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| Seasonal conditions and water availability in 2006-07 | ||
| Ongoing drought in eastern Australia in 2006-07 (map 2) marked the sixth consecutive year of below average rainfall throughout much of the Murray-Darling Basin, resulting in the lowest ever recorded inflows to many of the river systems and major water storages in the Basin (table 2). Consequently, irrigation water allocations were significantly lower than licenced entitlements in most regulated river valleys in 2006-07. Seasonal inflows to major water storages have an important bearing on the amount of water available for both irrigators and other water users. Generally, water storage levels in major dams — particularly in southern New South Wales and Victoria — increase during winter and spring in line with seasonal rainfall patterns before declining through the summer months as irrigation water demands increase. The timing of inflows and water allocations is critical for irrigated crops, and greatly influences the business decisions made by farmers. For example, irrigators planting annual crops — such as cotton or rice — are likely to respond to low water levels by delaying plantings until they get a more accurate indication of seasonal water availability. Consequently, plantings would be expected to be lower than normal if water allocations were low at the beginning of the season, as was the situation in 2006-07. Reflecting low river inflows and water storage levels, actual water use was below total entitlements in all regions surveyed in 2006-07 (table 3). In some regions, the purchase of temporary water allowed irrigators to increase their water use above the volume allocated by the relevant water authority. Also, some irrigators reused water on a number of crops. For those regions surveyed, the lowest average water use (including temporary purchases and reused water) relative to total entitlements were recorded for the Border Rivers region, horticulture farms in the Condamine–Balonne region, and broadacre farms in the Murrumbidgee region. In comparison, the highest average water use relative to total entitlements were recorded for dairy farms in the Murrumbidgee, Murray and Condamine–Balonne regions, and horticulture farms in the Murray and Loddon–Avoca regions. |
| Ongoing drought in eastern Australia in 2006-07 (map 2) marked the sixth consecutive year of below average rainfall throughout much of the Murray-Darling Basin, resulting in the lowest ever recorded inflows to many of the river systems and major water storages in the Basin (table 2). Consequently, irrigation water allocations were significantly lower than licenced entitlements in most regulated river valleys in 2006-07. Seasonal inflows to major water storages have an important bearing on the amount of water available for both irrigators and other water users. Generally, water storage levels in major dams — particularly in southern New South Wales and Victoria — increase during winter and spring in line with seasonal rainfall patterns before declining through the summer months as irrigation water demands increase. The timing of inflows and water allocations is critical for irrigated crops, and greatly influences the business decisions made by farmers. For example, irrigators planting annual crops — such as cotton or rice — are likely to respond to low water levels by delaying plantings until they get a more accurate indication of seasonal water availability. Consequently, plantings would be expected to be lower than normal if water allocations were low at the beginning of the season, as was the situation in 2006-07. Reflecting low river inflows and water storage levels, actual water use was below total entitlements in all regions surveyed in 2006-07 (table 3). In some regions, the purchase of temporary water allowed irrigators to increase their water use above the volume allocated by the relevant water authority. Also, some irrigators reused water on a number of crops. For those regions surveyed, the lowest average water use (including temporary purchases and reused water) relative to total entitlements were recorded for the Border Rivers region, horticulture farms in the Condamine–Balonne region, and broadacre farms in the Murrumbidgee region. In comparison, the highest average water use relative to total entitlements were recorded for dairy farms in the Murrumbidgee, Murray and Condamine–Balonne regions, and horticulture farms in the Murray, Eastern Mount Lofty Ranges and Loddon–Avoca regions. |
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| Farm performance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Broadacre | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| The financial performance of Australian broadacre farms (including both dryland and irrigated farms) fell sharply in 2006-07 as severe drought across most of southern Australia led to a significant reduction in farm production and incomes. As seasonal conditions deteriorated throughout the season there were widespread crop failures and many grain producers realised below average yields. Livestock producers turned off animals in response to a reduction in pasture availability and an increase in feed grain and fodder costs. Significant depletions of soil moisture and some of the lowest water storage levels on record resulted in summer crop production falling by more than 50 per cent. The impact on incomes of reduced cropping receipts on broadacre farms was exacerbated by a reduction in livestock receipts, principally because of weaker prices and reduced livestock fertility. Results from ABARE’s Australian agricultural and grazing industries survey show, at the national level, broadacre farm incomes are estimated to have fallen by 40 per cent to average around $41 180 a farm in 2006-07 (Hooper et al. 2008). Farm cash income for irrigated broadacre farms in the Murray-Darling Basin averaged around $62 690 in 2006-07, with an average farm business loss of around $36 390 (table 4). Overall, irrigated broadacre farms in the Murray-Darling Basin recorded an average rate of return to capital and management — defined as profit at full equity divided by total capital — of 0.5 per cent in 2006-07. The best performing regions for irrigated broadacre farms, by rate of return, were the Macquarie–Castlereagh and Loddon–Avoca regions, while the Goulburn–Broken region had the lowest average rate of return. However, there was wide variability in financial performance across farms in all regions in 2006-07. |
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| Dairy | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dairy farmers’ incomes fell substantially in 2006-07 because of the drought and consequently lower milk production, higher fodder costs, and slightly lower farmgate milk prices. Results from ABARE’s Australian dairy industry survey show that dairy farmers responded to the drought in a variety of ways, such as increasing their use of purchased feeds to replace pasture and reducing herd sizes. As the drought worsened and pasture production proved to be considerably below average in 2006-07, some dairy farmers increased the amount of concentrated rations (including grain, supplements and hay) fed to their milking herd. At the same time, farm costs rose as feed grain prices increased substantially as the drought sharply curtailed winter and summer grain production. There were also widespread cuts to cow numbers as many dairy farmers reduced herd sizes to reduce feed costs. As seasonal conditions deteriorated in 2006-07, average milk yields per cow declined by around 5 per cent. Consequently, average milk receipts per farm, and hence total cash receipts, are estimated to have fallen by around 7 per cent in 2006-07. With significant increases in the prices and quantity of purchased fodder and feed grains, total cash costs rose by more than 7 per cent in 2006-07. As a result of lower cash receipts and higher cash costs, farm cash income for Australian dairy farmers is estimated to have declined by 61 per cent to average around $34 600 in 2006-07 (Hooper et al. 2008). Farm cash income for irrigated dairy farms in the Murray-Darling Basin averaged around $33 640 in 2006-07, with an average farm business loss of around $55 170 (table 5). Overall, irrigated dairy farms in the Murray-Darling Basin recorded an average rate of return to capital and management of minus 0.3 per cent in 2006-07. The best performing region for irrigated dairy farms by rate of return in 2006-07 were the Murray and Eastern Mount Lofty Ranges regions. The Goulburn–Broken region had the lowest average rate of return. However, there was wide variability in financial performance across farms in all regions in 2006-07. |
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| Horticulture | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Like incomes of dairy and broadacre producers, horticulture producers’ incomes were affected by drought, reduced water allocations, and frost in some regions in 2006-07. Results shown are for the Murray-Darling Basin only because estimates of farm incomes for horticulture industries across Australia were not available for 2006-07. Farm cash income for irrigated horticulture producers in the Murray-Darling Basin averaged around $54 760 in 2006-07, with an average farm business loss of around $1920 (table 6). Overall, irrigated horticulture producers in the Murray-Darling Basin recorded an average rate of return to capital and management of 1.8 per cent in 2006-07. The best performing region for irrigated horticulture producers by rate of return in 2006-07 was the Condamine–Balonne region, while the Macquarie–Castlereagh region had the lowest average rate of return. However, there was wide variability in financial performance across farms in all regions in 2006-07. |
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