South East Irrigation Scheme Stage-3

Overview of Agricultural Opportunities

Snapshot 1 Agriculture in the south east

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Land capability 4 Enterprise prospects 6 Indicative margins and returns

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Additional resources 11 Disclaimer 11 Industry Information 11 Contact 11

1

Snapshot

The south east of Tasmania has a unique climate which favours a wide range of cool temperate agricultural enterprises. Following the development of the original South East Irrigation Scheme in 1986, the area is now renowned for its high-value viticulture and perennial horticulture such as stone fruit and salad leaf enterprises. Broad acre cropping and livestock production also have a long and successful history in the area.

Tasmania - Location of Irrigation Schemes

South East Irrigation Scheme Stage 3

The current scheme operating in the Coal Valley includes two discrete sections: the 2,625 megalitre (ML) Coal Valley Irrigation District (Stage 1) and the 1,975 ML South East Irrigation District (Stage 2). The new Stage 3 South East Irrigation Scheme (SEIS 3) will increase reliable water supply by an additional 5,000 ML. It will have the capacity to be augmented by an additional 2,000 ML of winter capacity depending on future demand. Stage 3 water will be delivered within an irrigation district covering 27,650 ha (including the current Stage 1 area). The soil types spanning the region suit the different requirements of perennial horticulture and vegetable production. There is plenty of room to expand: approximately 13,000 ha is potentially irrigable land, of which approximately only 15 percent is currently under irrigation.

“Condemned as “hopelessly uneconomic” prior to its construction by the then Federal Minister for Resources and Energy, the Coal River Valley irrigation project has Centred around the historic town of Richmond, the other since its construction in 1986 proven a highly successful population centres include Sorell and Brighton. Hobart source of wealth for Tasmania’s economy. – Tasmania’s capital city – is right on the doorstep. Air, sea, road and rail transport links service the district with Hobart airport and the Port of Hobart nearby.

Processing facilities in the south east include numerous wineries, on-farm fruit packing-houses, a salad leaf packaging facility and a steam-pelletisation plant for lucerne stock feed. There is potential to further develop down-stream processing and supply chain links for food, wine and a range of agricultural products.

“...with the aim of expanding its (Tasmania’s) position as a high-end food producer, the Coal River experience stands as a model of what might be achieved elsewhere...” (Source: Australian Innovation Research Centre, May 2009. Building regional innovation capability: the impact of irrigation in the Coal River Valley.)

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

2 South East Irrigation Scheme Stage 3 Disclaimer: This map is for informational purposes only. It should not be relied upon to establish with certainty the location of any of the features represented on it either absolutely or in relation to other features. This map is not suitable for site specific decision making.

South East Irrigation Scheme Stage 1

South East Irrigation Scheme Stage 3

An ideal cool climate production region

General soils and topography

Highly suited to temperate crops.

Hills – generally stony and shallow near tops.

Low risk from severe weather events:

Slopes – dolerite-derived slope deposits (brown soils in well drained positions, black cracking in imperfectly drained positions) both generally overlying sandstone or mudstone.

- Low number of heat events in summer. - Low frost risk for autumn. - Low hail risk, both frequency and size. - Rainfall events low impact. Range of fertile soil types and aspects. Range of agricultural expertise and support.

Lower slopes – generally texture-contrast soils from sandstone/mudstone but with areas of productive basalt soil. Valley floor – generally texture-contrast with acid and/or sodic subsoils with areas of clay dominated deeper soils.

Skilled resource base. (Source: Macquarie Franklin 2012. Climate, soils, advantages of the SEIS region.)

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

3 Competitive Advantages The south east region of Tasmania has a strong broad acre, horticultural and viticultural production base and is known for high quality and reliable produce. The region’s key advantage is a mild and relatively dry maritime climate with a notable lack of extreme heat, frost, and high rainfall events. With high reliability irrigation water (>95% surety), significant parcels of suitable farmland and innovative landowners the development of the Stage 3 South East Irrigation Scheme is a significant opportunity for agricultural expansion. The benefits of developing a diversified production base in this area might include: - A wider harvest window and prolonged market access. - Seasonality of supply opportunities. - Climate risk mitigation via multi region production. - Gaining access to new markets via Tasmania’s fruit fly free status. - Proximity to Hobart airport and transport links.

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

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Agriculture in the south east

The south east is a diverse agricultural region. Current production includes wine grapes, apricots, cherries, peas, cereals, vegetables (mainly lettuces, salad crops and vegetables for seeds), olives, walnuts, lucerne, as well as sheep and cattle farming. Fruits and grapevines are usually grown on sloping land above the valley floors to aid drainage and reduce

the potential impact of out-of-season frosts. The highly fertile soils, more common in the Sorell area are ideally suited for vegetable production. It is likely that over time additional agricultural production will be driven by increased plantings of higher value ($ per megalitre) perennial horticulture and fresh vegetables and to a lesser extent extensive cropping and livestock enterprises. 1

Land capability

A land capability assessment identified that there is approximately 13,000 ha of potentially irrigable land in the irrigation district. 2 This includes allowances for existing infrastructure, urban areas and extensive native vegetation. The land capability classes range from Class 4 to Class 6, with the majority being Class 4. While there is no Class 3 land included in the current land capability survey data there are some areas – specifically around Forcett and Sorell – that are candidates for being reclassified to this level with the addition of a reliable

water source. Table 1 provides the area of the various land capability classes within the potentially irrigable land. The land capability assessment, also considers north and east facing slopes where wine grapes in particular could be grown. Consequently some Class 6 land is included. Maps of land capability, the potential irrigable land, and soil types are available from the SEIS section on the Tasmanian Irrigation website: www.tasmanianirrigation.com.au.

1 Marsden Jacob Associates, 2012. Business Case for the proposed South East Irrigation Scheme – Final Report, Tasmanian Irrigation. 2 Adapted from - Agricultural Resource Managment 2010. Assessment of current and potentially irrigable land in the south east irrigation region of Tasmania, Tasmanian Irrigation.

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

5 Understanding land capability and potential irrigable land

Potential irrigable land is calculated from an assessment of land capability, contours, soil types, zoning and field observations. It includes significant areas of land capability Class 4 and 5 potentially suited to perennial horticulture and viticulture enterprises. In addition titles smaller than five hectares with poor connectivity to larger areas of agricultural land were excluded, as were easements and roads. Native vegetation* was also mapped, and threatened vegetation excluded.

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 (Source: Macquarie Franklin, 2011. South East Irrigation Proposal, Enterprise Mix and Margin Assessment. Report prepared for and more frequent cultivation. Class 4 is considered Tasmanian Irrigation.) 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 Table 1: Potential irrigable land in the new South East influenced by a range of physical characteristics, as Irrigation District (Stages 1 and 3) 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

Land Capability Class (Complex)

SEIS 3 (ha)

SEIS 1 (ha)

Total

4

7,086

4,696

11,782

4+5

93

58

151

5

651

249

900

5+4

14

93

107

6

33

3

36

Potential Irrigable Land

7,877

5,099

12,975

(Source: Grose C (Ed) 1999. Land Capability Handbook – Guidelines for the classification of agricultural land in Tasmania. Department of Primary Industries, Water and Environment.)

*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, zoning 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.

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

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Enterprise prospects

3,4

The wider south east region of Tasmania is highly suited to summer production of temperate horticultural fruits and vegetable crops due to a favourable combination of soil and climatic conditions. The summer climate allows high quality and reliable production and is somewhat unique for its positive attributes as well as its general lack of negative ones. The temperature profile between October and April (inclusive), being below an average daily maximum of 24 degrees and above an average daily minimum of 7 degrees, is within the recommended optimal range for temperate fruit and vegetable production over this entire period. A combination of factors including the region’s southerly latitude, low altitude and close proximity to the sea moderates temperature and reduces the risk of undersirable extremes of high or low temperatures occuring. This advantage has been realised over recent years where traditional summer production areas on mainland Australia have often seen unreliable production due to a number of prolonged heat events (and, to a lesser extent, high rainfall).

The region’s climatic attributes also include a number of other criteria favouring high quality and reliable production. This includes low average rainfall (around 500 mm/year average), no high impact rainfall events (in excess of 75 mm/day), low relative humidity, low frost risk and limited damaging hail events. The combination of these factors has underpinned the expansion of wine, fruit and fresh vegetable production in the Coal Valley and will help drive development in the green field areas around Sorell, Orielton and Forcett in the future. Further information on the climate, soils and advantages of the South East Irrigation District, including a frost distribution assessment, is available from the SEIS section on the Tasmanian Irrigation website.

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.

3 Unless otherwise stated, the information in the Enterprise Prospects section is reproduced from: Marsden Jacob Associates 2012, Business Case for the proposed South East Irrigation Scheme – Final Report, Tasmanian Irrigation and Macquarie Franklin 2011, South East Irrigation Proposal – Enterprise Mix and Margin Assessment, Report prepared for Tasmanian Irrigation. 4 This presents a general guide only to the current agricultural production in the South East 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.

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

7 Wine grapes The total area of bearing vineyards in Tasmania is around 1,400ha. This has increased annually since 1994 when there were only 28ha.5 The Coal River Valley contributes approximately 17% of the total state yield – 237 bearing hectares in approximately 60 vineyards. Total state production varies greatly between seasons. It peaked at 9,630 tonnes in 2008 before falling to 5,050 tonnes in 2009 as a result of poor growing conditions, and then recovered to 7,390 tonnes and 7,790 tonnes in 2010 and 2011 respectively. At present, Tasmania seems to have been largely immune from over-supply issues and associated reduction in grape prices that have occurred in the main grape growing areas of Australia and New Zealand. While grape prices in some mainland areas have fallen to below $500 per tonne, in 2011, prices of $2,350 to $2,450 per tonne were received for Chardonnay, Pinot Noir and Riesling grapes in Tasmania.6 Much higher prices have been achieved in some years for small quantities of very high quality grapes. For a well-managed vineyard in the south east an average yield of 8-10 tonnes per hectage is achieveable for table wines and around 10-12 tonnes per hectare for sparkling wines. Cherries The Coal River Valley is one of five main cherry growing districts in Tasmania. There are approximately 560 ha of cherries in Tasmania, producing about 4,000 tonnes per annum.7 Total state-wide production is expected to expand over the next few years, mainly from current plantings. Around 50-60% of Tasmania’s total production is exported to North East Asia and, more recently, to Europe, with the remainder sold on local and mainland markets.

fruit does not need to be fumigated which is costly and can reduce fruit quality. Favourable climatic conditions in south east Tasmania result in the harvest season extending by at least four to six weeks beyond mainland producers. There is some overlap with late mainland production. Local market prices are generally high from late January but price can be affected by extra supply prior to that. Presently average farm gate prices for cherries are around $5-$6 per kilogram. However, this can vary greatly, depending on pack-out and quality. Yields can also vary greatly. An average pack-out yield is around 10 and 14 tonnes per hectare. In recent years unseasonal rain has reduced the actual yield and both quality and pack-out was down. Apricots Tasmanian production of apricots was approximately 2,700 tonnes in 2009-10 but was down in 2010-11 as a result of the summer rain in that season. The Coal River Valley climate is considered ideal for apricot production (and peaches and nectarines), with cool nights and warm days resulting in larger fruit development and relatively late harvesting. Current apricot orchards are mainly in the Richmond to Campania area. Season 2012 farm gate prices for first grade fruit are around $5 per kilogram and $2-$3 per kilogram for second grade and depend on pack-out percentages. As was noted for cherries, yields can also vary greatly. Tasmania’s late production season offers the opportunity for premium prices on interstate markets and potentially overseas where demand for counterseasonal apricots is reportedly strong, especially in Europe and the Middle East.

The Tasmanian cherry season commences around mid December and goes through until mid to late February with peak season around the second and third week of January.8 Tasmania’s competitive advantage is for late season higher quality (large) fruit. Being fruit fly free is also a significant advantage to exporters. Tasmanian 5 Wine Tasmania, 2011 Tasmanian Vintage Report. 6 Wine Tasmania, Tasmanian Wine – 2011 in review. 7 http://www.cherrygrowers.org.au/regions/ accessed 22 August 2012 8 http://www.fruitgrowerstas.com.au accessed 22 August 2012

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

8 Fresh vegetables There are currently approximately 530ha of fresh vegetable production in the wider region. Around half of that area is babyleaf salad crops (lettuce and herbs), with the remainder made up of crops such as iceberg lettuce, cauliflowers, broccoli and potatoes. The area’s main advantage is its reliability, with the ability to produce crops when other areas are either too wet or too hot and dry. All products are for fresh markets both locally and interstate. There is scope for further production in the expanded supply area, particularly the Coal River Valley and in the Sorell/Orielton area where almost half of the potential irrigable area consists of productive soils derived from basalt. Despite being an annual crop, there is still a very high capital cost in establishing new fresh vegetable production areas. Costs include land preparation, irrigation, cool room facilities and specialised cultivation, planting and harvesting equipment. Apart from baby leaf salad crops, there is also potential for expanded production of iceberg lettuce, cauliflowers, broccoli, shoulder season carrots and

fresh potatoes. Again, the reliability of the area is a key factor, with production not impacted by the hot dry summer conditions that can affect other regions. Crops and livestock There is a range of ‘extensive crop’ and livestock enterprises that might expand output with additional irrigation water. These include cereals, alkaloid poppies, peas, lucerne and finishing of store lambs or cattle. Some of these are likely to be sensitive to water prices and may be useful to transition to higher value enterprises over time. In addition, there are a number of grass and vegetable seed crops grown in the area. While these tend to be higher value, the total area and water use is small and future expansion will be limited by requirements to keep seed crops isolated. A range of other crops Based on existing production, other potential enterprises could include nectarines, apples, berry fruits, olives, walnuts, hazelnuts and turf, as well as niche crops such as fresh and culinary herbs and essential oils.

The Coal River Valley is a long established fruit growing area in Tasmania, with any wider development being hindered through the lack of irrigation supply. With adequate and consistent water availability, the wider area in the south-east will have the potential to increase production of quality apple and stonefruit (includes apricots, cherries, nectarines, peaches and plums) crops. Tasmania, having a low level of pest incidence and being fruit fly free, in particular, has access to many international markets. In cases such as cherries to Korea and Japan, Tasmania has been able to stand aside from the mainland and secure market access. The Tasmanian brand of clean and green growing conditions is very strong in international markets as well as the mainland. The brand enables Tasmanian product to sell successfully against cheaper Southern Hemisphere producers. Compared with many stone fruit producing areas in the world, the Coal River Valley has an equitable climate in that it does not suffer from climatic extremes. Rainfall is limited and hence the requirement for irrigation. The upside of minimal rain is the reduction in disease pressure and therefore the ability to reduce the use of pesticides. Low rainfall diminishes the risk of ‘wet feet’ which neither pip fruit nor stone fruit crops are able to tolerate. There are a variety of soils in the south-east region. Cherries and apples in particular are suited to a full range of soil types; however, apricots are a little fussier and dislike soil that is too heavy. Source: Taken from note prepared for Tasmanian Irrigation Pty Ltd by Earnscy Weaver, Weaver Horticulture, Central Otago, New Zealand, 16 August, 2010.

South East Irrigation Scheme Stage 3

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 south east region. Annual gross margin is normally defined as the gross income of a crop less the variable costs of production. This is generally calculated on a per hectare basis for ease of comparison with other enterprises. Crops costs have been based on current values. Crop prices used are generally those suggested by a six-year trend – subject to the availability of data. Otherwise they are based on discussions with industry contacts. Where appropriate, costs include an allowance for contract cultivation, planting, spraying and harvesting and cartage, and own farm labour is included as a variable costs. Irrigation costs for extensive crop and livestock production are based on centre pivot irrigation which has a lower operating cost than travelling gun irrigators.9 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 margin calculations or whole farm budget that has universal application. The Gross Margin is highly dependent on the yield and price received for the product. Whilst enterprise gross margins are useful, the broad range of both perennial and annual enterprises, some of which have high capital requirements for establishment and long lead time before full production is achieved, are difficult to compare by using this methodology. Other forms of investment analysis may be more appropriate to compare potential longterm profitability. Interested parties should always undertake their own investigations. Past performance is not an indicator of future performance and every agricultural enterprise will be different.

9 Macquarie Franklin, 2011. South East Irrigation Proposal, Enterprise Mix and Margin Assessment. Report prepared for Tasmanian Irrigation.

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

10 Table 2: Indicative irrigated enterprise gross margins in the south east region

Gross margin per hectare ($/ha)

Water usage per hectare (ML/ha)

Gross margin per ML ($/ML)

Grapes (mechanical harvesting)

13,400

3.0

4,470

Cherries

38,000

4.0

9,500

Apricots

32,000

4.0

8,000

Baby leaf salad

15,000

3.8

3,950

Iceberg lettuce

11,900

2.4

4,960

Cauliflowers

4,400

3.6

1,220

Broccoli

3,500

3.0

1,170

Potatoes

10,100

3.0

3,370

Poppies

2,620

3.0

875

Cereals

880

2.5

350

Processing peas

1,060

2.5

425

Field Peas

760

2.5

305

Lucerne

1,600

6.0

270

Pasture – finish store cattle and lambs

550

3.5

160

Enterprise Perennial Horticulture*

Fresh Vegetables

Extensive crop and livestock

*At full production (Source: Macquarie Franklin, 2011. South East Irrigation Proposal, Enterprise Mix and Margin Assessment. Report prepared for Tasmanian Irrigation.)

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 www.dpipwe.tas.gov.au/wealthfromwater

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities

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Additional resources

Industry Information

Tasmanian Irrigation website, South East Irrigation Scheme (SEIS) section:

Coal River Products Association www.coalriverproducts.com.au

- Maps of soil types, land capability and potential irrigable land.

Wine Tasmania www.winetasmania.com.au

- A frost distribution assessment of the South East Irrigation Scheme, including viticultural potential.

Fruit Growers Tasmania www.fruitgrowerstas.com.au

- Presentation: Climate, Soils, Advantages of the SEIS region. Macquarie Franklin 2012.

Tasmanian Farmers and Graziers Association www.tfga.com.au

www.tasmanianirrigation.com.au

Tasmanian Institute of Agriculture www.tia.tas.edu.au

Department of Primary Industries, Parks, Water and Environment www.dpipwe.tas.gov.au/wealthfromwater 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 South East 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 Published: October 2012

Copyright © Tasmanian Irrigation.

South East Irrigation Scheme Stage 3

Overview of Agricultural Opportunities