The dairy industry, which has sold more entitlements to the Commonwealth than any other industry, is now more exposed to higher water prices and heavily reliant on the allocation market, a new report has found.
Commissioned by the Victorian Government and prepared by Frontier Economics, the Social and Economic Impacts of the Basin Plan in Victoria report was launched in Echuca last Thursday.
The Murray-Darling Basin Plan may have resulted in cutting dairy milk production by up to 30 per cent.
‘‘Milk production in the GMID (Goulburn Murray Irrigation District) has fallen in response to both horticultural expansion and the basin plan,’’ the report found.
‘‘The milk price slump at the time of writing is putting further downward pressure on milk production.
‘‘On-farm improvements in irrigation layouts and irrigation management strategies over the past 30 years have helped dairy farmers adapt to the changes.
‘‘However, many dairy farmers will have now exhausted most of their affordable options for coping with water scarcity in terms of their substitution, efficiency, alternative supply and exit strategies.
‘‘For dairy farmers in particular this increased their farming risk; dairy farmers sold more entitlements to the Commonwealth than any other group of farmers.’’
The report found this risk was masked for four years by the high level of carryover water resulting from the extraordinarily high rainfall years of 2010-11 and 2011-12.
The milk price slump is also putting further downward pressure on milk production.
The horticulture sector owns more than 40 per cent of high-reliability water shares and would also be more vulnerable if there was more demand on the water system.
The report said the Murray-Darling Basin Authority needed to do a more comprehensive evaluation of the real socio-economic impact of implementing the basin plan.
The introduction of the plan, the experience of the drought years and perhaps even climate change have left their mark on this region.
‘‘The characteristics of water use in the southern connected basin have changed significantly as a result of the basin plan,’’ the report found.
‘‘The consumptive pool has decreased significantly and the mix of industries has changed.
‘‘In particular, horticulture — with its relatively fixed water demands — now accounts for a larger proportion of the consumptive pool.
‘‘It is now at the point where in a repeat of 2008-09 allocation levels, horticultural use could account for all the available water.’’
■The report can be found on the DELWP website.
From the report:
‘‘The dairy industry is the mainstay of the GMID. Less water delivered to dairy farms means irrigation customers’ tariffs will increase significantly unless up to 40 per cent of delivery system infrastructure in place before the G-MW Connections project began can be rationalised.’’ (G-MW 2009)
‘‘The random nature of Commonwealth water purchases across the region contribute to the difficulty of rationalising infrastructure.’’
More horticulture coming:
‘‘... the approvals process for new irrigation developments in the Victorian Mallee is currently dealing with proposals that, at maturity, will require a further 25Gl, and Lower Murray Water staff have been approached by potential investors doing due diligence on proposals that might account for a further 91Gl in the next three to five years.
‘‘Not all of these proposals will proceed, but at this stage the trend is for continued horticultural expansion.’’
The plan has taken water:
‘‘The data presented in Chapter 3 shows that the basin plan has decreased irrigation water use, especially on farms in communities in and around G-MW districts.
‘‘It has also decreased irrigated production, especially on farms in communities in and around dairy regions.
‘‘This can be expected to have flow-on effects that will show up in future Census data.’’
‘‘A key finding is that Victorian irrigators who sold water entitlements to the Commonwealth are now more reliant on allocation purchases than they would have been without the basin plan.’’
From: Social and Economic Impacts of the Basin Plan in Victoria
Leitchville-Gunbower farmer John Smith
Mr Smith raised concerns about a delay in the rollout of the Connections project on his farm, 45km out of Echuca, labelling the rollout a ‘‘fizzler’’.
Mr Smith told the panel he’d had a signed contract for more than a year, that had not been implemented.
‘‘It’s actually been going for four years, then I got a contract that’s been sitting there for 18 months and not acted on,’’ he said.
‘‘So all up it’s nearly six years and we still haven’t got this channel gotten rid of and the piping program in place, and I’ve got the piping sitting there actually, and paid for it myself.’’
He was frustrated one farmer further down the line was holding up the rollout.
‘‘He’s holding up the main user of that channel which is ourselves, we use the most water out of it and pay the most rates.’’
The panel at the Echuca water meeting, including Connections project chairman Mike Walsh, said they would ensure Mr Smith was contacted to resolve the issue.
Mr Smith said while the panel was sympathetic to the problem, it was a case of translating that into getting the issue resolved.
‘‘They’re onto it, but it’s getting from that point to actually getting something done,’’ he said.