Irrigators’ considerations for investment in farm
irrigation systems: learning from farm case studies
Rabi Maskey and Rob O’Connor
Irrigation delivery system
Supply wheel
Upgraded/automated main supply channel
Plastic lined main supply channel
Solar powered control box
Farm Water Program
– Farm Water Program (also known as On-farm Irrigation Efficiency
Program) is about achieving farm water savings through improved
farm irrigation
– The water savings are shared between farmers and the environment,
with at least half the water savings transferred to the State or
Commonwealth environmental water holders
– Invest over $200 million of government money
– Approximately 400 projects been funded
Farm Water Program
– The program assess the water savings – based on
•
•
•
Soil type
Types of crop grown
Technology to be adopted
– Half of the water savings transferred to government
For example:
•
•
•
Say a landowner saves 100ML
Then he/she will receive (eg. $1800/ML X 50ML= $90K) on transfer
(90 ML)
the balance (eg. up to $1800/ML X 50ML= $90K) after the
completion of the work
On-farm irrigation systems
Centre pivot
Pipe and riser
Improved border check irrigation
Laser grading
On-farm irrigation systems
Re-use system
Linear move system
Computerised scheduling system
Is the irrigation investment
financially viable
to my situation?
Outline of presentation
– Identify whether or not irrigation investments
are viable from irrigators’ perspective
– Identify the reasons for irrigators’ participation
in the Farm Water Program and the learning
from it
– How the learnings are shared with other
irrigators and the broader industry
Case Study approach
–
–
–
–
–
5 case studies
Examined ‘without’ and ‘with’ project situations
Partial budget analysis & discounted cash flow analysis
Project life 20 years
7% real discount rate
– Economic criteria used:




Net Present Value (NPV)
Benefit-Cost Ratio (BCR)
Internal Rate of Return (IRR)
Period to break-even (years)
– Sensitivity analysis
Summary of five case studies
Case Study 1
Case Study 2
Case Study 3
Case Study 4
Case Study 5
Improved
Border- Check
Irrigation
Automatic
Irrigation
Improved
Border- Check
Irrigation
Pipes and
Risers
Centre Pivot
Industry
Dairy
Dairy
Cropping
Cropping
Cropping
Project area
24 ha
24 ha
65 ha
109 ha
25 ha
Crops ‘without’
project
Perennial
pasture
Perennial
pasture
Barley and
wheat
Rye grass and
oats
Rain-fed wheat
Crops ‘with’
project
Perennial
pasture
Perennial
pasture
Canola, wheat
and lucerne
rotation
Canola, wheat
and lucerne
rotation
Canola and
wheat rotation
Irrigation
technology
Project costs
Costs (per ha)
Irrigation
technology
Industry
Capital cost
Annualised capital
cost*
Improved
Border Check
Irrigation
Automatic
Irrigation
Improved
Border Check
Irrigation
Pipes and
Risers
Centre Pivot
dairy
dairy
cropping
cropping
cropping
$2,994
$1,627
$2,700
$3,300
$4,120
$283
$154
$255
$312
$390
-
$38
$30
$26
$98***
$52
$66
$82
Annualised other
costs**
$122
Maintenance cost
$60
Notes:
*Assumes 20 year life project with 7% discount rate
**Once off decommissioning costs, pasture re-establishment costs, removal of lucerne
*** Includes yearly licence fee
Project benefits
Industry
Production
benefits
Water saving
benefits
Improved Border
Check Irrigation
Automatic
Irrigation
dairy
dairy
cropping
cropping
cropping
2 t DM/ha/year
No productivity
benefits
High value crop mix;
increased production
High value crop mix;
increased production
High value crop mix;
increased production
5% of water applied
6ML/irrigation
(reduction of leakage
in channels) and 20%
of the water applied
2.4 ML/ha/year
Improved Border Pipes and Risers
Check Irrigation
7ML/irrigation
(reduction of leakage
in channels) and 20%
of the water applied
Time saving
benefits
4 hrs/
irrigation
7.5 hrs/
irrigation
30 hrs/
irrigation
36 hrs/
irrigation
Vehicle use
benefits
-
36km less
travelled/irrigation
60km less travelled/
irrigation
70km less
travelled/irrigation
Government
incentives
$28,700
$18,500
$81,000
$180,000
Centre Pivot
-
Targeted water
application
possible
-
Irrigation
complemented the
use of increased
fertiliser input to
increase
productivity.
-
Pumping cost of
$30-$40/ML in
addition to the
cost of water
None
Case Study approach
– 7% discount rate (opportunity cost of capital)
Year 0
1
2
3
4
5…. 20
most costs (now)
most benefits
some costs
bring it to today’s $
(Present value of the investment)
Benefit cost analysis with incentive
Industry
Net Present Value
Benefit-Cost Ratio
Internal Rate of Return
(%)
Period to break even
Improved
Border Check
Irrigation
Automatic
Irrigation
Improved
Border Check
Irrigation
Pipes and
Risers
Centre Pivot
dairy
dairy
cropping
cropping
cropping
+$90,200
+$5,600
+$266,000
+$545,000
1.60
1.09
2.2
2.2
14%
8%
27%
30%
8 years
9 years
5 years
4 years
Did not receive
incentive
Benefit cost analysis without incentive
Improved
Border Check
Irrigation
Automatic
Irrigation
Improved
Border Check
Irrigation
Pipes and
Risers
Centre Pivot
dairy
dairy
cropping
cropping
cropping
Net Present Value
+$62,850
-$11,985
+$185,000
+$365,000
+$29,357
Benefit-Cost Ratio
1.42
0.81
1.8
1.8
1.24
10.5%
0.37%
16.5%
16.5%
10.4%
12 years
>20 years
7 years
7 years
12 years
Industry
Internal Rate of Return
(%)
Period to break-even
Learnings
The key benefits from investments are:
• Production benefits
 2 t DM/ha/year (dairy)
 high value crop rotation and increased production
(cropping);
• Water savings
 ↓ 2.0ML/ha/year (dairy)
 ↓20% of water application (cropping)
• Save time chasing water for both cropping and dairy,
i.e. automation of irrigation infrastructure
Learnings
• Capital costs can range from $1,625 to $4,120 per
hectare depending on the type of technologies
• Energy costs could be a significant ongoing operating
cost for pressurised irrigation systems. For example,
the energy cost for a pipe and riser system is likely to
be in the range of $7-10/ML and $25-40/ML for a
centre pivot system
• The Farm Water Program provided funds for irrigators
to implement irrigation upgrades quicker than would
have been possible without these incentives
Learnings
• The size of the productivity improvement is the key to
the viability of irrigation infrastructure investment
• Water savings and labour savings only (without
productivity increase) are unlikely to make the
irrigation infrastructure investment viable
Extending the learnings
Farm walks
Irrigation Expo
Workshop for service providers
Publications
Thank you.