Download Dairy Industry Deregulation from the National Interest

Irrigation and the Canterbury Economy
Social and Economic Impacts
Nick Brown
Stuart Ford
The AgriBusiness Group
Presentation to CSWS Darfield 2006
Irrigation and the Canterbury Economy
• Irrigation in Canterbury
• Agriculture, Irrigation and the Canterbury
Economy
• Social and Economic Impacts
• Future Prospects
Presentation to CSWS Darfield 2006
Irrigation In Canterbury
Area under Irrigation
600,000
550,000
500,000
400,000
400,000
350,000
287,168
300,000
200,000
150,000
100,000
35,000
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Presentation to CSWS Darfield 2006
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Irrigation In Canterbury
Irrigated Land Use
2% 1%
27%
34%
36%
Dairy Pasture
Other Pasture
Presentation to CSWS Darfield 2006
Arable
Horticulture
Viticulture
Irrigation In Canterbury
Canterbury has;
• 20% of the farmed area in New Zealand. (Stats
NZ 2003)
• 58 % of all water allocated nationally for
consumptive use. (LE 2000)
• 70 % of all irrigated land in New Zealand. (LE
2000)
• Canterbury allocation predominantly irrigation.
Allocation Use
13%
3%
84%
Presentation to CSWS Darfield 2006
Irrigation
Industrial
Public Water Supply
Irrigation In Canterbury
Canterbury has considerable physical potential for
expansion of irrigated area. (LE 2002)
– Gross potentially irrigable 1.3 m Ha.
– Net potentially irrigable 1.0 m Ha.
Presentation to CSWS Darfield 2006
Agriculture, Irrigation and the Canterbury
Economy.
•
Agriculture has a declining share of NZ ‘s GDP.
National GDP Share by Broad Industry Group 2004
Agriculture
5%
Service
Industries
70%
Presentation to CSWS Darfield 2006
Forestry,
Fishing, Mining
2%
Goods
Producing
Industries
23%
•
Agriculture, Irrigation and the Canterbury
Economy.
Canterbury's economy is more dependant on
agriculture than the national average.
Canterbury Value Added by Broad Industry Group
2004
Forestry,
Agriculture
8%
Service
Industries
66%
Presentation to CSWS Darfield 2006
Fishing, Mining
1%
Goods
Producing
Industries
25%
•
Agriculture, Irrigation and the Canterbury
Economy.
Canterbury’s Value Added derives from 3 main
sub sectors.
Canterbury Agricultural Value Added by Sector 2004
Dairy
28%
Sheep and Beef
32%
Presentation to CSWS Darfield 2006
Mixed Cropping
18%
Ag Services
5%
Other
8%
Horticulture
9%
Agriculture, Irrigation and the Canterbury
Economy.
•
The Agricultural sector contributes about 10-11%
of Canterbury’s employment.
Canterbury Employment by Broad Industry Group
2004
Primary
Industries
11%
Service
Industries
65%
Presentation to CSWS Darfield 2006
Goods
Producing
Industries
24%
Agriculture, Irrigation and the Canterbury
Economy.
•
Canterbury’s employment is more evenly
distributed throughout the sectors.
Canterbury Agricultural Employment by Sector 2004
Dairy
17%
Mixed Cropping
22%
Sheep and Beef
29%
Presentation to CSWS Darfield 2006
Ag Services
10%
Horticulture
11%
Other
11%
Agriculture, Irrigation and the Canterbury
Economy.
Linkages through to goods producing industries
means that the contribution of the agricultural
sector increases.
• Direct plus indirect effects;
– Value added 8.4% to 11.7%.
– Employment 10.2% to 13.2%
Presentation to CSWS Darfield 2006
Agriculture, Irrigation and the Canterbury
Economy.
The contribution to Canterbury’s economy from
irrigation is significant. (Butcher 2000 )
– One third of value added.
– Likely to be higher now.
– 3,600 jobs on farm attributable to irrigation.
– Share of jobs supported by irrigation less than
the share of value added.
Presentation to CSWS Darfield 2006
Agriculture, Irrigation and the Canterbury
Economy.
•
Net contribution to GDP per Ha irrigated in
Canterbury 2002 / 03 is the lowest of all regions.
(Doak 2004).
Net GDP / Irrigated Ha
$
Auckland
6,880
Hawkes Bay
5,480
Tasman
4,660
Gisborne
4,530
Marlborough
4,250
Northland
4,110
Canterbury
1,170
Presentation to CSWS Darfield 2006
Agriculture, Irrigation and the Canterbury
Economy.
Water Use Efficiency – Economic Measures
•
The value of product produced per unit of water
volume consumed.
•
•
$ output / volume consumed
$ gross margin / volume consumed
Presentation to CSWS Darfield 2006
Agriculture, Irrigation and the Canterbury
Economy.
Econommic Return / m3 Water
25.0
2.9
20.0
5.2
($ / m3)
15.0
Marlborough
CanterburyOtago
Southland
5500
10.0
6000
5500
3000
4600
3000
5.0
2600
2000
1800
0.0
4600
3000
2600
1800
4600
3000
2600
2000
18.9
15.2
4.6
3000
2500
2000
1.2
5.2
2.5
0.4
0.6
Dairy - Canterbury
Grapes - Marlborough
Pipfruit - Hawkes Bay
Working Expenses
Gross
Revenue
Dairy - Canterbury
1.0
Grapes - Marlborough
9.7
Pipfruit - Hawkes Bay
21.8
Stonefruit - Central Otago
20.5
Potatoes - Canterbury
3.7
Process Peas - Canterbury
0.7
Presentation to CSWS Darfield 2006
Stonefruit - Central
Otago
Potatoes - Canterbury
Cash Farm Surplus
Working
Expenses
0.6
5.2
18.9
15.2
2.5
0.3
Cash Farm
Surplus
0.4
4.6
2.9
5.2
1.2
0.4
0.4
0.3
Process Peas Canterbury
Social and Economic Impacts
“Water can transmute a society as definitely
and profoundly as it transforms the
landscape”.
(Morton 1978)
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Irrigation development options.
• Intensification
• Diversification
• Capital Profit Uplift
Wave theory;
• Three waves (TBA)
• Tidal wave
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Social implications of ownership
change (TBA)
•
•
•
•
•
•
demographic change (age structure)
impact on community facilities such as schools
shift from `old’ to `new’ families
differences in ways of life - particularly dairying
and other types of farming
`old’ families provide stability
farm workers, local contractors and small
businesses must change skills base
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Changes in Usually Resident Population (% / 5 Years)
Lower Waitaki Amuri New Zealand
3.8
-2.8
4.8
1986
3.4
-8.6
6.7
1991
7.2
6
4.3
1996
3.3
7.7
-1.1
2001
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Median Household Income
Lower Waitaki Amuri
1981
14,222
15,749
1986
31%
12%
1991
66%
37%
1996
12%
44%
2001
26%
21%
43,864
42,000
Presentation to CSWS Darfield 2006
New Zealand
14,957
55%
33%
12%
14%
39,588
Social and Economic Impacts
Economic Indicators
• Output
• Employment
• Value Added
• Household Income
Presentation to CSWS Darfield 2006
Social and Economic Impacts
•
Likely scale of large community scheme
development economic impacts in Canterbury on
and off farm. (Butcher 2000 192,000 ha)
Off- Farm On-Farm
Total
Output ($m)
651
572
1223
Employment
(FTE’s)
3,429
4,828
8,527
254
264
518
Value
Added($m)
Presentation to CSWS Darfield 2006
Social and Economic Impacts
•
Sector location of flow on impacts. (CPWL 84,000 Ha)
Processing and Flow on Output by Industry Sector ($490 M)
Business
Transport and
Communications Services, $33
, $21
Community and
Social Services,
$30
Other, $17
Wholesale and
Retail, $33
Food
Processing,
$283
Construction, $7
Utilities, $34
Other
Manufacturing,
$32
Presentation to CSWS Darfield 2006
Social and Economic Impacts
•
Rule of thumb impacts (Ford 2002 ).
Increase in Economic Parameters (per 000 ha)
Farm
District Region
Output ($m)
2.5
3.4
9.2
NZ
9.7
Employment (FTE's)
7.5
12.6
27
29.4
Value Added ($m)
1.5
1.8
3.2
3.4
Presentation to CSWS Darfield 2006
Social and Economic Impacts
•
Location effects of CPW impacts (84,000 ha).
Change in spending patterns ($m).
Present With CPW Increase
SMALL TOWNS
Farm Working Expenses
34.4
90.2
55.8
Personal
1.5
8.1
6.65
Total
36
98.3
62.4
CHRISTCHURCH
Farm Working Expenses
Personal
Total
Presentation to CSWS Darfield 2006
13.2
3.2
16
50.1
17.6
67.7
36.9
14.5
51.4
Social and Economic Impacts
Conclusions
•
•
•
•
Irrigation brings significant ownership and land
use change.
Social community change is massive.
Quality measures are positive.
Impact on size and form of the business
community / economy is significant.
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Opuha Dam Ex Post Impacts (Harris 2006)
On Farm Impacts
• Total revenue is 2.4 times as high at $2,073 / ha for the
irrigated farms than the dryland at $862 / ha.
•
•
The ratio of Farm Working Expenses to Total Revenue is
very similar between the dryland and irrigated properties
(76% and 73% respectively).
Cash Farm Surplus as a proportion of Total Revenue is
similar for the two farm types at 24% and 27%
respectively but the dollar value of the surplus on the
irrigated farms is substantially higher.
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Scheme Wide On Farm Impacts (16,175 ha)
•
•
•
•
•
Total Farm Revenue increase of approximately $40
m / annum.
Total Farm Working Expenditure increase of
approximately $28 m / annum.
Cash Farm Surplus increase of approximately $12 m
/ annum.
Net Trading Profit after Tax increase of approximately
$3 m / annum.
Irrigated farms generate 2.0 times as many jobs, 2.3
times as much value added and 3 times as much
household income per ha as do dryland farms.
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Community Economic Impacts
Whole Economy Impacts
Additional Proportion
Impact with of Local
Irrigation Economy %
Output ($m / annum)
124
Value Added ($m / annum)
41
3.1
Household Income ($m / annum) 20
Employment (FTE's)
480
2.4
Presentation to CSWS Darfield 2006
Social and Economic Impacts
Social Indicators
Irrigated Farmers were;
– Younger
– Better educated
– Larger employers of local services.
“These changes are likely to result in more vibrant
and sustainable rural communities.”
Presentation to CSWS Darfield 2006
Future Prospects
• Irrigation development and regional
development.
• Striving for efficiency gains.
• Public : Private benefit conflict.
Presentation to CSWS Darfield 2006
Future Prospects
“ It may well be that community irrigation
schemes provide one of the most potent
forces for regional development and social
stability in agricultural areas of New
Zealand”
Presentation to CSWS Darfield 2006
Future Prospects
•
•
New large scale irrigation developments are
unlikely to occur in Canterbury without
Government support.
The rationale for this support is National and
District policy objectives which promote vibrant,
healthy and sustainable rural communities.
Presentation to CSWS Darfield 2006
Future Prospects
Figure 1: Conceptual representation of the sequence of water resource development for
irrigation
2010
2003
Presentation to CSWS Darfield 2006
Future Prospects
•
•
•
As marginal cost of new development increases
we will soon reach the point where cost exceeds
marginal benefit then;
forced to re look at existing (lower cost) water
allocation and use and achieve efficiency gains
(allocative, conveyance, application, economic)
in order to facilitate redistribution and;
re examine demand variables from an economic
perspective.
Presentation to CSWS Darfield 2006
Future Prospects
Regional Economic Impacts of Water Allocation and
Reliability. (Harris 2005)
$180,000,000
$160,000,000
$140,000,000
Regional CFS
$120,000,000
$100,000,000
Region Total without
capital costs
Regional total with capital
costs for new irrigation
$80,000,000
Existing Area
$60,000,000
Dryland
$40,000,000
$20,000,000
$0
0
10
20
30
40
Equivalent Irrigation Allocation (cumecs)
Presentation to CSWS Darfield 2006
50
60
Future Prospects
•
•
•
•
•
Cash farm surplus for all existing irrigators
decreased as reliability decreased.
Extra water was redistributed to new irrigators at
the lower reliability.
Regional Total CFS (GDP) increases as reliability
decreases.
Regional Total CFS with capital included (net
benefit) increases as reliability decreases.
Spreading the water further at lower reliability
increases public and new irrigator benefit at a
cost to existing irrigators.
Presentation to CSWS Darfield 2006
Future Prospects
DISCUSSION
Presentation to CSWS Darfield 2006