Who uses the water and on what?
This article is part two of a series on Murray Darling water and implications for sustainability. I have used information from the following:
- Water as an economic good
- The National Water Account
- The Murray-Darling Basin Authority
- and generally, ABS and ABARES data
MDB is short for Murray-Darling Basin.
Gl means 1,000,000,000 litres of water - approximately the size of 400 Olympic swimming pools
Ml means 1,000,000 litres of water. This enough to cover a hectare to a depth of 10cm on a quarter acre block (~0.1 hectares or 1000 sq m) to 1 metre high.
In this article, I provide some analysis on who uses water for what purposes in the Basin.
Please see the following link for an interactive view of water in the Murray-Darling. I obtained most of my data from this site. http://www.bom.gov.au/water/rwi/#sf_tt/292/2018 Also a pdf of basin information from 2011-12.
How did I produce this analysis?
I have collected information from the ABS, ABARES, BoM and Agriculture to piece together land use, crop production, pricing and water usage. The figures are going to be inaccurate to some degree but they do show some clear evidence that there is something to be seen here. Why have I had to do this analysis? Mainly because the statistics provided are focused on farmers, irrigators and those with a commercial interest in agriculture or irrigation. Here, I am interested in a social good perspective on the economics of irrigation in a Basin that has mixed arid, dry land and wetland agriculture with 3 million people dependent on the MDB for water and their livelihoods.
So – the numbers may not be accurate but they will not be far wrong. To get a better set of figures would take more time than I can devote to this. Treat what is presented as arguable and good enough to have the necessary discussions around Water Policy.
Water, Uses and Value
Land use in the Basin
Pasture includes cattle sheep, pigs, chickens and other animals
We are concerned with the 2% of land that is irrigated. Productivity of irrigated land is greater than that of non-irrigated in the MDB. For rice and cotton, there is no crop without irrigation. Of additional interest is the 0.3% urban usage. These are discussed at the end of the article.
Across the MDB there is high variability of rainfall. Timing of rain is also vastly different. Volume of rain also varies markedly. Farm types are therefore very different and irrigation serves to provide water when there is none at the time crops and animals need it. In some cases as for rice, cotton and citrus fruit, there would be little of that agriculture without irrigations. However, only 2% of the total landmass in the MDB is irrigated.
|WATER USE ON AUSTRALIAN FARMS, 30 June 2017|
|AGRICULTURAL WATER USE|
|Agricultural businesses (‘000)||88.1||36.1|
|Agricultural businesses irrigating (‘000)||22.1||9.2|
|Total water use (‘000 ML)||9 969||6 663|
|Water applied for irrigation (‘000 ML)||9 104||6 377|
|Water applied for other agricultural purposes (‘000 ML)||865||285|
|Change in total water use from 2015-16 (%)||8.9||27.9|
|SOURCES OF AGRICULTURAL WATER|
|Irrigation channels or pipelines (‘000 ML)||3 714||2 874|
|On-farm dams or tanks (‘000 ML)||1 324||732|
|Rivers, creeks or lakes (‘000 ML)||2 899||2 282|
|Groundwater (‘000 ML)||1 820||713|
|Recycled/re-used from off-farm (‘000 ML)||137||51|
|Town or country reticulated mains supply (‘000 ML)||72||11|
|Other water sources (‘000 ML)||3||0|
Note that on farm dams and tanks may be an under estimate.
Water Usage per Land Use Type
I will start with land use types
- in 2016-17 FY:
- The number of businesses applying water in 2016-17 fell 3% to 22,100, down from 22,700 in 2015-16. This reflects the increased water availability in 2016-17 due to average and above average rainfall across most of Australia.
- Total volume of area watered increased 4% to 2.2 million hectares in 2016-17. Increases to area watered for rice, cotton and pasture fed off are driving the national increase in 2016-17. The increase in volume applied was driven by a large increase in NSW, up 46% to 3.8 ML, primarily for rice and cotton crops.
- Pasture, cereal and other crops for grazing accounted for the largest area of crops irrigated during the 2016-17 period with 598,000 hectares, up 4% from the previous year however the total volume of water applied to pastures for grazing fell 8% , down to 1.5 million ML. Victoria, which irrigates the largest area of pasture, cereal and other crops for grazing had a 12% decrease in the volume of water applied (down to 793 thousand megalitres). This is attributed to the higher rainfall in 2016-17 compared to 2015-16.
- Area of irrigated cotton increased 55% in 2016-17 to 328,000 ha. Increases were seen in both New South Wales and Queensland, up 50% and 65% respectively. This reflects the 59% increase in area planted for irrigated cotton in 2016-17, with a 52% increase in New South Wales and a 71% increase in Queensland. The increase in area planted in 2016-17 is due to increased water availability with higher than average rainfall seen in parts of NSW and QLD. The volume of water applied to cotton increased 79% to 2.6 million ML, with a 66% increase in New South Wales and a 108% increase in Queensland.
Gross Value per Ml of Irrigation Water Used
This chart should say most of what needs to be said. There are some uses of water that are not very efficient users of irrigation water. High Value broadacre crops (food oil mainly), fruit, viticulture, nuts, vegetables for human consumption and market gardens are clearly the most efficient.
Compare this with the Volume applied to each commodity in Figure 5. Cotton, grazing, rice and sugar cane get the largest amounts of irrigation water. It is almost in inverse proportion to the economic value gained.
Of additional interest is the fact that the Southern Basin is where most of the high value added production occurs. Abstraction higher up in the MDB is used for lower value added uses.
The above chart Figure 6 uses five data sets to calculate the gross value of the produce for each farm type (actually a commodity type). Pricing comes from ABARES from ABS Gross Value across Australia. Total area of production per commodity comes from ABARES. Water usage per Ha for irrigated farm type form the ABS. A Yield Difference Factor, (again developed by the ABS) was used to adjust for the differences in productivity for irrigated land growing the commodity. ABARES Yield per Ha data was used to cross check Gross Value per Ha calculations.
GV/Ml = Gross National Value/Area under cultivation/Water Usage per Ha * Yield Difference Facto
Water for People
The previous analysis focused on water for agriculture. What about water for people? People need water for many things:
- Employment (industry, commerce and services all need water to operate)
- Recreation – sporting facilities etc
- Many other uses
Lets look at two easy to analyse factors that matter to people. Domestic water and industrial water. Domestic water costs around $3,000-$4,200 per Ml and is used for most of the needs identified above. It therefore has at least this economic value. How much is it worth if you have no domestic water? Maybe the price of bottled water at around $1 per litre or $1 million per Ml.
For industry the ABS has figures that suggest that small scale light industry adds some $108,000 of value per Ml of water. Calculations of lost GDP in Adelaide as a result of the Millennium are in line with this figure NPV adjusted.
Adelaide is at the bottom of the MDB and 40% of its water comes from the MDB. SA GDP is limited by lack of water. If there is a 2,000 fold greater value of water in Adelaide, a rational economic mind would surely say “let the water flow to the Lower Murray”.
The latest estimate form the MDBA is that as many as 3.5 million people rely on the MDB for their water. This number is increasing due to growth in the Canberra Region and Northern Basin.
|Nurseries, flowers and turf||1.1|
|Vegetables for human consumption or seed||1.1|
|Fruit and nut trees||1.4|
|Other broadacre crops||4.5|
|Other cereals for grain or seed||2.3|
|Pasture or crops for grazing||7.8|
I found the Yield Difference Factor interesting. It suggests that there is a great benefit to be gained by irrigating pasture, broadacre crops and cereal grains. There is a benefit and that is why farmers irrigate to get more produce from their farms.
The YDF is just a statistical adjustment and not a measure of yield increase. It adjusts for the proportion of land devoted to irrigation of the commodity type. That is why I used it in my analysis.
Evaporation is a large pachyderm in the corner. It is easy to think that water left in a river will only be wasted, especially when you see a dry river downstream. Water evaporates in the basin at a rate higher than the rainfall. However, this is calculated across the whole surface area and evaporation from water flowing in a river channel is relatively low. It is when water is stored in shallow dams with large surface areas that evaporation rates are extremely high. Even then, the water cycle returns some 30% of inland evaporation as increased inland rainfall. Not all is lost.
Economic Value and Tradeoffs
Farmers can easily see the benefits of irrigating their farm. Increased productivity and therefore profits and sustainability matter to them. The same farmers find it harder to see the water passing their property as a common resource. This is one of the reasons that water Policy has a hard time gaining traction with rural communities.
Figure 7 shows the usage and cost of distributed water, which is delivered through pipes of some kind. Agricultural water is usually not treated to the same level as industrial and household water. What the chart shows is that that water used for agriculture is the more than half the total used for all purposes and less than 10% of the total cost. Agricultural water is priced according to the distribution, storage and infrastructure costs to deliver it, rather than the value of water as a shared commodity. Limits on usage so that extraction is fairer are through entitlements and allocations that are administered through a complex system in the MDB.
In short, the entitlements granted to farms greatly exceed the amount of water available in all but the highest rainfall years. A Ml of water for agriculture can cost between $30 and $90 compared to $3-4,000 for domestic supply. Domestic and, to some extent industrial, water has treatment and high reliability storage costs included that agricultural water does not. Water pricing is more complex than this when taking into account water trading … use the analysis here as a starting point and an indication as to how farmers think about using water.
How do you convince a farmer that they should forego water that they could use for their own benefit to leave it in the river? When water is cheap for farmers to buy they will use it for purposes that generate relatively low value add – they still make more money by irrigating than by not doing so. If you only need to get $50 more value from using a Ml of water then it is easy to make the choice to use it to irrigate pasture and get 7 times the production for a few months as a result.
Rice. It only makes economic sense to grow rice when there is an abundance of water in the system and therefore all other “normal” water demand is satisfied. In effect this is what happens in the MDB. Rice is a planned crop that can be planted in good years and the land devoted to more water efficient purposes in drier years. This is what has been observed in the Murrumbidgee Irrigation Area when validating water pricing models for water trading. In this case economics works.
The Big Tradeoff
In economic terms there is an In microeconomic theory, the opportunity cost, also known as alternative cost, of making a particular choice is the value of the most valuable choice out of those that were not taken. See https://en.wikipedia.org/wiki/Opportunity_cost for the... More when someone consumes a resource to produce a gain. This analysis shows that there are indeed opportunity costs when low value activity consumers water and thus deprives downstream users of a resource that could have made more money.
Another article will discuss water entitlements, allocation and change in rural communities.