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Meander Valley Agriculture Study MVC & DEDTA

Davey & Maynard Page 0

Meander Valley Council Department Economic Development Tourism & Arts

Meander Valley Agriculture Study

July 2010



Foreword

Davey & Maynard has been retained by the Meander Valley Council (MVC) and the Department of Economic Development Tourism & Arts (DEDTA) to undertake a study to inform decision and policy making at both State and local government levels in relation to the use of additional water coming from the Meander Valley Irrigation Scheme (MVIS). In particular a detailed assessment of the following key issues was requested;

1) Farming patterns and the profile of the district’s agriculture and processing sectors prior to the commissioning of the MVIS.

2) The investment and production plans and intentions of irrigators in the district who are or will be accessing water from the MVIS.

3) The potential of new irrigation supplies to raise productivity and gross margins both at the farm gate and in downstream processing businesses.

Both levels of government have expressed an interest in encouraging and facilitating the flow of water to the highest value uses either through expanding or improving existing enterprises or through the introduction, development and promotion of new higher value enterprises.

In proposing the Meander Valley Agriculture Study the MVC and DEDTA were mindful of the history of other irrigation schemes within the State such as the Cressy-Longford Irrigation Scheme (CLIS), Winnaleah Irrigation Scheme (WIS) and South East Irrigation Scheme (SEIS), which have taken an extended time to fully utilize the available water, and in the case of SEIS, in particular, has involved a wholesale change in the type of agriculture undertake.

Are there lessons from these schemes that might assist in promoting a more rapid move to highest and best use of water from the MVIS? Are there new enterprises that particularly suit the climate and resources of the Meander Valley area that could be fast-tracked in some way? Or is the best option an expansion of enterprises that already have a proven track record in the municipality? Will there be a requirement to provide additional resources to ensure best use of the additional water so as to maximize the returns to local businesses, the community and the State?

These are the types of questions behind the decision of the MVC and DEDTA to undertake the Meander Valley Agriculture Study.

Author Contact: Lance Davey Davey & Maynard PO Box 31 Devonport TAS 7310 Phone (03) 6424 9311 Mobile 0438 139401

[email protected]

mailto:[email protected]



CONTENTS

1 SUMMARY ....................................................................................................................................................................... 1

1.1 AGRICULTURAL PROFILE ....................................................................................................................................................... 1 1.2 CLIMATE ............................................................................................................................................................................ 1 1.3 MEANDER VALLEY IRRIGATION SCHEME (MVIS) .................................................................................................................... 2 1.4 MVIS WATER USE AND CONSTRAINTS .................................................................................................................................. 2 1.5 MARKET PROSPECTS............................................................................................................................................................ 3 1.6 POTENTIAL GROWTH & DEVELOPMENT STRATEGIES ............................................................................................................... 4

2 MEANDER VALLEY MUNICIPALITY ................................................................................................................................. 7

2.1 LOCATION .......................................................................................................................................................................... 7

3 AGRICULTURAL PROFILE OF THE MEANDER VALLEY.................................................................................................... 9

3.1 LAND USE .......................................................................................................................................................................... 9 3.2 STOCK NUMBERS .............................................................................................................................................................. 10 3.3 CROPPING ........................................................................................................................................................................ 12 3.4 TOTAL AREA IRRIGATED ..................................................................................................................................................... 14 3.5 VALUE OF AGRICULTURAL PRODUCTION .............................................................................................................................. 16 3.6 POPULATION & EMPLOYMENT ........................................................................................................................................... 19 3.7 MAJOR INFRASTRUCTURE ................................................................................................................................................... 20

4 MEANDER VALLEY CLIMATE......................................................................................................................................... 23

4.1 RAINFALL.......................................................................................................................................................................... 23 4.2 TEMPERATURE ................................................................................................................................................................. 25 4.3 IRRIGATION REQUIREMENTS ............................................................................................................................................... 27

5 MEANDER VALLEY IRRIGATION SCHEME .................................................................................................................... 28

5.1 INTRODUCTION ................................................................................................................................................................. 28 5.2 WATER RIGHTS ................................................................................................................................................................. 28 5.3 SCHEME CAPITAL COST ...................................................................................................................................................... 29 5.4 MVIS WATER USE 2008-09............................................................................................................................................. 29 5.5 MVIS LAND CAPABILITY .................................................................................................................................................... 30

6 MVIS WATER USE AND CONSTRAINTS ........................................................................................................................ 34

6.1 PREVIOUS FARM SURVEYS .................................................................................................................................................. 34 6.1.1 September 2001 Survey .......................................................................................................................................... 34 6.1.2 August 2002 Survey ................................................................................................................................................ 35

6.2 2010 FARM SURVEY ......................................................................................................................................................... 36

7 MARKET PROSPECTS ................................................................................................................................................... 43

7.1 INTRODUCTION ................................................................................................................................................................. 43 7.2 DAIRYING ......................................................................................................................................................................... 43 7.3 CASH CROPPING ............................................................................................................................................................... 46

7.3.1 Poppies ..................................................................................................................................................................... 46 7.3.2 Processing vegetables ............................................................................................................................................. 46 7.3.3 Processing potatoes ................................................................................................................................................ 47 7.3.4 Fresh vegetables ...................................................................................................................................................... 48 7.3.5 Cereals ...................................................................................................................................................................... 48 7.3.6 Pasture seed ............................................................................................................................................................ 49 7.3.7 Pyrethrum ................................................................................................................................................................ 49



7.3.8 Field peas ................................................................................................................................................................. 49 7.3.9 Canola and canola seed .......................................................................................................................................... 50 7.3.10 Wasabi ................................................................................................................................................................ 50

7.4 PERENNIAL CROPS ............................................................................................................................................................. 50 7.4.1 Raspberries .............................................................................................................................................................. 50 7.4.2 Grapes ...................................................................................................................................................................... 51 7.4.3 Hazlenuts ................................................................................................................................................................. 51 7.4.4 Truffles ...................................................................................................................................................................... 51

7.5 LIVESTOCK FINISHING ......................................................................................................................................................... 51 7.6 HORSE INDUSTRY .............................................................................................................................................................. 52

8 POTENTIAL GROWTH & DEVELOPMENT STRATEGIES ................................................................................................ 54

8.1 INTRODUCTION ................................................................................................................................................................. 54 8.2 DIVERSIFICATION ............................................................................................................................................................... 54 8.3 VALUE ADDING ................................................................................................................................................................. 54 8.4 MARKETS FOR EXISTING PRODUCTS ..................................................................................................................................... 55 8.5 BARRIERS AND OBSTACLES ................................................................................................................................................. 55 8.6 LESSONS FROM THE SOUTH EAST IRRIGATION SCHEME .......................................................................................................... 56 8.7 RECOMMENDATIONS ......................................................................................................................................................... 57

8.7.1 Meander Valley Irrigation Group ........................................................................................................................... 57 8.7.2 Climate data ............................................................................................................................................................ 58 8.7.3 Dairy processing capability ..................................................................................................................................... 58 8.7.4 Research & development ....................................................................................................................................... 58 8.7.5 Electricity grid .......................................................................................................................................................... 60 8.7.6 Pipeline capacity and utilization ............................................................................................................................ 60

9 ATTACHMENT 1 FARM SURVEY RESULTS ................................................................................................................... 61

10 ATTACHMENT 2 – MVIS LAND CAPABILITY BY ZONE ................................................................................................. 62



1 Summary

1.1 Agricultural Profile

There are around 435 rural establishments in the Meander Valley municipality with a total area of 105,000 hectares.

The area has a long history of irrigated agriculture with around 20,000 ML of water use prior to the commencement of the Meander Valley Irrigation Scheme (MVIS) in 2007-08.

Livestock enterprises (dairy, beef and sheep) account for almost 75% of the total farm area, and livestock products (especially milk) and livestock slaughtering contribute 60% of the gross value of agricultural production. The Meander Valley is one of the three key dairy areas in the state.

Cropping enterprises make up another 6% of total farm area but contribute the remaining 40% of total value of agricultural production. Vegetables are a major contributor with cereals, poppies and pasture seed also important.

While the area of crops has fallen over time there has been an increase in total value of production which exceeds inflation.

The area of higher value crops such as potatoes, onions, poppies and beans has increased over time, while cereals and green pea areas have declined.

Fruit production makes up only a very small share (less than 1%) of total crop area.

At the 2006 population census “agriculture, forestry and fishing”, with 888 people employed, was one of five major employment sectors in the municipality – along with “retail trade”, “health care and health assistance”, “manufacturing” and “education and training”.

In addition to its direct on-farm employment, agriculture also contributes to the “manufacturing” sector with Tasmanian Alkaloids and Ashgrove Cheese being major employers in the area.

1.2 Climate

Rainfall averages around 1,100 mm in the upper (south and west) part of the valley to around 600-700 mm in the areas in the east towards Launceston.

This rainfall gradient along with soil types, largely accounts for the prevalence of dairying to the south-west of Deloraine and cropping to the east.

There has been a downward trend in rainfall over the past 30 to 40 years which has, in part, contributed to an increase in the demand for irrigation water.



Maximum and minimum temperatures and the incidence of frost have significant implications for current and proposed agricultural pursuits in the area – but temperature data is almost non-existent within the municipality.

In general terms, however, the eastern end of the municipality has higher maximum and minimum temperatures throughout the year which along with soil types favours cropping towards that part of the municipality.

1.3 Meander Valley Irrigation Scheme (MVIS) The MVIS is based on the 43,000 ML Meander Dam – completed in 2007.

The scheme was initially designed to deliver 24,000 ML, but when four pipeline extensions currently under construction are completed, the total supply will be around 31,000 ML of which 29,500 ML is additional supply and the remainder pre-existing water rights.

The total cost of the dam plus pipeline extensions is expected to be around $55 million with sales of water rights covering around 62% ($34 million) of that amount.

Around 14,300 ML of water rights are allocated along the Meander River with the remaining 16,700 ML to be distributed via the pipeline extensions.

Tasmanian Irrigation Schemes (TIS)which operates the MVIS reported close to 7,000 ML of water use in 2008-09 with the bulk being on pasture (58%) followed by poppies 13%, peas 9%, potatoes 9%, seed crops 9% and vegetables 3%.

Around one quarter of the 43,000 hectares of land in the expanded MVIS footprint is Class 3 or prime agricultural cropping land, with a further two thirds Class 4 land suitable for irrigated pastures and some annual cropping.

There will be a significant expansion in irrigated agriculture over the next year or so as the full scheme comes on line.

1.4 MVIS Water Use and Constraints

The overall allocation of the additional 29,500 ML of water to be delivered by the MVIS is likely to be around 60% for dairying, 10% livestock finishing and 30% cash cropping.

This has been a consistent message from farm surveys in 2001, 2002 and 2010, and actual water use recorded by TIS in 2008-09.

Only a very small proportion is likely to be used for perennial horticulture or on new enterprises.

Based on the recent (2010) farm survey, the average area irrigated per farm is likely to increase by around 76% - from 70 hectares to 123 hectares.



On farm employment is expected to increase by around 55 full time equivalents once the scheme is fully operational.

On-farm investment is expected to total around $1,430/ML ($42 million) in addition to

the $1,150/ML average outlay for water right purchases ($34 million).

The estimated $76 million total capital outlay represents an average of around $400,000 per farm over 180 farms. This capital requirement has been identified by farmers as a key constraint in being able to make the best use of the water supplied by the scheme.

Other constraints noted by farmers were low product prices, Aurora power supply issues, availability of markets for additional product, pipeline capacity (and delays in construction) and planning approval problems.

The State government (through TIS) offers finance for water right purchases but the terms are principal and interest over 5 or 10 years which increases cash flow issues over the early years – compared to interest-only loans.

With around 60% of the additional 29,500 ML of water being used for dairying, total milk production is likely to increase by a minimum of 16 million litres and possibly 20 to 25 million litres. This represents a 2.0 - 3.5% increase in total state production of around 700 million litres.

The possibility of dairy processing/manufacturing constraints in the state was an issue in 2009. However, recent announcements by Fonterra in relation to additional capex have eased concerns somewhat – at least for the next few years.

1.5 Market Prospects

Prices for many agricultural products are relatively subdued at the present time but there appear to be reasonable prospects for a many enterprises in at least the short to medium term.

Milk prices are relatively low but are improving compared to the past year, and Fonterra which is the main milk processor in the State, is undertaking an expansion in milk processing capacity that will allow production to continue to increase – at least in the short to medium term.

On a smaller local scale Ashgrove Cheese is also expanding production - with significant employment spin-offs for the municipality.

While there appears to be limited potential to expand processed vegetables and potatoes, several fresh vegetable companies are planning significant expansion over the next few years, and are targeting the Meander Valley for some of the increase.

Poppy prices are down somewhat in 2010-11 but improvements in productivity continue and production statewide is expected to increase from around 20,000 hectares to at least 25,000 hectares in the near future subject to the availability of suitable land and water.



The area of pyrethrum in Tasmania is expected to double from 2,000 to 4,000 hectares over the next few years.

Cereal production can also expand but prices are expected to remain at modest levels in

the short to medium term.

For pasture seed production, demand and prices are currently down but are expected to improve with the easing of the drought on the mainland and forecast improvements in the dairy industry. The industry has prospects for improvement in productivity that would improve returns and overall viability.

Lamb and mutton prices are high at the present time while cattle prices are relatively subdued. In the short to medium term cattle and sheep prices may not increase substantially but there is potential to expand profitable production with irrigation and improvements in grazing management.

1.6 Potential Growth & Development Strategies

Diversification While there may be potential for the introduction of new higher value enterprises into

the area, the Meander Valley has had a long irrigation history and a wide range of enterprises have been trialed over that time.

Davey & Maynard believe that development for the foreseeable future will lie mainly with the effective expansion of irrigation enterprises for which the municipality already has a proven record.

A number of smaller potentially “high value” enterprises have established a “toe hold” in

the municipality. These include crops such as raspberries, hazelnuts, truffles and wasabi. However, any new enterprises that do arise are likely to be relatively low water users for an extended period of time and from that point of view would have emerged without a new irrigation scheme.

Value-adding Ashgrove Cheese is a prime example of value-adding of agricultural produce, with milk

from the Bennett family farm being used to produce cheese that is sold through their retail/tourist business as well as through supermarkets throughout Tasmania and on the mainland.

Christmas Hill Raspberries value-adds raspberry production in combination with a tourist venture, and some increase in production is anticipated over the next few years.

Tasmanian Alkaloids at Westbury might also be considered to be a value-adding

operation for poppies grown throughout the state, and several seed companies are located within the municipality – Roberts Seeds, Tas Global (Dents) and Heazlewood Seeds. These are all vibrant businesses with potential to expand in the future.

Another value-adding possibility is for a fresh vegetable packing operation to operate in

the municipality. However, there are already several such operations operating in the Devonport and Ulverstone municipalities nearby.



Barriers and Obstacles The major constraint raised by farmers in the recent survey was the capital investment

associated with the purchase of water rights and the additional on-farm infrastructure required to utilize that water.

Tasmanian Irrigation Schemes has a finance option to fund the purchase of water rights.

However, that option involves a $50/ML higher capital cost and requires principal and interest payments over either 5 or 10 years. The rapid capital repayment involved is not helpful from a cash flow point of view.

Aurora Energy power installation costs and delays in providing service was another

issue raised by farmers in that survey.

One potential constraint to the expansion of dairying was the limited milk processing /manufacturing capacity in the state. However, Fonterra’s recent announcements on capital expenditure have eased that concern – at least for the short to medium term.

Lessons from the South East Irrigation Scheme A recent report prepared by the Australian Innovation Research Centre (AIRC) listed a

number of conclusions in relation to the success of the Coal River project which may be applicable to the MVIS.

A major difference between the two schemes, however, is that the SEIS introduced water

into a previously dry area so the requirement for land use change which occurred in the Coal Valley is not as relevant to the Meander Valley which has had a long history of irrigation.

Davey & Maynard believe there is a much greater case in the Meander Valley for building

on the foundation that already exists and in improving the management and performance of current enterprises.

However, two major forces in the development of irrigated agriculture in the Coal River

which would have a similar benefit in the Meander Valley, were the operation of the Coal River Valley Products Association as an active industry support group, and the level of locally applicable research and development work undertaken at the University farm by the University and State Government DPIPWE. These are options that should be promoted for the MVIS.

Recommendations Some preliminary recommendations which would assist in the development of irrigated

agriculture in the Meander Valley are included in the report. These include the formation of a Meander Valley Irrigation Group along the lines of the Coal River Valley Products Association. The group could address a number of issues raised by the AIRC in relation to accessing

information, development of skills including business skills, sharing experience, promoting the availability of finance on appropriate terms, and fostering research and development.

The State government’s “Wealth from Water” program has outlined an outlay of $7.2 million over three years to assist in irrigation development throughout the state. Some of those funds might be available to help implement initiatives proposed by the group.



Initial projects undertaken by the group might come from the following;

Promoting the collection and collation of existing and new regional scale soil and micro-climate data as proposed in the “Wealth from Water” program.

Working closely with the dairy companies and State government to ensure that adequate processing capacity comes on line at the appropriate time in the future. This is particularly important given the importance of dairying in the area.

Promoting local research and development projects in mainstream areas such as pasture production and utilization, seed production, and fresh vegetable production. And in the developmental industries such as hazelnut production.

Promoting farm business management training opportunities that will assist in the development of forward looking, profitable and sustainable farm businesses in the municipality.

The proposed group might also negotiate infrastructure issues on behalf of members, such as the following which were raised by farmers in the recent farm survey; The adequacy of the electricity grid to cope with the substantial increase in MVIS and

on-farm pumping, and also over the timeliness of new installations. MVIS pipeline capacity and utilization.



2 Meander Valley Municipality

2.1 Location The municipality of Meander Valley stretches east west from the outskirts of Launceston to the centre of the Cradle Mountain – Lake St Clair National Park. Urban centres include Prospect, Hadspen, Carrick and Westbury in the east and Deloraine, Mole Creek and Meander in the centre/west. Meander Valley Municipality



Meander Valley Municipality



3 Agricultural Profile of the Meander Valley

Agricultural production is a major component of economic activity in the Meander Valley.

Because of soil types and climate most of the agricultural land in the area is associated with grazing enterprises. Livestock products (especially milk) and livestock slaughtering make up over 60% of the gross value of agricultural production, and the Meander Valley is one of the three key dairy areas in the state - along with the Circular Head and Dorset municipalities.

Crops make up the remaining, almost 40% of value of agricultural production in the municipality with vegetables being a key contributor. While the total area of crops has fallen over the past 20 or so years, the value of output has continued to rise.

The Meander Valley has a long history of irrigated agriculture (both dairying and cropping). This was given a boost with the Meander Valley Irrigation Scheme (MVIS) coming on line in 2007-08 to supply around 12,500 ML of extra water along the Meander River, and more recently a further 17,000 ML through pipelines1 to areas away from the river. The additional 29,500 ML will substantially expand the pre-MVIS total irrigation supply of perhaps 20,000 ML.

3.1 Land Use

There are around 435 rural establishments in the Meander Valley with a total area of 105,000 hectares (240 hectares per farm), with grazing being the major land use at almost 75% of the total area (Figure 1).

The total grazing area which includes pasture and native and volunteer pasture has fallen somewhat over the 20 years from a high of 85,000 hectares (72%) in 1985-86. Over the same period the cropping area has also fallen from 12,400 hectares (11%) in 1985-86 to 6,700 hectares (6%) in 2005-06. The total cropping area includes cash crops such as cereals, potatoes, vegetables and poppies etc and also pasture and crops cut for hay. The reduction over time is mainly due to reduced cereals and peas.

While the area of crops has fallen there has been an increase in value of production partly due to the increased area and value of poppies. Figure 12 shows an increase in the value of crops of $18.3 million over a 10-year period from $$21.2 million in 1995-96 to $39.5 million in 2005-06. This reflects a compound increase of 6.4% per annum – well above inflation.

The “other” non-crop and non-grazing area includes native vegetation and plantations on farms as well as buildings and roads.

1 Pipelines currently under construction.



Figure 1; Agricultural land use – Meander Valley Municipality

Source; ABS Agricultural Census data2

3.2 Stock Numbers

Dairy and beef cattle are major grazing enterprises with numbers having increased at the expense of sheep over the 20 years to 2005-06 (Figure 2 & Figure 3). Sheep numbers declined markedly after 1990-91 following the demise of the reserve price scheme for wool in 1991.

Figure 2; Total dairy and beef cattle numbers

2 ABS census data to 1996-97 available as a consultancy from ABS. 2000-01 and 2005-06 available free on website 7125.0 Agricultural Commodities: Small Area Data, Statistical Local Areas.

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Figure 3; Sheep numbers


The Meander Valley is one of the three main dairy areas in the state along with the Circular Head and Dorset municipalities (Figure 4). In 2009 there were 453 dairy farms in Tasmania with 74 of those (16%) in the Meander Valley.

Figure 4; Tasmanian dairy farm numbers by municipality

Source; Tasmanian Dairy Industry Authority, 2009

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3.3 Cropping

By area, cereals, vegetables (including potatoes), pasture seeds and poppies are the main crops grown (Figure 5). Perennial horticulture such as orchards, truffles, grapes and berries make up only a very small part of the overall cropping mix.

Cereal cropping fell by over 60% between 1985-86 and 2005-06. Cereal grains in Tasmania are used for the feed industry (dairy, poultry and pigs) and in the case of barley for malting. Feed grains are also imported from the mainland and local prices are closely linked to those on the mainland where greater economies of scale pertain. Since the 2005-06 census there has been a period of significantly higher grain prices (2007-08 and 2008-09) associated in part with high milk prices and a shortfall in supply world-wide. It is likely that future statistics will show increased production in those years before falling in 2009-10.

Total vegetable area also declined somewhat over the 20 years to 2005-06. On the other hand there has been an increase in poppies and pasture seed.

Figure 5; Crop areas


Figure 6 shows that the decline in vegetables is mainly due to a marked contraction in the demand for processed peas, with the area of peas grown falling from around 1,900 hectares in 1985-86 to 600 hectares in 2005-06. Also, broad beans (around 260 hectares) were eliminated after the 1990-91 census. Other vegetable crops such as beans, potatoes and onions have increased over time.

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Figure 6; Vegetable area


There is only limited perennial horticulture in the municipality. In 2005-06 there was a total of 44 hectares of which there was 24 hectares of berries (mainly raspberries), 13 hectares of orchards and 7 hectares of grapes (Figure 7).

The area of berries and grapes has increased in recent years while orchards (apples, cherries, nuts) have reduced slightly3.

In previous years there were a number of raspberry farms in the area but that number has declined over time to the current two major producers - Berry Exchange (Costas) and Christmas Hills (Dornauf). The total area of raspberries is currently (in 2010) around 10 hectares.

Hazelnuts are an orchard crop that has recently been introduced into the area and which could be well suited to the local climate. A total of around 14 hectares was established at Hagley around 5 years ago.

3 The 21 hectare figure for orchards in 1995-96 may be a statistical anomaly. Alternatively it might relate to a failed planting.

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Figure 7; Perennial horticulture


3.4 Total Area Irrigated

The ABS census results for the municipality in 1990-91 and 1995-96 show a total area irrigated of around 4,800 hectares. There are no figures available from more recent censuses.

With an average irrigation rate of say 3.0 ML per hectare around 15,000 ML was probably being used at that time. Given a gradual increase in irrigation since 1995-96 it is likely that the pre-MVIS irrigation water usage was at least 20,000 ML.

The 1990-91 census provided a breakdown of the total area irrigated with vegetables comprising 41% followed by pasture 39%, other crops (including poppies) 13% and cereals 6% (Figure 8).

While vegetables made up a slightly higher proportion of area irrigated than pasture it is likely that pasture, with a higher application rate on average, would have used a higher proportion of the total water. Also, since that time there has been an increasing trend towards irrigation on dairy farms.

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Figure 8; Enterprise proportion of total area irrigated (1990-91)


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3.5 Value of Agricultural Production

The total value of agricultural production in the municipality increased from $61 million to $102 million (+66%) over the 10 years to the 2005-06 census (Figure 9). This is equivalent to a 5.3% compound rate of increase over the period – significantly greater than inflation.

Livestock products (mainly milk) and livestock slaughtering made up 61% of the total value of production in 2005-06 with crops making up the remaining 39%.

Figure 9; Total gross value of agricultural production


In line with earlier comments on the importance of the dairy industry, milk made up almost 90% of the total value of livestock products in 2005-06 with wool making up most of the remainder (Figure 10). This was before the major milk price increase experienced in 2007-08, and subsequent substantial reduction in 2008-09 and 2009-10. The value of wool produced has remained relatively constant over the 10-year period shown.

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Figure 10; Gross value of livestock products


Cattle slaughtering made up 69% of the total value of livestock slaughtering in 2005-06 with sheep contributing only 22% (Figure 11). Interestingly the value of sheep slaughtering increased over the 10 year period despite the reduction in sheep numbers that occurred over that time. This presumably reflects an increase in prime lamb production (versus wool) and higher values per head.

Figure 11; Gross value of livestock slaughterings


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While the area of crops grown fell in the 10 years to 2005-06 there has been a substantial increase in the value of production - from $21.2 million in 1995-96 to $39.5 million in 2005-06 (Figure 12). This was mainly due to the increase in the value of vegetables from $9.6 million to $22.2 million. While not normally considered a cash crop, the value of cereal and pasture cut for hay also contributed to the increase in the ABS totals.

As noted above (Figure 6) the decline in vegetable area is mainly due to a marked contraction in the demand for processed peas, with the area of peas grown falling from around 1,900 hectares in 1985-86 to 600 hectares in 2005-06. Also, broad beans (around 260 hectares) were eliminated after the 1990-91 census. Other vegetable crops such as the higher value beans, potatoes and onions have increased over time.

Figure 12; Gross value of crops


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Vegetables Pasture/cereals for hay

Cereals Fruit

Other including poppies



3.6 Population & Employment

At the last census in 2006 the population of the Meander Valley municipality was 18,653 people, up 4% from 17,598 people at the previous 2001 census.

The increase over the period was mainly a result of an increase people aged 50 years and older (Figure 13). At the same time the number of people between 25 and 30 fell - along with the number of young children.

Figure 13; Meander Valley population by age

Source; ABS web site, labour force data at LGA level

Larger employers in the municipality include the Launceston Country Club Casino (480 employees) and Tasmanian Alkaloids (>200 employees)4. Other major employers are Unimim Lime Ltd (Mole Creek) and Ashgrove Cheese plus around 600 smaller businesses (1-9 employees) and 345 farm businesses.

“Agriculture forestry & fishing” along with “Retail trade”, “Health care & social assistance”, “Manufacturing” and “Education & training” are the major employment sectors in the municipality (Figure 14).

In 2006 there were 888 people employed in “Agriculture forestry & fishing” down slightly from 911 in 2001. In addition the “Manufacturing” category has a significant agricultural base (eg Tasmanian Alkaloids and Ashgrove Cheese).

4 Meander Valley Council website

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Figure 14; Meander Valley employment by industry

Source; ABS web site, labour force data at LGA level

3.7 Major Infrastructure Major “public” infrastructure in the municipality includes the public road system, electricity grid, gas pipeline and the Meander Valley Irrigation Scheme (MVIS). Roads While the State government controls the major highways and roads the Meander Valley Council has a network of 564 km of sealed roads and 237 km of unsealed roads and 217 bridges. Electricity grid Aurora Energy is a State owned company which undertakes the management, construction and maintenance of distribution systems throughout the state – in conjunction with Transend Pty Ltd which owns and operates the transmission system from power stations to substations around the state. Irrigation schemes The MVIS is a recent addition to the municipality’s infrastructure inventory. Construction of the 43,000 ML Meander Dam and Huntsman Lake was completed in late 2007 with potential for tourism, eco-tourism, agricultural, environment and recreational activity growth. An associated mini-hydro scheme commenced generating and exporting electricity to the grid in February 2008. The scheme is owned and operated by Tasmanian Irrigation Schemes (TIS) which is a wholly owned subsidiary of the Rivers and Water Supply Commission (RWSC). The initial plan was to supply up to 24,000 ML to farms with access to the Meander River. More

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recently approval has been obtained to expand total supply by around 29,500 ML5 by piping water to several areas which do not have direct access to the river. A further irrigation development in the area is a Tasmanian Irrigation Development Board project to supply water to the Whitemore and Hagley area from the Poatina tailrace. Valley Central Industrial Estate Another recent infrastructure addition is the Valley Central Industrial Estate (VCIE) which is a transport and industrial estate on Birralee Road at Westbury – opposite and adjacent to the Tasmanian Alkaloids poppy processing factory. The total area rezoned for the purpose is 127 hectares (including Tas Alkaloids). The development is positioned to attract the transport and logistics sector with the ability for ancillary transport and maintenance industries to be established. Benefits include easy access to major Tasmanian road networks including the A1 Highway connecting the Northern, North Eastern, North Western and Southern Regions, and close proximity to the Devonport and Bell Bay Ports. Services include water, domestic sewer, storm water, underground power, natural gas and fibre optic communications. As a part of the industrial estate and utilizing its access to natural gas BOC plans to construct a Micro LNG production plant to provide an alternative to diesel for heavy duty vehicles. It was expected to be operational by mid 2010. There is also scope for further agricultural value adding businesses to establish at VCIE (in addition to Tas Alkaloids). Possibilities include fresh vegetable packing or seed cleaning facilities, although both of these are currently well catered for through existing businesses within the municipality (seed cleaning) or nearby (fresh vegetable packing). Another option is for the facility to become a base for agricultural services and training.

5 Original MVIS rights 14,290 ML less 1,440 ML of pre-existing rights plus 16,690 ML of pipeline proposals.



Agricultural Profile Summary

Agricultural production is a major component of economic activity in the Meander Valley.

There are around 435 rural establishments in the municipality with a total area of 105,000 hectares.

The Meander Valley has a long history of irrigated agriculture with around 20,000 ML of water use prior to the commencement of the Meander Valley Irrigation Scheme (MVIS) in 2007-08.

When the four pipeline extensions are completed the MVIS will comprise 31,000 ML of water rights of which 29,500 ML is additional supply.

Livestock enterprises (dairy, beef and sheep) account for almost 75% of the total farm area and livestock products (especially milk) and livestock slaughtering contribute 60% of the gross value of agricultural production. The Meander Valley is one of the three key dairy areas in the state.

Cropping enterprises make up another 6% of land use and contributes the remaining 40% of total value of agricultural production with vegetables being a key component.

While the area of crops has fallen over time there has been an increase in total value of production which exceeds inflation.

The area of higher value crops such as potatoes, onions, poppies and beans has increased over time, while cereals and green pea areas have declined.

Fruit production makes up only a very small share (less than 1%) of total crop area.

At the time of the 2006 population census “agriculture, forestry and fishing”, with 888 people employed, was one of five major employment sectors in the municipality – along with “retail trade”, “health care and health assistance”, “manufacturing” and “education and training”.

In addition to its direct on-farm employment, agriculture also contributes to the “manufacturing” sector with Tasmanian Alkaloids and Ashgrove Cheese being major employers.

The Valley Central Industrial Estate (VCIE) is a recent addition to infrastructure in the municipality.

With services such as water, sewer, power, natural gas and fibre optic communications there is possibly scope for further agricultural value adding businesses such as vegetable packing and seed cleaning, and as a base for agricultural services and training.



4 Meander Valley Climate

The climate in the Meander Valley varies from higher rainfall and relatively cooler areas in the south and west to warmer and drier areas in the east towards Launceston. There has been a reduction in rainfall over the past 30 to 40 years which has, in part, contributed to an increase in the demand for irrigation.

Other than rainfall, however, there is very limited climatic data for the municipality.

4.1 Rainfall

Rainfall falls from a high of around 1,100 mm in the upper (south-west) part of the catchment to around 600-700 mm in the east towards Launceston (Table 1).

Table 1; Average annual rainfall

Station Period Years Elevation Average rainfall

(no.) (m) (mm)

Mole Creek 1914 - 2009 90 240 1,122 Dunorlan Sharmans Rd 1939 - 2009 52 274 993 Deloraine Athol 1884 - 2009 119 237 949 Westbury Valley View 1871 - 2009 110 207 832 Cressy Res. Station6 1939 - 2009 70 148 628 Launceston Mt Pleasant7 1962 - 1989 26 137 784 Launceston Ti Tree Bend7 1980 - 2009 30 5 669

Source: Bureau of Meteorology

The average rainfall at Deloraine over the 39 years since 1970-71 is 925 mm with a downward trend of around 10 mm a year (Figure 15). Both the average rainfall and downward trend need to be treated with caution because there is no recorded value for Deloraine for 9 of the 39 years.

6 Cressy is not actually in the Meander Valley municipality but is close by and is similar climatically to Westbury and it has more detailed weather records. 7 Prospect at the eastern end of the municipality is close to the Launceston stations which are just outside the municipality.



Figure 15; Deloraine rainfall – 1971-2009

Source: BOM, Deloraine, 39 years from 1971

The Cressy Research Station outside the eastern end of the municipality has a more complete rainfall record (Figure 16). It has an average rainfall of 618 mm over the 39 years since 1971 and shows a downward trend of around 2.4 mm a year.

Figure 16; Cressy rainfall – 1971-2009

Source: BOM, Cressy Research Station, 39 years from 1971

The main difference in rainfall between Deloraine and areas closer to the eastern end of the municipality is in winter rainfall. Whereas Deloraine has a higher rainfall than Cressy



throughout the year it has a much higher winter rainfall (Figure 17). Dairy areas to the west and south of Deloraine have higher rainfall again.

Figure 17; Cressy & Deloraine rainfall by month

Source: BOM, from Dairy Tas IntoDairy website

4.2 Temperature

Maximum and minimum daily temperatures and the incidence of frost have a have significant implications for current and proposed agricultural pursuits in the Meander Valley. Unfortunately there is very limited temperature data available for the municipality.

The Westbury (Valley View) recording station has mean maximum and minimum temperatures by month for 1933 to 1956 but nothing since. Deloraine (Athol) only has records for 1916 to 1931. There is nothing available for days of frost. The Cressy Research Station site can be used as a proxy for the areas around Carrick, Hadspen & Westbury. Subject to the data limitations outlined, Figure 18 and Figure 19 show mean maximum and minimum temperatures for the eastern end of the Meander Valley versus Deloraine in the centre. The eastern areas have higher maximum temperatures throughout the year and particularly in summer.

The eastern area also has higher minimum temperatures throughout most of the year – except in July when there is very little difference. Throughout the winter months both areas have mean minimum temperatures of 1-2 degrees C.

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Figure 18; Mean maximum temperatures

Source: BOM, from Dairy Tas IntoDairy website

Figure 19; Mean minimum temperatures

The lack of detailed up-to-date temperature data throughout the municipality is a limitation in being able to assess the prospects of a range of agricultural pursuits. This may be able to be overcome with the implementation of the State government’s proposed “Wealth from Water” program. One of the key parts of that $7.2 million three year program is to “bring together existing and new regional scale soil and micro-climate data – for new irrigation districts and other productive agricultural areas”. We understand that funding has been approved for a pilot/scoping study in 2010-11 and that at least some of that work will be undertaken in the Meander Valley.

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4.3 Irrigation Requirements

Based on the limited climate data available the average irrigation requirement for a full season is around 4.0 ML/ha in Deloraine and 6.0 ML/ha at Cressy.

These assessments are based on average rainfall at the two sites, average pan evaporation figures from Cressy Research Station (for Cressy) and Elliott Research Station (for Deloraine). They also assume a crop factor of 0.8 (compared to pan evaporation) and an application efficiency of 80%. Relatively small changes in these assumptions could easily result in irrigation requirements of +/- 25% compared to the suggested figures.

The lack of reasonable climatic data throughout much of the municipality is a limiting factor in terms of the design and monitoring of efficient irrigation systems, as well as in assessing the suitability of current and new cropping options in the municipality.

Meander Valley Climate Summary

There is only limited climatic data available for the Meander Valley municipality.

Rainfall averages around 1,100 mm in the upper (south-west) part of the valley to around 600-700 mm in the areas in the east towards Launceston.

This rainfall gradient along with soil types, largely accounts for the prevalence of

dairying to the south-west of Deloraine and cropping to the east.

There has been a downward trend in rainfall over the past 30 to 40 years which has, in part, contributed to an increase in the demand for irrigation.

Maximum and minimum temperatures and the incidence of frost have significant

implications for current and proposed agricultural pursuits in the area – but temperature data is almost non-existent.

In general the eastern end of the municipality has higher maximum and minimum

temperatures throughout the year which again favours cropping towards the eastern end.

A key part of the State Governments “Wealth from Water” program may help

remedy the shortfall in climatic data in the municipality, with its objective of bringing together “existing and new regional scale micro-climate data – for new irrigation districts and other productive agricultural areas”.



5 Meander Valley Irrigation Scheme

5.1 Introduction The Meander Valley Irrigation Scheme (MVIS) is based on the 43,000 ML Meander Dam which was completed in late 2007. The scheme was initially designed to deliver 24,000 ML per annum of high security water for irrigation along the Meander River. It is operated by Tasmanian Irrigation Schemes (TIS) Pty Ltd, which is a wholly owned subsidiary of the Rivers and Water Supply Commission (RSWC). The inaugural MVIS irrigation season opened in December 2007 and the associated mini-hydro scheme commenced generating and exporting electricity to the state grid in February 2008. Water usage in the first (half) season 2007-08 was 4,010 ML. Initially the scheme was limited to water supplied along the Meander River from the township of Meander in the south through Deloraine to the north then east to Carrick. More recently it being expanded with pipelines planned/constructed to deliver water to four additional areas for the coming irrigation season;

(1) Caveside-Dairy Plains (2) Quamby- Osmaston (3) Rubicon (4) Hagley

5.2 Water Rights Currently there is a total of 30,960 ML of water rights allocated along the river and the four pipelines (Table 2). The pipeline “water rights” are not official at the current time but in fact cover allocations for which farmers have paid a 10% deposit. The 14,290 ML initial MVIS water rights include 2,200 ML of “investor” water belonging to three agricultural processing companies (Roberts Ltd, Glaxo Smith Kline and TPI). It also includes 1,440 ML of pre-existing (mainly 22.5ML per farm) water rights that were transferred into the scheme8. Most of the investor rights are expected to be sold to farmers over time.

8 Tasmanian Irrigation Schemes, pers. comm.2010



Table 2; MVIS Water Rights

Scheme Water Rights

(ML)

Initial MVIS 14,290 Pipelines Caveside-Dairy Plains 4,270 Quamby-Osmaston 3,100 Rubicon 6,695 Hagley 2,605 16,670 Total 30,960

Source; Tasmanian Irrigation Schemes, 2010.

5.3 Scheme Capital Cost

The total capital cost of the Meander Dam was $38 million9. The expected cost of the additional pipelines is close to $17 million giving a scheme total of around $55 million.

If the total 29,520 ML of new water rights along the Meander plus expected pipeline rights cost farmers an average of $1,150 per ML their capital contribution to the scheme will be around $34 million or 62% of the total.

5.4 MVIS Water Use 2008-09

The supply of irrigation water from the Meander dam commenced in the 2007-08 season with water usage to date restricted to farms able to take water directly from the Meander River.

TIS undertook a survey of water use at the end of the 2008-09 season. Total use was 6,968 ML in that year, up from 4,010 ML in the initial (half) season in 2007-08 (Table 3).

Pasture irrigation accounted for 58% of total water use followed by poppies 13% and a range of other crops.

9 Tasmanian Irrigation Schemes, pers. comm. June 2010.



Table 3; Water use survey - MVIS (2008-09)

Enterprise Water usage (ML) (%)

Pasture 4,037 58 Poppies 889 13 Peas 658 9 Potatoes 596 9 Seed 584 8 Vegetables 202 3 Orchards 2 0 Total 6,968 100

Source: Tasmanian Irrigation Schemes 2009

5.5 MVIS Land Capability

A total of 43,200 hectares is included within the expanded (including pipelines) MVIS. Around one quarter (10,476 hectares) is Class 3 or prime cropping land, with a further two thirds (29,138 hectares) of Class 4 land which is suitable for irrigated pastures and some annual cropping. The total irrigable area (Classes 3, 4 & 5) is 42,970 hectares (Table 4).

In outlining the land class by zones (below) the original MVIS Meander River section has been split into two – Meander East and Meander West – reflecting the differing agriculture in those two areas. Meander West (to the south and west of Deloraine) along with the Caveside-Dairy Plains zone has limited Class 3 cropping land and generally higher rainfall than Meander East, which leads to a high proportion of specialist dairy and beef farms in those two zones. The Rubicon zone also has a high proportion of dairy and beef farms despite significant amounts of Class 3 land.

Table 4; MVIS land capability – hectares

Zone Land Class 3 4 5 6 Total (ha) (ha) (ha) (ha) (ha)

Meander East 3,108 7,102 853 189 11,162 Meander West 67 6,933 610 53 7,663 Caveside-Dairy Plains 80 5,629 1,223 23 6,955 Quamby-Osmaston 2,494 4,125 279 6,898 Rubicon 3,112 4,603 392 8,107 Hagley 1,615 836 2,451 Total 10,476 29,138 3,357 265 43,236

Source: Davey & Maynard from DPIPWE land classification



Table 5; MVIS land capability – percent

Zone Land Class 3 4 5 6 Total (%) (%) (%) (%) (%)

Meander East 28 63 8 2 100 Meander West 1 90 8 1 100 Caveside-Dairy Plains 1 81 18 100 Quamby-Osmaston 36 60 4 100 Rubicon 38 57 5 100 Hagley 66 34 100 Total 24 67 8 1 100

Source: Davey & Maynard from DPIPWE land classification

A map showing the location of the irrigation zones and the land capability within those zones is included on the following page. Larger scale maps of each zone are included in Attachment 2.



Meander Valley Irrigation Scheme – Land Capability



Meander Valley Irrigation Scheme (MVIS) Summary

The MVIS is based on the 43,000 ML Meander Dam – completed in 2007.

It was initially designed to deliver 24,000 ML, but when four pipeline extensions currently under construction are completed, there will be a total of around 31,000 ML of water rights of which the new supply will be around 29,500 ML.

The total cost of the dam plus pipeline extensions is expected to be around $55 million with sales of water rights covering around 62% 9$34 million) of that amount.

14,300 ML of water rights are allocated along the Meander River with the

remaining 16,700 ML to be distributed via the pipeline extensions.

Tasmanian Irrigation Schemes (TIS) reported close to 7,000 ML of water use in 2008-09 with the bulk being on pasture (58%) followed by poppies 13%, Peas 9%, potatoes 9%, seed crops 9% and vegetables 3%.

Around one quarter of the 43,000 hectares of land in the expanded MVIS

footprint is Class 3 or prime agricultural cropping land, with a further two thirds Class 4 land suitable for irrigated pastures and some annual cropping.

There will be a significant expansion in irrigated agriculture in the

municipality over the next year or so as the full scheme comes on line.



6 MVIS Water Use and Constraints

This section addresses the question of farmer intentions and constraints in relation to the additional 29,500 ML of water to be supplied by the MVIS – based on farmer surveys undertaken in 2001 and 2002 as part of the initial dam assessment process, and more recently as part of the current project.

In general terms it appears that current and projected water use is in line with original farm plans which suggested that 60-70% of the additional water would be used on grazing enterprises (mainly dairy) with the remainder on cash crops.

6.1 Previous Farm Surveys

6.1.1 September 2001 Survey

The evaluation of the Meander Dam proposal included farm surveys of farm businesses interested in buying water10. Details were sought on farm area, current enterprises, and the amount of additional water that might be required given that water could be supplied at a “reasonable” price.

Survey questionnaires were mailed to 346 potential users. These included businesses in areas away from the Meander River itself on the basis that water could be pumped away from the river – even though this was not part of the original proposal.

A total of 160 valid responses were received, with 102 respondents expressing an interest in obtaining water from the Scheme - 40 with Meander River frontage and 62 with no river frontage.

The total area of irrigable land on the 102 properties was almost 20,000 hectares of which around 4,600 ha was being irrigated at the time. The total additional water requirement identified at the time was 24,745 ML (Table 6).

Table 6; Indicative water demand - postal survey (September 2001)

Source of demand Farms Water required

(no.) (ML)

Meander River frontage 40 11,295 No Meander River frontage Rubicon 13 4,880 Western Creek 12 4,875 Other 37 3,695 62 13,450 Total 102 24,745

10 Davey & Maynard, Deloitte Touche Tohmatsu, Serve-Ag Pty Ltd (2002) Meander Dam Feasibility Study, Agricultural and Economic Report, March 2002.



Source: Davey & Maynard (2002)10

The main irrigation enterprises on the 102 survey farms, in order of area irrigated, were;

Dairy 42% of area irrigated Poppies 24% Livestock finishing 16% Potatoes 7% Peas 4% Cereals 1% Miscellaneous crops 6%

The total area of high value orchard and berry fruit was only 18 ha (0.4%) of the 4,639 hectare total.

Based on the indicated area of irrigation and crops, total water use in the 2001-02 season on the 102 farms was estimated at 13,000 ML with perhaps 60% of that for dairying.

Of the indicative 24,745 ML of extra demand, five potential dairy users made up around 10,000 ML with four of these not having direct access to the Meander River.

The overall conclusion from the survey in 2001 was that the main use of additional water would be for dairying, poppies and vegetables (including potatoes).

6.1.2 August 2002 Survey

A further farm survey was undertaken in August 2002 to better quantify the likely demand for water from the Scheme.

A total of 121 landowners were re-surveyed – selected on the basis of the September survey together with any non respondents known to have Meander River frontage.

The results suggested a total uptake of 5,775 ML to 22,085 ML depending on price ($55 to $110/ML), with most of the demand coming from farms along the Meander River, and very limited demand from off-stream users – particularly at higher water prices.

Based on this survey and the previous one in 2001 the economic evaluation of the proposed scheme11 in 2002 assumed a total demand of 20,000 ML made up as follows (Table 7).

11 Davey & Maynard (2002), Meander Dam Proposal Economic Evaluation, August 2002.



Table 7; Anticipated water use – economic assessment (2002)

Enterprise Demand (%) (ML)

Dairying 60 12,000 Livestock finishing/agistment 10 2,000 Cropping 30 6,000 Total 100 20,000

Source: Davey & Maynard (2002)11

6.2 2010 Farm Survey

As a part of the current project a total of 64 farmers with either an existing MVIS water right or an allocation to one of the new pipelines were interviewed to assess their intentions in relation to the additional water. Specifically;

Amount of existing (new)water rights or pipeline rights being purchased, Enterprises to be irrigated, Additional farm infrastructure required to utilize the additional water, Additional farm employment

The farmers interviewed were intended to provide a representative sample of each of the six zones. The aim was to interview a total of 10 to 15 farms per zone and around 60% of the water in each zone. The 64 farms surveyed represented 34% of total farm numbers and 58% of total water rights (Table 8).

Table 8; Farms surveyed - 2010

Zone Total Population

Total Water Rights

Farms surveyed Water surveyed Farms % of

total Water % of

total (farms) (ML) (no.) (%) (ML.) (%)

Meander East* 59 7,900 12 20 2,652 34

Meander West* 24 6,390 10 42 3,915 61

Caveside-Dairy Plains 33 4,270 9 27 3,130 73

Quamby-Osmaston 24 3,100 9 38 1,620 52

Rubicon 20 6,695 15 75 4,980 74

Hagley 20 2,605 10 50 1,790 69

Total 180 30,960 65 36 18,087 58 Source: Tasmanian Irrigation Schemes, 2010

* Note; Total farm numbers for the original MVIS (Meander East + Meander West) include 7 farms with only a pre-existing 22.5 ML water right (158ML). The totals for Meander East and Meander West a total of 1,437 ML of pre-existing rights – some bundled in with the new MVIS rights.

For Meander East a total of 12 farms were contacted - which covered only 20% of the total farms and 34% of the total water. The lower percentage of farm and water coverage in this zone is due to the large number of farms and the fact that seven of those farms had only pre-existing 22.5 ML water rights and also the presence of 2,200 ML of “investor” water rights in that area – including agricultural processing firms Roberts Ltd, Glaxo Smith Kline and TPI. Over time it is expected that the bulk of these will be sold to farmers in the area.



Figure 20; Water surveyed versus water rights by zone

For the initial Meander River part of the MVIS (Meander East and Meander West) there is a total of 1,438 ML of pre-existing rights included in the 14,290 ML total (10%). On this basis new water in that area is in fact only 12,852 ML. Also there are three large agricultural company “investor” water right holders with a total 2,200 ML – these were not included in the survey. If both the pre-existing rights and the 2,200 ML of “investor water” are eliminated, the surveyed water for the combined Meander zones is increased to 62% of the total (adjusted) rights of 10,650 ML (52% in Meander East and 67% in Meander West).

Details of the intended usage of the 18,087 ML of MVIS water on the 65 survey farms are summarized below (Figure 21) with details included in Attachment 1.

Around 27% of the extra water is likely to be used to more fully irrigate currently irrigated areas, 66% to expand the total area irrigated and the remaining 8% spare or unallocated at the time of the survey. The 65% of water to be used for expanding irrigation area will require significant extra on-farm capital expenditure in addition to the purchase of water rights themselves at $1,100-1,200/ML.

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Figure 21; Farm survey - overall allocation of additional water

As for the previous surveys in the area, the predominant intended use of the additional water is for dairy farming 63%, livestock finishing 10% and cropping 27% (Figure 22). In fact this is very similar to the percentage allocation used as the basis of the initial 2002 economic assessment (Table 7).

“Livestock finishing” here includes cattle and sheep but also a component for horse breeding in the Carrick area. The main crop usage identified was cereals, poppies, fresh vegetables and processed potatoes.

With around 63% or so of the additional 29,500 ML of water used for irrigated dairying, there is potential for a substantial increase in milk output in the municipality. On a very simplistic level, the extra 18,500 ML (63% of 29,500 ML) could lead to an extra 3,500 cows milked12 and an increase in milk production of around 16 million litres.

In fact the additional output is likely to be greater than this because a proportion of the extra pasture production would be used for fully feeding current dairy cows and this has a higher feed efficiency than for additional cows with their additional maintenance requirements. Total production could increase by perhaps 20 to 25 million litres.

An additional 25 million litres of milk would represent a 3.5% increase in total state production of around 700 million litres.

12 At 1 tonne of dry matter per ML applied and 5.3 dry matter per cow (allowing for 25% replacements).

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Figure 22; Farm survey – per cent water allocation by enterprise

Overall, the average area irrigated per farm on the survey farms is expected to increase from 70 hectares prior to the Scheme to 123 hectares - plus 76% (Table 9).

Table 9; Farm survey – average area irrigated per farm

Meander East

Meander West

Caveside Mole Creek

Quamby Osmaston

Rubicon Hagley Total

Farms surveyed 12 10 9 9 15 10 65

Area irrigated (ha/farm) Current 106 84 64 58 70 31 70

Extra 26 49 61 34 72 69 53

Total 131 133 125 92 143 100 123 Source: D&M, 65 survey farms representing 58% of scheme water

Additional on-farm investment of around $25.9 million or an average of almost $400,000 per farm was underway/planned to utilize the additional water on the survey farms (Table 10). This is equivalent to $1,430 per ML which is greater than the cost of the water right itself ($1,100 - $1,200/ML).

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Based on an average on-farm capital cost of $1,430 per ML, the total outlay associated with the 29,500 ML of additional water will be around $42 million – in addition to $34 million for water rights.

Table 10; Farm survey – extra on-farm investment

Meander East

Meander West

Caveside Mole Creek

Quamby Osmaston


Farms surveyed 12 10 9 9 15 10 65

Extra on-farm capital investment Total $3.4m $3.6m $1.9m $2.5m $12.4m $2.2m $24.6m

$ per farm 279,000 356,000 211,000 282,000 823,000 222,000 399,000

$ per extra ha 10,800 7,400 3,500 8,400 11,400 3,300 7,600

$per extra ML 1,260 910 605 1,570 2,480 1,235 1,430 Source: D&M, 65 survey farms representing 58% of scheme water

Total on-farm employment was expected to increase by 0.5 full time equivalents (FTE)/farm or +25% (Table 11). This is equivalent to around 1.8 FTE per 1,000 ML. On this basis the entire MVIS (29,500 ML of extra water) might be expected to employ an extra 55 FTE on farm, plus additional people in associated enterprises such as contracting, manufacturing etc.

Table 11; Farm survey – extra on-farm employment

Meander East

Meander West

Caveside Mole Creek

Quamby Osmaston


Farms surveyed 12 10 9 9 15 10 65

Employment (FTE/farm) Current 2.2 2.3 2.0 1.6 2.3 1.5 2.0

Extra 0.2 0.3 0.4 0.6 1.0 0.3 0.5

Total 2.29 2.6 2.4 2.2 3.3 1.8 2.5 Source: D&M, 65 survey farms representing 58% of scheme water

As a part of the survey farmers were also asked to indicate their main constraints in being able to make the best use of the additional water being supplied by the scheme. Their responses are summarized in Figure 23 below. The main issues raised (in order of number of respondents raising that issue) were;

Cost of the water and infrastructure, Low product prices, Aurora power installation cost capacity & delays, The availability of markets & contracts, Limited pipeline capacity, Difficulty in obtaining planning approvals and a perceived poor attitude of

bureaucracy (council & state government) in relation to development, Delays in pipeline construction,



The impact of frost on the ability to grow higher value crops, The age of farmers, Climate change, Access to the pipeline via a neighbor, and

Lack of own pipeline offtake.

Milk processing/manufacturing capacity was not mentioned by farmers as a potential limiting factor. There were concerns in relation to overall state capacity in 2009, however, recent announcements by Fonterra in relation to planned capital expenditure have eased these concerns, at least for the next few years.

Figure 23; Farm survey – farmer constraints in achieving the best outcome from additional water

As noted above the capital outlay (around $76 million or $400,000 per farm) has been identified as a key constraint in being able to make the best use of the additional water. The state government (through TIS) has a provided a finance option to assist farmers in buying water rights. However, for farmers who exercise that option there is an additional $50/ML cost up front (discount foregone), and the terms involve principal and interest payments over a 5 or 10 year period at 8.0 or 8.1% respectively. This means a significantly higher cash outlay over the 5 or 10 year period – compared to an interest-only loan.

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MVIS Water Use and Constraint Summary

The overall allocation of the additional 29,500 ML of water delivered by the MVIS is likely to be around 60% for dairying, 10% livestock finishing and 30% cash cropping.

This has been a consistent message from farm surveys in 2001, 2002 and 2010, and actual water use recorded by TIS in 2008-09.

Only a very small proportion is likely to be used for perennial horticulture or on new enterprises.

Based on the recent (2010) farm survey, the average area irrigated per farm is likely to increase by around 76% - from 70 hectares to 123 hectares.

On farm employment is expected to increase by around 55 full time

equivalents once the scheme is fully operational.

On-farm investment is expected to total around $1,430 per ML in addition to the $1,150 per ML average outlay for water right purchases.

The $76 million total outlay represents around $400,000 per farm over 180

farms.

This capital outlay has been identified by farmers as a key constraint in being able to make the best use of the water supplied by the scheme.

Other key constraints noted by farmers were low product prices, Aurora power supply issues, availability of markets for additional product, pipeline capacity (and delays in construction) and planning approval problems.

The state government (through TIS) offers finance for water right purchases

but the terms are principal and interest over 5 or 10 years which increases cash flow issues over the early years – compared to interest-only loans.

With around 60% of the additional 29,500 ML of water being used for

dairying total milk production is likely to increase by a minimum of 16 million litres and possibly 20 to 25 million litres. This would represent a 2.0 - 3.5% increase in total state production of around 700 million litres.

The possibility of dairy processing/manufacturing constraints in the state

was an issue in 2009. However, recent announcements by Fonterra have eased concerns somewhat – at least for the next few years.



7 Market Prospects

7.1 Introduction

With additional water availability, farmers in the Meander Valley have signaled their intention to increase production of a range of current dairy, cropping and livestock finishing enterprises. Some farmers in the area have expressed concerns in relation to the availability of crop contracts and current low market prices.

This section reviews market prospects for enterprises likely to utilize the additional water.

7.2 Dairying

Dairying is a major enterprise in the Meander Valley, particularly in the higher rainfall zones to the west and south of Deloraine. The area is an efficient low cost producer of milk and is one of three main dairy areas in the state. As noted above (Section 3) there are currently 74 dairy farms in the municipality and these contribute strongly to the value of agricultural production through both milk and livestock sales.

Increased dairy output in the Meander Valley is most likely to come from expansion of production on existing farms although there is potential to create new dairy farms by conversion of current beef or cropping farms to dairying.

Despite milk prices being quite volatile over time Tasmania has shown a consistent long-term upward trend in milk production – while dairy farm numbers have continued to fall (Figure 24). Average farm size has grown through a combination of the exit of smaller farms and an expansion in area and stocking rate for those that remain.

Figure 24; Tasmanian dairy farm numbers and production

Source: Dairy Australia, Dairy Industry in Focus 2009.

The prospects for the continued expansion of dairying in Tasmania including the Meander Valley will mainly depend on two main factors;

(1) Future milk prices, and

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(2) Milk processing capacity

Farm gate milk prices in Tasmania in 2009-10 at around $4.30 per kg milk solids (kg MS) are relatively low and farm returns are being negatively impacted. However this comes after a record price year in 2007-08 and a longer-term trend which suggests a more “normal” price of perhaps $5.00 to $5.50 per kgMS (Figure 25). In fact, opening prices for 2010-11 suggest a return to somewhere near that range.

World milk prices have improved somewhat over the past six months or so. ABARE in its most recent Australian Commodities13 has pointed out that somewhat stronger world export prices in 2009-10 are the result of higher than expected import demand for milk powders by China and lower than expected production in the European Union, Australia and New Zealand. World prices are expected to rise further in 2010-11 and to remain relatively high over the period to 2014-15. However, they note that “the characteristics of the world dairy market mean that international dairy prices are likely to continue to fluctuate significantly over the medium term. Only a relatively small share of world dairy production enters world trade and small changes in production or consumption …. can lead to volatility in world dairy product prices. The disposal of intervention stocks … may also contribute to significant fluctuations in world market prices”.

ABARE also notes that while world dairy prices are expected to increase somewhat, the forecast high Australian dollar will limit Australian farm-gate prices to around 35.5c/L ($4.75/kg MS) in 2010-11 peaking at 36.3c/L ($4.85/kg MS) in 2009-10 dollars in 2013-14.

Figure 25; Tasmanian milk prices

Source; Dairy Australia, Dairy Industry in Focus 2009, plus Davey & Maynard estimate for 2008-09 & 2009-10.

Fonterra has suggested a reasonable indicative milk price for longer-term budgeting purposes in Tasmania might be around $5.00/kg MS15. Again this is heavily dependent

13 ABARE, Australian Commodities, March Quarter 2010

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on the issues referred to by ABARE above and in particular the value of the Australian dollar.

Despite the recent low milk prices many dairy farmers remain relatively optimistic on the future of the industry. Those who have been in the industry for some time have seen a number of highs and lows and (grudgingly) accept price volatility as a part of the industry. In addition they have been able to continue to increase production in an attempt to become more efficient and contain their cost of production against increasing input prices.

A significant concern in the recent past has been the lack of milk processing capacity in the state to be able to handle continued growth in the industry – and thus the ability for farmers to increase output and maintain viability.

The milk industry in Tasmania is primarily based on manufacturing milk (milk powders, cheese and butter) rather than the liquid milk market which accounts for less than 10% of total production.

The major manufacturing companies in the state are Fonterra, Cadburys and National Foods (Lactos and King Island Dairy Products). Murray Goulburn the large mainland based cooperative has a small presence in the state through Classic Foods UHT plant at Edith Creek near Smithton.

The liquid milk market is serviced by National Foods (Pura Milk), Betta Milk and more recently Ashgrove which has grown rapidly over the past year.

Fonterra which uses around two thirds of the state’s total milk produces mainly high quality commodity products such as whole and skim milk powders, cheddar cheese and butter. Over the past 5-10 years Fonterra (previously Bonlac) has been the only company with a stated milk intake growth policy. Cadburys, Lactos and King Island Dairies have only sought modest increases in intake, and the liquid milk market in the state is a mature market with limited growth prospects.

In January 2010 Fonterra announced an $11.5 million investment program to increase cheese and whey powder processing capacity at its Spreyton and Wynyard manufacturing sites14. Once complete the investment will permit an overall expansion of around 50-60 ML per annum15. This will remove processing bottlenecks in the short term, allowing a 10-15% increase in intake. The company is also considering further expansion plans which will require significantly increased dairy farm output to make investment viable.

Based on these comments the availability of processing capacity would not appear to be a limiting factor, at least the short to medium term. There have also been reports that Murray Goulburn is considering an expanded presence in the State.

Any large-scale investment will require a reasonable certainty of additional farm supply. It may be that the Meander Valley Irrigation Scheme, in combination with other proposed irrigation schemes throughout the state, can help create that certainty.

14 Fonterra Farmlink, Australian Edition, Autumn 2010 15 Bruce Donnison, Fonterra, Managing Director Ingredients Australia, pers comm. (April 2010)



7.3 Cash Cropping

7.3.1 Poppies

In recent years all three poppy companies (Tas Alkaloids, Glaxo and TPI Enterprises) and the Tasmanian Poppy Growers Association have expressed concerns in relation to procurement of the total area required in the State. With reliable water the Meander Valley is in a position to provide some of the extra area required.

The Poppy Growers Association has noted that ”In spite of price increases the industry was some 2,000 hectares short of requirements for the 2007-08 season due in main to the very dry conditions. This amounted to a loss of approximately $7m gross at farm-gate. Unfortunately a similar situation eventuated for the 2008-09 season only on a larger scale. The processing companies were seeking to grow approximately 24,000 hectares of poppies but were only able to contract 18,000 hectares”. “Of the 18,000 hectares contracted approximately 2,500 hectares were not sown due to lack of water ...... In circumstances where the industry is unable to meet its orders let alone take on new orders the processors will have no alternative but to look for other sources of supply.”

Around 20,000 hectares was grown in 2009-10 and with strong world demand for alkaloids there is a view that this could expand to over 25,000 hectares over the next few years16. More recent comments suggest that the total area might expand to something in excess of 25,000 hectares.

Tasmania’s major poppy companies have announced price cuts for the coming season17 but new varieties with improved performance are being introduced.

Tasmanian Alkaloids will cut prices for its TED variety Thebaine crops by 7.5% at an average assay of 3.6% and further for assays below 3.6% and less for higher assays. Contracts for codeine and morphine will remain the same as for 2009-10.

Glaxo Smith Kline will cut prices by 7.5% across all points on the scale for growers with annual contracts.

TPI had earlier indicated that, as a result of the high Australian dollar it will be looking to reduce its input price by 20% next season, with a 10% reduction to come from both farmers and contractors (planting, harvesting and cartage). The price reduction may be less than announced – depending on the value of the $A.

7.3.2 Processing vegetables

Processing vegetables include peas, beans, broccoli, cauliflowers, onions and carrots. Processing potatoes are included as a separate category (Section 7.3.3 below)

16 Keith Rice, Tasmanian Poppy Growers Association, Midlands Water Scheme Information Forum, February 2010.

17 Tasmanian Country, June 11, 2010.



Two processing companies currently operate in Tasmania - Simplot at Devonport and McCains at Smithton.

Simplot currently uses a total of around 50,000 tonnes of farm product in Tasmania with peas, carrots and beans the main crops. According to company sources there is potential to process a greater amount but competition from lower cost suppliers such as China and New Zealand is limiting the potential for growth. In addition there is an ongoing 1-2% per annum substitution of fresh product for frozen product in the Australian market. A recently announced advertising campaign promoting “Australian grown” may result in an increased requirement for these crops. Currently the Meander Valley contributes close to 20% of total factory input and while there are plans to increase total broccoli and cauliflower production, it is unlikely that the Meander Valley will be targeted.

The McCains Smithon facility which at its peak was utilizing around 25,000 to 30,000 tonnes of farm product annually has been cut to around 7,000 tonnes in 2009-10 and is to be closed completely after the current season. Vegetable processing is to be concentrated at its New Zealand plant. While this is a major set-back for Tasmanian vegetable growers only a very small proportion was sourced from the Meander Valley. Hence the impact of the closure will not be as great as for the North West and Far North West.

The relatively “flat” demand situation for processed vegetables outlined by the companies is in line with the farmer survey indicating that only a limited amount of additional water would be used for those crops (Figure 22).

7.3.3 Processing potatoes

Potatoes are considered the backbone of the Tasmanian vegetable industry. With a farm gate value of $82.5 million in 2006-07 the potato industry makes up approximately 70% of the total value of vegetable production18. The industry comprises three sectors – processing (80%), fresh sales (10%) and the seed potato market (10%).

Frozen French fry products dominate the processing sector with production mainly concentrated across the north of the State.

Processing potatoes are a significant water user in the area, and farmers in the Meander Valley are planning on using some of the additional water to expand the area grown.

There are two processing plants – the Simplot factory at Ulverstone and the smaller McCains factory at Smithton. Combined total factory intake is around 320,000 tonnes grown on around 5,800 hectares.

According to company sources Simplot source around 8% of their total intake in the Meander Valley. McCains are not active in this area.

Because of the very competitive world market situation, neither company is intending to expand production at the present time but there is the processing capacity to do so in the longer term – albeit in the Simplot case by pushing the limits somewhat and thereby leaving less scope for handling production problems and potentially with reduced supply reliability.

18 DPIPWE The Tasmanian Potato Industry, May 2009



Company sources at Simplot have indicated that they are currently importing product from the USA and EU and that despite Australian demand increasing at 4-5% per annum, any expansion, in the short-term at least, is likely to come from imports.

McCains have highlighted four areas where they claim to be uncompetitive with overseas supply despite their factory being efficient in terms of both throughput and quality. These are the price paid to farmers, and the cost of water, electricity and labour.

Following a substantial price increase in 2008-09 there was a slight reduction in 2009-10 and early indications are that price may come back further for the 2010-11 season. However, gross margins per hectare and per megalitre of water applied are still relatively high.

7.3.4 Fresh vegetables

Fresh vegetable production has been nominated by farmers as using perhaps 5% of the additional water supply from the MVIS (see Attachment 1). This might relate to an extra 1,300 hectares in total and, depending on crop composition, perhaps another 25,000 to 50,000 tonnes of product.

There are five major fresh vegetable packing companies located on North West coast including one organic producer. Products include onions, carrots, potatoes, broccoli and swedes. There is also another group in the Scottsdale area which tends to concentrate on onions but also includes a significant area of carrots. Both sourced primarily in that area.

The main North West companies were contacted as a part of this project. In total those companies were packing around 160,000 tonnes of farm output of which around 30,000 tonnes (19%) was sourced from the Meander Valley.

Several of the companies (Harvest Moon, Premium Fresh & Field Fresh) indicated an intention to expand production by a combined 65,000 tonnes over the next five years. Around 10,000 tonnes of that increase was expected to come from the Meander Valley. Any increase in organic production was considered to be limited by the available market.

In general the priority areas for expansion were the North West Coast, Meander Valley and Central North. In relation to onions the Hagley-Westbury area was noted for its soil quality and availability of water (with MVIS) whereas some of the more traditional areas may be less favoured because of disease risk. Economies of scale were also mentioned as benefits for the Far North West and possibly the Hagley-Westbury area.

In the past month Harvest Moon has taken over the Field Fresh carrot operation and while carrot production may be curtailed somewhat it has flagged an increase in its broccoli and bean operation. The company markets vegetables throughout Australia and South East Asia. In a recent statement19 it indicated that it was able to hold ground in Asian markets because of its service and food safety, rather than on pricing.

7.3.5 Cereals

Cereals are a major crop option for the area and one of the crops that farmers are intending to expand with additional water. Additional output would supply feed wheat, barley and

19 Tasmanian Country June 25.



oats, and malting barley. Demand for cereals for the dairy industry locally has fallen with the reduction in milk prices. However at the current lower grain prices and with milk prices forecast to improve, demand would be expected to increase.

Cereal prices have fallen somewhat in the past season following a peak in 2007-08. Prices in Tasmania are closely linked to those on the mainland which are in turn dependent on world prices.

In the short term ABARE13 is forecasting the wheat price20 to fall by 22% to $252/t in 2009-10 from $324/t in 2008-09, and a further 7% to $235/t in 2010-11. Beyond this, the projected price is expected to show a gradual increase to $275/t in 2014-15. In real terms that would be similar to the forecast price for 2009-10.

7.3.6 Pasture seed

Pasture seed is a common crop grown in the area and the farm survey indicated that a limited (2%) of the extra water might be used for pasture seed production. Crops include perennial and annual ryegrass, various clovers, cocksfoot, phalaris and fescue. The drier summer climate in the eastern section of the MVIS is well suited to pasture seed production.

A number of seed companies active in Tasmania have been contacted as a part of this project. Several of those (Roberts, Tas Global, Heazlewoods) are located in the Meander Valley Municipality and constitute an active and innovative industry with potential for expansion.

Total production has been curtailed in recent years because of a lack of water and more recently by a market oversupply as a result of reduced demand on the back of mainland drought conditions and the downturn in the dairy industry. However all companies expected a significant increase in demand in the short to medium term.

In general, pasture seed production require only limited amounts of irrigation water and help in completing an overall rotation with higher value crops such as potatoes and poppies. There is often a livestock component which enables farmers to sell finished livestock rather than stores.

7.3.7 Pyrethrum

While farmers in the recent survey have not indicated an intention to greatly expand the already limited area of Pyrethrum in the Meander Valley area, Botanical Resources Australia (BRA) has indicated an intention to double the total area grown in Tasmania from 2,000 hectares to 4,000 hectares over the next few years.

Company sources have suggested that perhaps around 280 hectares (14%) of the proposed increase could be grown in the Meander Valley area.

7.3.8 Field peas

Field peas include maple, marrowfat and blue peas. While none were identified in the surveys outlined above, there is potential to grow these crops in the future.

20 APW (Australian Premium White) 10% protein net pool price



Midland Seeds is one company that contracts for these crops and they have indicated that their requirements are likely to increase over time. Gross margins per hectare are similar to pasture seeds.

7.3.9 Canola and canola seed

The demand and price for canola has fallen markedly over the last year or so, partly as a result of increased GM canola production on the mainland. This will also impact on the demand for canola grown for seed.

Because of the low gross margin and the fact that canola regrowth is a weed in poppy crops, the area of irrigated canola is the State appears likely remain low for the foreseeable future. However, there does appear to be a niche market for GM free canola seed which has significantly better gross margin than for canola as a crop in its own right.

7.3.10 Wasabi

A small wasabi operation is located near Deloraine. The business might perhaps be considered to be in a production and market development stage at the present time with no major expansion expected in the near future.

7.4 Perennial Crops

Climatically the Meander Valley is generally considered to be unsuited to perennial horticulture such as apples, cherries, apricots and grapes although there may be some potential in areas close to Launceston at the eastern end of the municipality. There is some limited production of berries and there has recently been a hazelnut plantation established.

As noted above, the area of berries and grapes has increased in recent years while orchards (apples, cherries, nuts) have reduced slightly21.

7.4.1 Raspberries

The well drained red soils, cool winters and generally temperate climate in the Meander Valley Municipality are favourable for berry crops such as raspberries.

In previous years there were a number of raspberry farms in the area but that number has declined over time to the current two major producers - Berry Exchange (Costas) and Christmas Hills (Dornauf). The total area of raspberries is currently around 10 hectares. Both companies have indicated an intention to expand production and may intensify their production methods.

The total water requirement is likely to be relatively small however, possibly no more than 100 – 200 ML.

21 The 21 hectare figure for orchards in 1995-96 may be a statistical anomaly. Alternatively it might relate to a failed planting.



7.4.2 Grapes

There is currently very limited production of grapes in the municipality. However, there may be potential for production towards the eastern end of the Municipality towards Launceston There are already successful vineyards south of Launceston. Further climatic studies would be required to determine the suitability of the area.

7.4.3 Hazlenuts

One grower has recently established 14 hectares of plantation in the Hagley area. Hazlenuts may well be suited to the climate in the municipality with other key success factors being the selection of suitable cultivars and the availability of reliable markets. The proponents are targeting the higher value desert quality end of the market and are confident that there is a viable future with perhaps 500 tonnes grown in the municipality.

7.4.4 Truffles

Around 110 hectares of (mainly) oak trees inoculated with tuber melanosporum have been established in the municipality over the past 15 years for truffle production. Total output is reported to be increasing. Further plantings are anticipated but are not in an area serviced by the MVIS.

7.5 Livestock Finishing

Around 10% of the additional water from MVIS is intended to be used for finishing livestock. This total includes some water allocated for the race horse breeding industry (see Section 7.6 below)

Store cattle and sheep can be “finished” on irrigated short-term or perennial pastures or in association with cash crops or lucerne. Pasture seed crops and winter wheat also supply grazing potential as well as seed, grain and hay.

Some farmers choose to include pasture as part of an overall cropping and pasture rotation particularly on lower class soils which can be degraded by continuous cropping. While the margin per hectare is generally not high, water use is generally relatively low which can mean a reasonable margin per ML. Pasture irrigation can also be used to complete an overall rotation under a pivot, and on occasions the returns can be quite high. For example, with adverse seasonal conditions, being able to finish store lambs or cattle rather than selling on a depressed market can produce good returns. Similarly, ensuring that replacement stock are able to be kept on-farm and well grown prior to lambing (or calving) can be worthwhile.

As indicated above (Section 3.5) there is already a strong base in red meat production in the Meander Valley with around 29% of the gross value of agricultural production being “livestock slaughtering”. Value-adding some of the current cattle and lamb production by taking it a more acceptable final product could add significantly to gross value of production.

Around 75% of Tasmanian livestock is processed in the State to produce branded value-added products for local and export markets22. The remaining livestock are exported live primarily to mainland destinations for finishing or direct processing. Beef dominates the industry with around 75% of total farm gate value.

The Australian weighted average saleyard price for beef is forecast to be around 279 c/kg in 2009-10 and 272 c/kg in 2010-11 compared to 296 c/kg in 2008-0913. “The forecast lower

22 DPIPWE The Tasmanian Red Meat Industry May 2009.



domestic beef prices in the short term mainly reflect the effect of increased competition for Australian beef in key export markets, especially in Japan and the Republic of Korea. In addition, the assumed higher average value of the Australian dollar over these two years, especially against the US dollar, is expected to place downward pressure on beef export earnings and, hence, domestic saleyard prices”. However, there is some potential for herd rebuilding to increase prices in the short term – following the good rainfalls in late 2009 and early 2010. Over the medium term to 2014-15 ABARE project a gradual increase in output and relatively steady prices in real 2009-10 dollars.

In contrast, ABARE has shown a sharp increase in sheep meat prices (both lamb and mutton) in 2008-09 and 2009-10 and has forecast a further 3% increase in 2010-11 as a result of reduced lamb production and increased demand. Over the medium term lamb prices are projected to remain relatively high in real terms. Production is expected to fall slightly to 2011-12 before gradually rising, while demand is expected to increase gradually.

The interest from interstate buyers ensures competitive prices for Tasmanian producers although more through put is required local processors to ensure their viability. Irrigated pasture and forage crops, and winter wheat also have potential to improve the supply of finished stock through late autumn and winter.

A number of benchmarking studies have shown large opportunities for red meat producers to significantly increase production and profit by increasing the production and utilization of pasture – both with and without the added benefit of irrigation. As an example a MLA funded project for Circular Head beef producers was recently able to double output and more than double profit with improved grazing management on dryland farms.

7.6 Horse Industry

There are several commercial horse breeders in the Carrick area at the eastern end of the

MVIS. As for the dairy industry it is considered that there is a comparative advantage for the

industry in the Meander Valley in terms of soils and climate and particularly so with the

guaranteed performance associated with irrigation. And there is potential to attract

mainland breeders to the State.

However, local breeders are somewhat pessimistic regarding the state of the thoroughbred

industry following the removal of the previous funding arrangement with Tote Tasmania.

The breeding industry is closely linked to the racing industry and any reduction in funding to

the racing industry will impact on the breeding industry.



Market Prospects Summary

Prices for many agricultural products are relatively subdued at the present time but there appear to be reasonable prospects for a most enterprises in the short to medium term.

Fonterra, the major milk processor in the State, is expanding milk processing

capacity and suggesting an indicative farm gate budgeting figure of around $5.00per kg MS compared to an estimated $4.30 per kg MS in 2009-10.

On a smaller local scale Ashgrove Cheese is also expanding production - with

significant employment spin-offs for the municipality.

While there appears to be limited potential to expand processed vegetables and potatoes, several fresh vegetable companies are planning significant expansion over the next few years.

Poppy prices are down somewhat in 2010-11 but improvements in productivity continue and production statewide is expected to increase from around 20,000 hectares to at least 25,000 hectares in the near future subject to the availability of suitable land and water.

The area of pyrethrum in Tasmania is expected to double from 2,000 to 4,000

hectares over the next few years.

Cereal production can also expand but prices are expected to remain at modest levels in the short to medium term.

For pasture seed production, demand and prices are currently down but are

expected to improve with the easing of the drought on the mainland and forecast improvements in the dairy industry.

Lamb and mutton prices are high at the present time while cattle prices are

relatively subdued. While cattle and sheep prices may not inease substantially in the short to medium term, there is potential to expand profitable production with irrigation and improvements in grazing management.



8 Potential Growth & Development Strategies

8.1 Introduction

The question has been asked as how to best facilitate the shift to relatively high value production with the advent of additional water supply in the Meander Valley municipality;

1) Is there a need or otherwise to assess alternative products or diversification? 2) Is there scope for further value adding and downstream processing of the districts

products? 3) Are there markets for existing or new products? 4) Are there barriers or obstacles that need to be overcome? Such as business

skills/planning, labour shortages, limited finance, infrastructure bottlenecks.

8.2 Diversification

While there may be potential for the introduction of new higher value enterprises into the area, the Meander Valley has had a long irrigation history and a wide range of enterprises have been trialed over that time. While prices for some are relatively low at the present time there is a diverse range of enterprises already available.

On this basis Davey & Maynard believe that development for the foreseeable future will lie mainly with the effective expansion of irrigation enterprises for which the municipality already has a proven record.

A number of smaller potentially “high value” enterprises have established a “toe hold” in the municipality. These include crops such as raspberries, hazelnuts, truffles and wasabi. However, any new enterprises that do arise are likely to be relatively low water users for an extended period of time and on that basis could have emerged without the new irrigation scheme.

At the present time we are not aware of any large scale new enterprises that are particularly suited to the soils and climate of the municipality. However there is definitely scope for increased output of a range of current enterprises and improvements in the profitability and sustainability of those enterprises.

8.3 Value adding

Ashgrove Cheese is a prime example of value-adding of agricultural produce, with milk from the Bennett family farm being used to produce cheese that is sold through their own retail outlet/tourist business as well as through supermarkets throughout Tasmania and on the mainland.

Plans are underway to increase both the total output of cheese and the value-added tourism component at Elizabeth Town and fresh milk has been a recent addition to their operation with further expansion of that enterprise planned. Overall the business expects that staff numbers could increase from the current 50-60 to perhaps 150 over the short to medium term. While soils, climate, water and proximity to the Bass Highway are all important



components in the success of this business, the most important ones are the entrepreneurship and business focus of the family members involved.

Christmas Hill Raspberries value-adds raspberry production in combination with a tourist venture, and some increase in production is anticipated over the next few years.

Tasmanian Alkaloids at Westbury might also be considered to be a value-adding operation for poppies grown throughout the state, and several seed companies are located within the municipality – Roberts Seeds, Tas Global (Dents) and Heazlewood Seeds. These are all vibrant businesses with potential to expand in the future.

Another value-adding possibility, given the likelihood of increased fresh vegetable production, is for a fresh vegetable packing operation to operate in the municipality. However, there is already a number of such operations operating in the Devonport and Ulverstone municipalities nearby, so there would need to be some particular advantage for a new operator to start up or for one of the current operators to locate some facilities in the area – possibly at the new Valley Central Industrial Estate.

8.4 Markets for Existing Products

The market prospects for a range of existing products are outlined above (Section 7).

In general terms, while prices for many agricultural products are relatively subdued at the moment compared to a couple of years ago, and while there is unlikely to be expansion in processing vegetables and potato industry, there are markets opportunities for additional output from the following “mainstream” enterprises;

Milk Fresh vegetables Poppies Pyrethrum Cereals Pasture seeds Red meat

8.5 Barriers and Obstacles

The major constraint raised by farmers in the recent survey was the capital investment associated with the purchase of water rights and the additional on-farm infrastructure required to utilize that water.

For the MVIS as a whole we have estimated the total capital requirement to be of the order of $76 million - $34 million for water rights plus $42 million of on-farm investment. Over around 180 farmers this represents an average of $400,000 per farm, and many will have outlays of over $2 million. Given current product prices this is likely to prove difficult to service in many instances, and the TIS loan option which might have helped requires principal and interest payments over 5 or 10 years. This is not helpful from a cash flow point of view.

Other issues raised were;

Cost of the water and infrastructure,



Low product prices, Aurora power installation cost capacity & delays, The availability of markets & contracts, Limited pipeline capacity, Difficulty in obtaining planning approvals and a perceived poor attitude of

bureaucracy (council & state government) in relation to development, Delays in pipeline construction, The impact of frost on the ability to grow higher value crops, The age of farmers, Climate change, Access to the pipeline via a neighbor, and

Lack of own pipeline offtake.

We understand that the Meander Valley Council has already commenced discussions with Aurora in relation to the impact of the MVIS on electricity requirements and the capacity of the grid to service those requirements. One potential constraint to the expansion of dairying was the limited milk processing /manufacturing capacity in the state. However, as mentioned previously, recent announcements by Fonterra have eased that concern – at least for the short to medium term.

8.6 Lessons from the South East Irrigation Scheme

While there are a number of clear differences between the South East Irrigation Scheme (SEIS) and the MVIS there are possible lessons from the former which may be applicable to the latter. A report prepared by the Australian Innovation Research Centre (AIRC)23 listed a number of important conclusions in relation to the success of the Coal River project;

1) The greatest proportion of the value created by the addition of irrigation to the Coal River Valley came not from support to existing enterprises and land uses, but from new – and often completely unanticipated – businesses.

2) The conventional form of economic analysis employed to assess the project’s feasibility prior to its construction – cost benefit analysis – entirely failed, through repeated iterations, to judge accurately the project’s value.

3) A few, in fact a handful, of entrepreneurs exercised a disproportionate impact on value creation, and their experience influenced the decisions of many others.

4) While irrigation was a necessary precondition to the transition to new land uses (innovation), to make that transition happen required in addition the presence of other economic capabilities and activities – including information about alternatives, access to skills and experience, development of business skills and confidence, availability of finance, and access to suitable logistics.

5) Risk is the defining challenge in land-use transition, and perceptions of excessive risk were the main obstacle to overcome in effecting the shift.

6) Deliberately organized community leadership was vital in supporting entrepreneurs and sharing experience – specifically the Coal River Products Association.

23 “An Innovation Strategy for Tasmania, a New Vision for Economic Development” Appendix C: Lessons from the Coal River Experience: How Irrigation can contribute to Innovation – from A. Lejda, Susan Nelle and Jonathon West, Building Regional Irrigation Capability: The Impact of Irrigation in the Coal River Valley



7) External research and demonstration (University and Government) was instrumental in overcoming perceived risk.

8) The availability of high-quality logistics was critical in facilitating the foundation and growth of new businesses.

From these conclusions a number of lessons for future irrigation projects were proposed;

1) The projects should incorporate entrepreneurship and land-use transition as explicit associated elements from the start.

2) Such projects should aim deliberately to reduce the actual and perceived risk confronted by entrepreneurs;

Management risk – training and mentoring, Production risk – testing and demonstration projects by non-private entities,

and Market risk – information about potential markets.

3) Local knowledge of the innovation system is essential – including the presence of supporting institutions off-farm.

The “conclusion” in relation to economic assessment of irrigation schemes is not relevant here because the scheme is already in place. Also, the SEIS introduced water into a previously dry area so the requirement for land use change is not as relevant to MVIS, which has had a long history of irrigation. Davey & Maynard believe there is a much greater case in the Meander Valley for building on the foundation that already exists and in improving the management and performance of current enterprises.

However, the observation that “a handful, of entrepreneurs exercised a disproportionate impact on value creation, and that their experience influenced the decisions of many others” is relevant to the Meander Valley. Also, the importance of “information about alternatives, access to skills and experience, development of business skills and confidence, availability of finance, and access to suitable logistics” is an important message.

Two major forces in the development of irrigated agriculture in the Coal River were the presence of the Coal River Valley Products Association as an active industry support group, and the level of locally applicable research and development work undertaken at the University farm by the University and State Government DPIPWE. These are options which should be promoted for the MVIS.

8.7 Recommendations

8.7.1 Meander Valley Irrigation Group

The Meander Valley Enterprise Centre has recently proposed the formation of a body along the lines of the Coal River Products Association. The main objective of that group would be to promote the development of irrigated agriculture in the MVIS. Providing there is farmer support we would strongly support the formation of such a group.

The group could address a number of issues raised by the AIRC in relation to accessing information, development of skills including business skills, sharing experience, promoting the availability of finance on appropriate terms, and fostering research and development. It might be a reformation of the lobby group that helped ensure the building of the MVIS. Alternatively it could be a completely new group.



The State government’s “Wealth from Water” program has outlined an outlay of $7.2 million over three years to assist in irrigation development throughout the state. While the program may not commence until 2011 it is possible that some of those funds could help implement initiatives proposed by the group.

Initial projects undertaken by the group might come from some of the recommendations outlined below.

8.7.2 Climate data

There is a need for a more comprehensive and up-to-date set of climatic data for the region. Collection and compilation of such data is imperative for (1) the efficient design and operation of current irrigation systems and enterprises and (2) the assessment of possible new agricultural pursuits. One of the aims of the “Wealth for Water” program is to bring together existing and new regional scale soil and micro-climate data. This would be a worthwhile investment for the MVIS.

8.7.3 Dairy processing capability

The dairy industry is a key sector in the municipality and is likely to utilize around 60% of the additional water. For dairy businesses to be able to grow it is crucial that there is sufficient processing capacity in the State to allow that to occur. While Fonterra has announced an expansion of manufacturing capacity that will increase capacity in the short to medium term, further investment may be required for longer term growth - by Fonterra or other industry players.

The Meander Valley irrigation community should work closely with the dairy companies and State government to ensure that adequate processing capacity comes on line at the appropriate time in the future.

8.7.4 Research & development

The Australian Innovation Research Centre (AIRC) report (Section 8.6) highlighted the importance of applied research in the development of agriculture in the Coal River Valley. There are a number of areas where local R&D could lead to more efficient water usage and substantial financial benefits for the Meander Valley area. A number of these are outlined below.

Pasture production and utilization Given the importance of grazing enterprises (dairy and livestock finishing) to the Meander Valley and the potential for increases in pasture production and utilization there is definite scope or research, development and demonstration projects to be undertaken within the MVIS.

There are a number of pasture coaching, benchmarking and demonstration models that could be adopted in the area to greatly increase output at limited cost. While these are reasonably common in the dairy sector there has been limited uptake for beef and sheep. To some extent this is due to relative novelty of finishing livestock under centre pivot irrigators in Tasmania.

Institutions such as Dairy Tas, TIAR and MLA would be likely partners in this work if there is a strong local commitment.



Seed production Pasture other seed production is an enterprise well suited to the drier areas in the municipality and a number of seed firms operating there have indicated a desire to expand production over time. The enterprises often have a grazing component that complements grazing enterprises on the far. However, gross margins are considered to be too low by many farmers.

For many farmers the enterprise is seen as something of a “catch-crop” associated with sowing down a new pasture, and the resulting management practices are therefore somewhat haphazard – thereby reinforcing the view of the enterprise as being low profit. Also the species involved are generally specifically bred to maximize herbage rather than seed production. However, there are management practices centred around irrigation, nitrogen fertilisers and growth inhibitors that can substantially increase seed yield. For example, one seed company noted that New Zealand ryegrass seed yields as high as 4.0 t/ha have been recorded. In Tasmania, 1.5 t/ha is considered a reasonable yield for a well managed crop and 2.0 t/ha a high yield. At 1.5 t/ha the expected gross margin (including grazing and hay) is around $1,300/ha. An increase in yield to 2.0 t/ha increases the gross margin to $2,100/ha. At that level or above the enterprise would be attractive to many farmers and the seed companies could obtain additional supplies.

We believe there is scope for farmers within the MVIS to work with seed companies to undertake research and demonstration projects to maximize returns.

Fresh vegetables A number of North West fresh vegetable packing companies have indicated an intention to substantially expand production, including in the Westbury Hagley area. A local group could help facilitate such an expansion by working with the companies and undertaking trials to prove/improve production potential. Additional climatic data, particularly in relation to frost might also be useful. As for the Coal River Valley experience there is likely to be a significant benefit from localized R&D.

There may also be potential or a new vegetable packing enterprise or an offshoot of one of the current packers to be located at the Westbury industrial site.

Hazelnuts There are a number of new crops that could be suited to the area. One of these is Hazlenuts which already has a commercial planting of around 14 hectares. The proponents believe there has been a lack of support from all levels of government,, and they have had difficulties in importing breeding stock from Oregon. While they appreciate the need for quarantine controls they believe that people involved could be much more helpful.

RIRDC24 has undertaken an assessment of a range of varieties and sites in south eastern Australia to highlight the most appropriate soils and climatic conditions, including some observations on potential profitability.

24 Basil Baldwin, (2010) “Hazelnut variety assessment for south eastern Australia” RIRDC 09/178, Jan 2010.



Research and market development programs should be devised to assist such innovative projects as this

8.7.5 Electricity grid

The farmer survey highlighted some concerns with the adequacy of the electricity grid to cope with the substantial increase in MVIS and on-farm pumping and other infrastructure, and also over the timeliness of new installations.

While we understand that the MVC has already commenced discussions with Aurora Energy a joint approach with farmers might help facilitate an understanding of each other’s issues and the most cost effective response. It would presumably be helpful for Aurora to have an indication of overall irrigation plans for the next few years rather than a series of one-off applications.

8.7.6 Pipeline capacity and utilization

Farmers along some of the new pipelines have expressed concerns over the adequacy of flow and their ability to access water at peak times.

Issues such as this could be negotiated jointly with a local group such as proposed by the MVEC and TIS.



9 ATTACHMENT 1 Farm Survey Results

Farm Survey March 2010 – Proposed Water Use (additional supply)

Meander

East

Meander

West

Caveside -

Dairy

Plains

Quamby -

Osmaston


Survey farms (no.) 12 10 9 9 15 10 65

Extra water on current irrigation area(ML) (ML) (ML) (ML) (ML) (ML) (ML) (%)

Dairy 0 880 340 0 1,355 0 2,575 53

Livestock finishing 364 0 20 0 30 44 458 9

Processed vegetables 87 0 0 0 10 40 137 3

Processed potatoes 80 0 0 60 50 0 190 4

Fresh vegetables 113 0 0 100 0 36 249 5

Poppies 119 0 35 50 65 35 304 6

Pyrethrum 0 0 0 0 30 0 30 1

Cereals 64 0 25 0 0 600 689 14

Pasture Seed crops 175 0 25 10 5 25 240 5

Vegetable seed crops 0 0 0 0 0 0 0 0

Perennial Horticulture 0 0 0 0 0 0 0 0

Other 0 0

Total 1,002 880 445 220 1,545 780 4,872 100

Extra water on new irrigation area(ML) (ML) (ML) (ML) (ML) (ML) (ML) (%)

Dairy 0 2,395 2,285 400 2,415 280 7,775 67

Livestock finishing* 394 214 25 50 320 180 1,183 10




Poppies 206 80 0 120 200 140 746 6

Pyrethrum 0 0 0 0 5 25 30 0

Cereals 160 0 0 105 275 25 565 5




Other 0 0

Total 1,336 2,790 2,335 1,060 3,405 760 11,686 100

Total extra water- on current plus new Irrigation area(ML) (ML) (ML) (ML) (ML) (ML) (ML) (%)

Dairy 0 3,275 2,625 400 3,770 280 10,350 63

Livestock finishing* 758 214 45 50 350 224 1,641 10




Poppies 325 80 35 170 265 175 1,050 6

Pyrethrum 0 0 0 0 35 25 60 0

Cereals 224 0 25 105 275 625 1,254 8




Other 0 0 0 0 0 0 0 0

2,338 3,670 2,780 1,280 4,950 1,540 16,558 100

Spare water 314 245 350 340 30 250 1,529

Total 2,652 3,915 3,130 1,620 4,980 1,790 18,087

* Includes horse breeding



10 ATTACHMENT 2 – MVIS Land Capability by Zone

See Section 5 for overall scheme Legend

meander valley agriculture study mvc & dedta · 2014. 2. 17. · meander valley agriculture...

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