7 Nov 2013

Irrigation costs can outweigh benefits - report

3:39 pm on 7 November 2013

A report prepared for the Government by the Treasury three years ago suggests irrigation can be a lemon for farmers.

The Potential of Irrigation report was prepared for the Government in 2010 and found the cost of irrigation at the farm gate can exceed the benefits.

It found that most of the economic benefit from irrigation schemes came from the construction activity.

Green Party co-leader Russel Norman says the report should raise a very big question for farmers.

"Across the projects, the costs were greater than the benefits at the farm gate, which then leads you to the conclusion why on earth would the individual farmer pick up or get into this kind of project when the costs are greater than the revenue returned," he says.

Dr Norman says a lot of the easier irrigation projects have been done in the past, and some of the projects now being proposed involve very high upfront capital costs.

He says if farmers are exposed to the cost of that upfront capital, it affects the economic viability of these projects quite significantly, if they are not subsidised by the taxpayer.

Dr Norman says farmers need to analyse the business case for any irrigation scheme they are thinking about investing in very closely.

However, Federated Farmers does not buy into the concerns of the Treasury or the Greens.

Water spokesperson Ian Mackenzie says the devil is in the detail and the report is too focused on the short term costs of farmers investing in irrigation schemes, not the long term benefits to them and their region.

He says analysis of investment in irrigation over the long term will show it is actually one of the best things a farmer can do.

"You can take a property that is possibly too small, certainly far too reliant in terms of uncertainty on poor weather, and with irrigation you can not only significantly increase the output, you can also get certainty of production which gives you confidence to actually spend money to produce more," he says.

Mr Mackenzie says the Treasury report is now several years old and the terms of trade for agriculture have improved dramatically since then.