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Treading water? Irrigated ag in Australia

Irrigation experienced a boom Down Under until the 1990s, then started to plateau. As one of the country’s largest irrigated farms goes up for sale, we look at the sector’s financial performance over the past decade.

 

At first sight, irrigated agriculture is no big deal in Australia. The sector accounts for just 5 percent of tilled agricultural land. But it produces nearly 30 percent of total agricultural output, and is essential to many commodities such as horticulture, grapes, rice and cotton. During the drought of the 2000s, for example, rice production nearly ceased in the country.

Irrigation matters for another reason. Agriculture uses more than half of all water consumed in Australia, and irrigated farms take up 90 percent of that. The vast majority of them are therefore regulated: irrigators need an authorized allocation to extract water from rivers, underground tables or supply systems. Some crops have got less thirsty in recent years: rice used nearly 45 percent less water in 2015-16 than it did during the previous period; the consumption of dairy farmers has nearly halved since 2012-13.

Such variability is largely explained by seasonal conditions. These also loom large when it comes to financial performance, which we assess here by zooming in on the Murray Darling Basin – Australia’s most important agricultural region. Most farmers pocketed modest incomes during the drought years of the 2000s, but their revenues increased in the following decade.

Other factors also play a role, though. The average income of dairy farmers peaked in 2013-14 before declining in subsequent years – a result of lower milk prices and higher input costs. Horticulture farms have made more cash every year since 2012-13, while rice farms went from peak to trough as water allocation volumes collapsed in 2015-16.