospects
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The north east is one of the most productive agricultural areas in Tasmania and supports a diverse variety of cropping, dairy and livestock enterprises. Agricultural land in the north east is dominated by land capability classes 2, 3, 4 and 5. There are significant areas of “prime” land and some very productive and versatile soils. The high rainfall, cool, temperate climate in the elevated ranges becomes a dryer, warmer, maritime climate on the northern coastal plains. The north east has long daylight hours in summer and warm summer temperatures ideal for intensive agriculture. The region has historically produced significant quantities of processing potatoes and peas and is renowned for beef and lamb production. With increased high-security irrigation water and significant expansion in processing capacity growth in dairying is expected. Based in the region’s natural attributes there is potential to grow a range of vegetable crops, broad acre crops and berry fruit. A large lavender (essential oil) venture illustrates the region’s diversity and some hops are also still grown in the district. Currently the main enterprises in the Upper Ringarooma catchment include dairy and livestock production (beef cattle and sheep), poppies, and potatoes. Dairy There are currently 73 dairy farms representing 14% of Tasmania’s herd in the North East region with the Ringarooma catchment making up a substantial proportion of that number.8 All milk from the region is supplied to Fonterra,9 the world’s largest dairy
exporter. Increased dairy output in the upper Ringarooma is most likely to come from expanding production on existing farms and converting current dryland grazing farms to dairying. Irrigation might be used in a range of ways to improve or maintain farm returns in dairy. These include: −− increased production per cow. −− some increase in cow numbers plus increased production per cow. −− significant increase in cow numbers plus increased production per cow. −− significant increase in cow numbers but no increase in production per cow. −− maintain current cow numbers and production per cow, but reduce purchased feed. Each of these, and various other permutations and combinations, has differing implications in terms of the physical and financial response per ML of water applied, and for the amount of additional capital required for irrigation infrastructure, dairy facilities and dairy stock. Because of this there are a number of alternative gross and net margin scenarios that might emerge with extra water. Tasmanian dairying is entering a major expansion phase with key processors Fonterra, Lion, Murray Goulburn and Cadbury investing to expand their milk processing capacity at various sites throughout the state. More cows, more people, and more land are needed over the next 3 to 5 years with 40% (plus) more milk being demanded by the main milk processors. This represents in the order of 350 ML of milk to take total
6 Unless otherwise stated, the information in the Enterprise Prospects section on dairy, livestock, potatoes and poppies is reproduced from: Marsden Jacob Associates 2012. Upper Ringarooma Irrigation Scheme Business Case – 5,700 ML scheme. Final report. Tasmanian Irrigation. and Macquarie Franklin 2011, Proposed Upper Ringarooma irrigation Scheme – Enterprise Mix and Margin Assessment, Report prepared for Tasmanian Irrigation. 7 This presents a general guide only to the current agricultural production in the Upper Ringarooma Irrigation District, potential new opportunities and some of the risks associated with agricultural production in the district. The information is not exhaustive, is not an indication of likely success, and does not necessarily mean that there is an immediate market or processing capacity available to take the product. 8 Tasmanian Dairy Industry Authority (TDIA) dairy licence data 31 January 2012. 9 http://www.intodairy.com.au/index.php/dairy-regions-in-tasmania/15-northern-dairy-region accessed 13-9-12
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
7 annual milk production to 1,150 ML. New dairy farm conversions as well as increased productivity will be required to help meet this demand.10 Beef cattle and sheep Beef and sheep production continues to remain a very important component of agricultural production in Tasmania. Beef dominates the red meat industry accounting for around 75% of total farm gate value. Much of Tasmania is ideal for pasture production with grass fed beef predominating and because progeny can be finished as vealers and yearlings, Tasmanian beef is well suited to higher priced markets demanding high quality and tender beef. Some 260,000 cattle are sold annually either to local processors or to interstate buyers. Around 75% of Tasmanian livestock is processed in the state to produce branded value-added products for local and export markets.11 The remaining livestock are exported live primarily to mainland destinations for finishing or direct processing. About 65% of beef processed in Tasmanian is exported overseas. Japan is Tasmania’s most important beef market, followed by the United States. About 10% of Tasmanian beef cattle are exported live to mainland destinations annually, for finishing and processing. While the value of sheep production is less than beef production, there are some 850,000 adult sheep and lambs sold by Tasmanian farmers to local processors and intestate buyers. About 35 per cent of Tasmanian sheep meats processed in Tasmania are exported overseas, mainly to the United States and the Middle East with the majority of product consumed in Australia.12 Tasmanian Freight Equalisation Scheme statistics show that in 2008-09 approximately 329 000 sheep and lambs were sent to interstate buyers, mostly for finishing and processing.13 Store cattle and sheep can be “finished” on irrigated
pasture or forage crops. This is often done to round out a rotation including potatoes and poppies where the higher returning potato crop, for example, is used to cover the capital investment in irrigation infrastructure in the first instance, and then for the water to be used on pasture. Poppies Poppies are a major crop for Tasmania and the state supplies approximately 45 per cent of the world’s opiate-based pharmaceuticals. The crop is grown for the production of morphine, codeine and thebaine which are used in the manufacture of pain killing drugs and in cough mixtures. Poppies complement a range of crops in the farm rotation and when grown well, will yield around 2.5 tonnes per hectare. Poppies are ideally suited to mixed crop and livestock farming enterprises. There are, on average, 800 growers cultivating about 25,000 hectares of poppies annually in Tasmania.14 In season 2011/12 close to 24 000 ha was harvested state-wide by the three poppy companies (Tasmanian Alkaloids, GlaxoSmithKline and TPI Enterprises). Season 2012/13 will be another record planting year with a combined area of over 36 000 ha approved by the Poppy Advisory and Control Board. Based on previous performance, it is reasonably expected that approximately 27 000 ha will be harvested during the 2012/13 season.15 A small portion of the total is currently grown in the north east. In recent years all three processors and the Tasmanian Poppy Growers Association have expressed concerns in relation to procurement of the total area required for poppy production in the State. In previous dry seasons the companies were unable to plant sufficient area to achieve their production targets. Additional irrigation water is likely to increase reliability and output over time.
10 Dairy Tas 2012. Making more milk: filling the factories. Report prepared by DairyTas with Macquarie Franklin available at www.dairytas.com.au 11 Department of Primary Industries, Parks, Water and Environment 2009. Tasmanian Red Meat Industry Profile. Available at www.dpiw.tas.gov.au; updated Hugh Griffiths, Senior Industry Development Officer, DPIPWE, pers comm. October 2012. 12 ibid 13 Australian Government, Tasmanian Freight Equalization Scheme – 2008 Statistics – from 1 July 2008 to 30 June 2009, in Department of Economic Development, Tourism and the Arts 2011, Sector Profile and Summary – Food and Agriculture – Red Meat available at http://www. development.tas.gov.au/economic/economic_development_plan/achieving_our_vision/sector_development/sector_strategies/food_and_agriculture/ red_meat 14 Department of Justice. Poppy Advisory Control Board. http://www.justice.tas.gov.au/poppy/the_industry/Who_Can_Grow_Poppies. accessed 13-9-12 15 Department of Primary Industries, Parks, Water and Environment 2012. Developing the Tasmanian Poppy Industry: Social and economic factors influencing farmer decisions to grow poppies. Tender documentation available on www.farmpoint.tas.gov.au accessed 13-9-12
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
8 Processing potatoes Potatoes are considered the backbone of the Tasmanian vegetable industry and account for approximately 70% of the total value of vegetable production.16 The potato industry comprises three sectors – processing (80%), fresh sales (10%) and the seed potato market (10%). There are processing plants at Ulverstone (Simplot) and at Smithton (McCains) with most produce from the north east being processed by Simplot. Current total state production is around 320,000 tonnes grown on 5,800 hectares – mainly across the north of the state. Simplot’s opening potato price for season 2012/13 is $288 per tonne - a reduction of about 11% on previous season.17 The long-term trend price since 2004/05 is approximately $330 per tonne. Current issues facing the industry are increasing competition from overseas imports and over production. Contracted volumes are also down year-on-year. The industry is currently experiencing some cyclical supply and demand issues exacerbated by the high Australian dollar. However world consumption continues to increase which offers the potential for a return to more normal market conditions in the medium term.18
Further information on the suitability factors for assisting in site selection for a range of crops is available from the Department of Primary Industries, Parks, Water and Environment website, www.dpipwe.tas.gov.au/ wealthfromwater. This website also includes enterprise profiles of the market opportunities for a range of potential crops in Tasmania, fact sheets on irrigation management as well as a host of other useful tools and information.
16 Department of Primary Industries, Parks, Water and Environment 2009. Tasmanian Potato Industry Profile, available at www.dpipwe.tas.gov.au. 17 ABC Rural 24 & 27 August 2012 http://www.abc.net.au/rural/news/content/201208/s3575259.htm accessed 13-9-12 18 Hugh Griffiths, Senior Industry Development Officer, Department of Primary Industries, Parks, Water and Environment pers comm. October 2012.
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
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Indicative margins and returns
Table 2 provides indicative gross margins for a range of potential enterprises in the Upper Ringarooma. The enterprise net margins are a function of: −− Enterprise gross margins (income less variable costs). −− Dryland gross margin foregone. −− Extra farm overheads associated with the increased intensity of the farming operation. −− Extra irrigation infrastructure required (irrigators, underground mains, power supply, pump stations etc). −− Extra on-farm storage required. −− Extra livestock capital required.
Table 2: Indicative irrigated enterprise margins in the Upper Ringarooma Enterprise
Gross margin per hectare ($/ha)
Water usage per hectare (ML/ha)
Gross margin per ML ($/ML)
Net margin per ML ($/ML)
616
585
Dairying* Base margin – total dairy area
2,200
Margin with extra water
2,635
Extra gross margin
435
0.7
Extra irrigation area (%)
14%
14%
Extra gross margin per irrigated area
3,080
5.0
616
585
Livestock Finishing (stores)
860
5.0
175
35
Potatoes
5,720
5.0
1,145
910
Poppies
2,270
2.1
1085
685
*The dairy gross margin described here is an average of a number of possible scenarios with additional water applied to a current irrigated dairy farm. (Source: Macquarie Franklin, 2011. Proposed Upper Ringarooma irrigation Scheme – Enterprise Mix and Margin Assessment, Report prepared for Tasmanian Irrigation.)
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
10 Enterprise gross margins shown in Table 2 are Macquarie Franklin (agricultural consultants) estimates based on average yields and practices for the area using 2010 costs. Prices paid have been adjusted to reflect a more “normal” or trend situation. However, in general, these are similar to 2011 prices so the effect on net margins is not great. The net margins for cash cropping include an allowance for contract cultivation, planting, spraying, harvesting and cartage. Own farm labour is included as a variable cost. Irrigation costs for potatoes and poppies assume big gun or travelling irrigators rather than centrepivots - based on general practice in the area. In calculating net margins from the gross margins for the cash crops and livestock finishing enterprises the following assumptions have been used: −−
−−
−−
−−
For dairying, the margins are based on increasing the amount of irrigation for a current irrigated dairy farm using either a centre-pivot irrigator or long laterals – both of which involve substantially lower application costs than travelling irrigators. The dairy net margin is a composite figure based on a range of possible uses for the additional water. As noted previously, additional water for a currently irrigated dairy farm can be used in a number of ways, resulting in a number of alternative gross and net margins that might come from the extra water.19 These margins include the costs of pumping and associated irrigation activities, but do not include the annual cost of water.
Because of the large variation in environmental conditions, farm management systems and crop rotations, it is impossible to produce any gross and net Dryland enterprises with a gross margin of $400/ margin calculations that have universal application. ha replaced by an irrigated crop/livestock finishing The margins are highly dependent on the yield and enterprise. price received for the product. Whilst enterprise gross Extra farm overheads associated with the increased margins are useful, the broad range of both perennial farming intensity = 10% of irrigated gross margin and annual enterprises, some of which may have high earned. capital requirements for establishment and long lead time before full production is achieved, are difficult to Extra on-farm irrigation infrastructure required compare by using this methodology. Other forms of for some of the extra irrigated area - at $2,000/ investment analysis may be more appropriate to compare ha irrigated based on a farm survey (previously potential long-term profitability. Interested parties should conducted as part of the feasibility assessment for always seek independent advice and undertake their own URIS). investigations. Past performance is not an indicator of No extra on-farm storage required on the basis that future performance and every agricultural enterprise will irrigators will be able to irrigate directly from either a be different. river or pipeline or that the scheme can supply water to a current farm dam.
−− Real (net of inflation) discount rate of 6%.
19 Macquarie Franklin, 2011. Proposed Upper Ringarooma irrigation Scheme – Enterprise Mix and Margin Assessment. Report prepared for Tasmanian Irrigation.
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
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ENTERPRISE ANALYSIS TOOLS Easy to use tools are available on-line to guide farmers and investors who are considering new higher return enterprises and investing in irrigation in Tasmania.
Gross margin analysis - interactive gross margin analysis spreadsheets for a wide range of livestock, cash crops, vegetables, extractive crops, fruits and nuts which can easily be adjusted for inputs, yields and prices. Designing a Successful Business - Utilising the enterprise and gross margin analysis in a whole farm budget. This will assist businesses in making a transition and guide farm management decisions for improved profitability. It is an easy tool to help prepare a budget for a bank loan. Profitability of irrigated perennial crops - An investment module for those perennial horticultural crops where expenses are very high in the initial years and the majority of income is derived once the enterprise is fully established. Irrigation investment analysis - A worksheet to assist in planning investment in new irrigation infrastructure, plant and equipment (e.g. dams, pump types). It also considers that a new irrigation development is not always additional income – as income from current enterprises is forgone.
These tools are available from the Department of Primary Industries, Parks, Water and Environment webpage: www.dpipwe.tas.gov.au/wealthfromwater
19 Macquarie Franklin, 2011. Proposed Upper Ringarooma irrigation Scheme – Enterprise Mix and Margin Assessment. Report prepared for Tasmanian Irrigation.
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
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Additional resources
Industry Information
Tasmanian Irrigation website Upper Ringarooma Irrigation Scheme (URIS) section: www.tasmanianirrigation.com.au
Dairy Tasmania www.dairytas.com.au
−− Maps of land capability and potential irrigable land. −− Presentation: Climate, soils, and the advantages of north east Tasmania for irrigated agriculture. Macquarie Franklin 2012. Department of Primary Industries, Parks, Water and Environment www.dpipwe.tas.gov.au/wealthfromwater
Into Dairy – Dairy farming in Tasmania www.intodairy.com.au Tasmanian Farmers and Graziers Association www.tfga.com.au Tasmanian Institute of Agriculture www.tia.tas.edu.au Dorset Economic Development Group www.dorset.com.au
Invest Tasmania www.investtasmania.com.au
Disclaimer
Contact
This document has been prepared by Tasmanian Irrigation Pty Ltd and is intended to provide a general overview only. Tasmanian Irrigation Pty Ltd gives no warranty, expressed or implied, as to the accuracy or completeness of the information contained in this report or in the links or additional resources referred to therein. Agricultural enterprises and irrigation are subject to a range of production, financial and environmental risks that are not covered in detail in this report. Parties interested in investing in the Upper Ringarooma Irrigation Scheme should undertake their own evaluation and not solely rely on this report.
Tasmanian Irrigation Pty Ltd PO Box 84, Evandale, TAS 7212 Telephone: +61 3 63988433 www.tasmanianirrigation.com.au Published: October 2012 Copyright © Tasmanian Irrigation.
Upper Ringarooma Irrigation Scheme
Overview of Agricultural Opportunities
