Weekly Water Report – 25 February 2019

It also highlights that the winter crop was a tale of two seasons.

In Western Australia farmers reported bumper yields, but in eastern states production was disastrously low.

A critical lack of rainfall throughout the growing season meant many crops simply ran out of moisture.

Some farmers did not even bother getting their harvesters out of the shed, and large areas of crop were cut for hay, grazed by livestock or simply abandoned.

Overall, production was down 20 per cent to 30.4 million tonnes.

Production fell 60 per cent in NSW, 51 per cent in Victoria and Queensland, and 24 per cent in South Australia.

In stark contrast, WA recorded a 21 per cent increase in production to 17.1 million tonnes, the second-largest ever.

Peter Collins, senior economist with ABARES, said it was a surprising result.

“They had a really good finish to the season and that’s boosted production so we’ve had to raise our forecasts,” he said.

The big dry rolls on in the east

Drought is hitting the production of summer crops like cotton and rice.

Mr Collins said dryland areas had low levels of subsoil moisture and irrigators faced reduced access to water at higher prices.

“The conditions have been drier and warmer than average in the southern cropping regions of Queensland and northern NSW, and in the Riverina supplies of irrigation water has been down, so all of these things combined have reduced prospects of summer crop production,” he said.

This meant the area planted to cotton fell by 44 per cent with yield estimated to fall by the same amount to 581,000 tonnes of cotton lint and 821,000 tonnes of cottonseed.

Rice was hit even harder, with the area planted falling 83 per cent to 10,000 hectares.

There was an increase in the amount of sorghum planted, but production is expected to fall by nine per cent to 1.3 million tonnes.

An almost total failure

Far away from the spectacular yields seen throughout Western Australia, the season was a total write-off for many growers around Walgett in north-west NSW.

Local agronomist Greg Rummery said the season started dry and stayed that way.

“In reality it was the smallest crop I’ve seen in the last 30 years in this district in terms of crop actually planted, smaller again in terms of crop actually established, and definitely smaller again in terms of crop actually harvested,” he said.

“The amount of crops harvested within a 100-kilometre radius of Walgett you could count on one hand.”

It was only two seasons earlier that an extraordinary one million tonnes of grain was harvested in the district.

But in 2018, Mr Rummery estimated that figure was only a few thousand tonnes.

“The period of years we’ve endured since 2012 — 2012 being a good year, 2016 being a good year, and fundamentally droughts in every other year — the extremes we’ve seen have been unprecedented in recent history,” he said.

“It’s very dry and the prospects for this winter don’t look great.”

Bouncing back from drought

Dylan Hirsch farms in the low rainfall zone, around 300 kilometres north of Perth, in the Perenjori Shire.

He said the ideal coincidence of high yields and excellent grain prices made last season exceptionally profitable.

“It was just pleasing that they came together, so for profitability it was probably our best year in recent memory,” he said.

“We were coming off essentially our worst drought on record in 2017 so it was a really a catch-up year for us, we’re back on an even keel again.”

Source: ABC Rural 2019-02

The National Farmers’ Federation has welcomed the passage of Future Drought Fund legislation through the House of Representatives today.

“This is a great outcome,” President Fiona Simson said.

“Drought is an integral part of farming in most parts of Australia. Yet to date, no Australian government has been able to successfully determine how to best help farmers and rural communities prepare for, manage and recover from drought.”

The Future Drought Fund will provide secure funding for projects dedicated to solving this perennial problem.

The NFF particularly welcomed amendments to establish a Future Drought Fund Consultative Committee – an outcome the NFF sought in its submission to the Senate Finance and Public Administration Legislation Committee inquiry.

The Committee will be tasked with advising on the Drought Resilience Funding Plan and funding of specific grants and projects and will play an important role in ensuring money is spent where it will have the most impact on building long-term drought resilience.

“This was a collaborative effort that resulted in stronger legislation,” Ms Simson said.

“The Prime Minister’s resolve to establish the Future Drought Fund has taken drought policy beyond band aid measures that crop up while we are in drought.

“The Fund will enable support for measures that get to the core of how best to deal with drought.”

“Agriculture Minister, David Littleproud should be congratulated for his willingness to amend the legislation to ensure greater transparency and oversight.

“We also thank independent member for Indi, Cathy McGowan for her strong support for improving the legislation.

“The amendments have ensured that the Future Drought Fund will be effective in building Australia’s long-term drought resilience,” Ms Simson said

Source: National Farmers Federation 2019-02

While the official numbers will not be available for another few months, the mango industry is confident that it has produced its second-biggest crop on record.

“It’s looking like we’ll produce in excess of 10 million trays,” Robert Gray said, chief executive of Australian Mango Industry Association.

“It’s still a little bit early to put the final number out with growers in Mareeba [Queensland] and Gin Gin [Western Australia] still picking, but it’s been another big crop and the Northern Territory and Queensland are vying to see who has produced the most fruit.”

Mango industry to eventually surpass 15 million trays

Last season the industry picked 10 million mango trays for the first time.

Producing two big crops in a row is not so much a sign of bumper yields, but of the increasing number of new mango plantations starting to mature and produce commercial quantities of fruit.

Mr Gray said a lot of mango trees had been planted across Australia in the last 10 years and the extra volumes were helping the industry.

“It means that mangoes are the premium summer fruit in the marketplace across the country,” he said.

“That scale we have now makes us important to consumers and our retail customers.

“We see our national production exceeding 15 million trays in the next five to 10 years, so there’s another 50 per cent growth to happen in the medium term.”

Mango marathon not profitable for all growers

Mr Gray admitted there had been weeks this season where growers struggled to make a profit.

“When we don’t get it right we get depressed prices and this year again we had examples of fruit in the market that exceeded what the demand was,” he said.

“So we didn’t get it perfect and every year we continue to strive to improve what we do.”

Growers in northern Queensland faced a glut of fruit hitting the pre-Christmas market brought on by an unprecedented heatwave in late November.

Mareeba growers, John and Deb Nucifora, started picking at the start of December and are still going 12 weeks later.

With about 20,000 trays of Brooks mangoes still to pack, Mr Nucifora said the finish line could not come soon enough.

“You get more of a sense of achievement when the season brings you top dollar,” he said.

“This year’s been a hard fight all the way through so we’re looking forward to the end. We’ve had enough now.”

Australia’s mango production is so geographically spread out these days, that mango lovers will not have to go without for long.

The first mangoes of the 2019/20 season will be picked in the NT in July/August.

Source: ABC Rural 2019-02

Key points:

• The Vertessy report, ordered by the Government, found that “exceptional climatic conditions, unparalleled in the observed climate record” contributed to the mass fill kill
• It made 20 provisional recommendations including calls to improve water monitoring in tributaries and greater transparency around floodplain harvesting
• A final report by Professor Vertessy’s panel is expected by the end of next month

Chaired by Melbourne University Professor Rob Vertessy, the report found that “exceptional climatic conditions, unparalleled in the observed climate record” contributed to the fish deaths.

The report was ordered by the Government following mass fish kills near Menindee, NSW, in December and January.

It follows a separate report by the Australian Academy of Science, requested by Labor, which found irrigators pumping too much water upstream, drought, and low flows into and from Menindee Lakes had contributed to the deaths of millions of fish.

The Vertessy report has made 20 provisional recommendations including calls to improve water monitoring in tributaries that feed the Barwon-Darling River and greater transparency around floodplain harvesting in NSW and Queensland.

It also called for real time monitoring of diversions across the Barwon-Darling.

The report found sudden reductions in the air temperature and low oxygen levels in the water were the primary cause of the fish deaths.

“Recent extreme weather events in the northern Basin have been amplified by climate change,” the report found.

“Future changes in the global climate system are likely to have a profound impact on the hydrology and ecology of the Murray-Darling Basin and exacerbate the risk of fish deaths.”

Water Minister David Littleproud responded to the interim report by committing to urgent works in the river, including the establishment of fish ladders and a warning system to predict when more fish deaths might occur.

The Government also announced $3 million for fish research and separate funding for communities that installed aerators to pump oxygen into the water and create fish refuges.

“I welcome the findings of the independent panel and will begin work in response immediately, including on allowing fish to move more freely around the river system,” Mr Littleproud said.

A final report by Professor Vertessy’s panel is expected by the end of next month.

Source: ABC Rural 2019-02

But when such a complex issue makes headlines, the basic facts are often forgotten.

Should we be growing cotton in a place like Australia? Do we still irrigate crops during drought? What is the industry’s stance on water theft? Is the Murray Darling Basin Plan helping the environment?

These are some of the questions we’re receiving from everyday Australians who want to make sense of what they’re hearing about farming in the Murray Darling Basin.

We want to ensure the truth is laid out, so you can cut through the noise and take an informed stance on these issues. Keep reading to learn more, and if you have questions – please leave us a comment at the bottom of the page.

How do water allocations work?

• Farmers buy or leasewater licences/entitlements.
• Annually, state governments allocate water to irrigators based on the amount of water available in the system, after water for the environment and critical human needs has been prioritised.
• The licences allow growers to access a set amount of the total water allocated by authorities for farming.
• Farmers with a water licence can use the water they extract to grow whatever they like.

Why are crops like cotton grown in Australia?

• Cotton is a desert plant that is water efficient and suits Australia’s climate.
• Cotton is the crop of choice as it gives growers the best return per megalitre of water. Other summer crops, like corn and soybeans, use similar amounts of water per hectare.
• Cotton is an annual crop that is only grown when sufficient water is available.
• Banning cotton would not see any extra water returned to the environment, as the water has been allocated to the irrigator’s licence.
• If cotton was to be banned in Australia, farmers would use their water to grow the next most profitable crop.

How is irrigated agriculture impacted by drought?

• During a drought, the amount of water for farmers significantly drops, as allocations are reduced.
• The water that is available is prioritised for critical human needs and the environment first.
• If there’s no water available, there are no irrigated crops grown (unless a farmer irrigates using water they stored when there was a high water allocation).

What is the NFF/irrigation industry’s stance on water theft?

• The industry has zero tolerance of law breaking and believes offenders should face the full force of the law.
• If someone is known to be doing the wrong thing, they should be reported to relevant state authorities, and those concerns should be thoroughly investigated.
• Australia’s irrigated agriculture sector has high standards for growers which demand best practice.

Source: Australian Farmers 2019-02

Dairy production has declined from its peak in 2000 and many dairy farms have converted to alternative land uses. In this agribusiness bulletin, we explore the underlying reasons behind the decline in production (and confidence) among Australia’s dairy farmers, but also consider the longer-term prospects of a resilient sector.

How did the industry get here?

Prior to 2000, the Australian dairy industry was heavily regulated, by both state and federal governments. Price controls, subsidies, and quotas were applied in various jurisdictional forms to market milk (i.e. fresh drinking milk) and manufacturing milk (used to make butter, cheese, and milk powder).

At that time, this provided a level of income protection for dairy farmers by creating a level of certainty in the ‘farm-gate’ price of market milk. However, some would argue that this protection came at a cost to consumers who were paying a higher price.

Following state level shifts towards deregulation, in 2000 the Australian dairy industry was deregulated at the federal level. Existing protections were largely eliminated and, despite programs intended to ease the transition, many dairy farming operations became unviable without price protections in place.

Dairying became more centralised into fewer, but more intensive, dairy regions. States where farms primarily supplied drinking milk to domestic markets saw significant numbers of farms exiting the market. In Victoria, the largest producer of milk with lower costs of production, the dairy industry began focussing more on export markets.⁴

The wash-up of all this was that, following deregulation, Australia’s total milk production fell from the high levels of 2000, and has not recovered in the near two decades since.

What are the issues currently impacting the dairy industry?

Fast forward to 2019, and dairy producers are grappling with pricing practices and global commodity trends (two issues previously insulated by regulation) along with variable seasonal conditions.

Milk price transparency

Currently, dairy farmers have relatively low bargaining power when selling their milk to processors, because milk is perishable and not differentiable and there are many competing producers. Farmers generally sell their raw milk by entering into short term contracts with milk processors, where the farm-gate price received may vary between farms.

Some milk price contracts can end up bestowing processors with unusual rights such as ‘indicative pricing’ which allows processors the ability to alter the price they pay farmers after the contract has been entered into. This can happen mid-season, well after farmers have begun supplying their milk and can result in farmers repaying them for sales already made. Price revisions in 2016 reportedly led to some dairy farmers exiting the industry or selling their farms to meet these surprise repayments, which resulted in intervention by the ACCC.

The lack of price transparency is an issue for farmers, who aren’t well-informed by processors about how farm-gate milk prices are set. In response to this, the Federal Government initiated a Milk Price Index which is prepared by Deloitte Access Economics and is intended to help demystify Australia’s dairy commodity milk pricing.

Furthermore, the ACCC has proposed a mandatory code of conduct to prevent instances such as retrospective price cuts occurring in future, which has growing industry support. A mandatory code might lift the confidence of farmers, many of who are currently disenfranchised suppliers with continuing suspicions about the pricing strategies of milk processors.

Major supermarkets also feature heavily in the milk price debate with $1 per litre milk. Yet, the ACCC has not found any evidence that the $1 milk had any direct effect on farm-gate prices. Instead, in a 2018 report, the ACCC found that if the retail price of drinking milk were to increase, most of the benefit would flow to retailers and processors, rather than to farmers.

Increasing exposure to global commodity trends

A broader issue around milk pricing is that the Australian dairy industry is increasingly at the mercy of the global market, with a growing share of the industry’s revenue coming from exports of dairy products. While Australian producers have benefited from growing global demand, such as Chinese demand for milk powder, they have also encountered market volatility resulting from seemingly unrelated factors, such as Russian sanctions.

As such, processors tend to take on risk when choosing what commodities to produce and can pass this risk on to farmers through farm-gate pricing.

Seasonal conditions

Seasonal conditions have also contributed to the recent decline in milk production. With drought affecting multiple dairy-producing regions, farmers have had to contend with poor pasture growth, high feed prices and reduced water allocations. Under these conditions, many farmers have opted to milk a lesser portion of the herd, de-stock, or even exit the industry.

Long term prospects for Australia’s dairy sector

With all these factors at play, farmers face tremendous uncertainty over their future income. By the time milk is sold, farmers have purchased inputs such as hay and water throughout the year, with uncertainty over the price they will receive for their product. With the added uncertainty of weather and seasonal conditions, this makes it difficult for farming businesses to invest. Even investments that would improve productivity and increase resilience tomorrow impose too high a cost today.

However, while recent conditions have not been favourable, we consider the prospects for Australia’s dairy sector are strong over the long term. Global dairy commodity prices have increased modestly and stabilised since 2016 and, in the long run, the demand prospects for dairy remain strong reflecting rising middle class incomes and growing demand for dairy-based products such as baby formula.

Furthermore, while individual farmers may struggle to justify investment in the current environment, the local and foreign investment environment for dairy assets, particularly in Tasmania and Victoria, has been fertile ground in recent years. This investment may see smaller dairy farmers exit the industry, with fewer but larger farming operations remaining. Over time, this shift may allow farmers to leverage their size when negotiating prices with processors.

While it might take some time to eventuate, the two factors of new investment and increased prices will bring benefits to Australia’s dairy sector – a sector that has demonstrated resilience in remaining competitive through all of its recent challenges.

Source: Deloitte 2019-02

The National Farmers’ Federation has launched a petition which it will present to Labor and Greens representatives, who have committed to rewriting laws that limit the amount of water that can be recovered through voluntary buybacks by the Commonwealth.

NFF chief executive Tony Mahar said farmers are weighed down by the weight of “headline-grabbing, politically-motivated attacks” on farming by ill-informed politicians.

“We are asking farmers and basin communities to help us do this. One way is to sign the petition to let MPs and Senators know why a removal of the 1500GL cap would be a disaster,” Mr Mahar said.

“Unfortunately, the shock move by the Senate to consider legislation to remove the 1500 gigalitre cap on water buybacks provided in the Water Act, is just the start.”

Mr Mahar’s comments follow Labor’s reaction to a report it commissioned into the Menindee fish kills by the Australian Academy of Sciences, which included discussions of increasing the volume of water recovery in the Northern Basin.

Namoi Valley Irrigators chief executive Jon Maree Baker, representing NSW cotton country, said irrigation communities are doing it tough.

“The media programs, continual legal reviews and outright misrepresentations of our industry has to stop. People are seriously suffering and all it is doing is driving family farms away from the land.”

Ms Baker warned Labor had indicated it would react to the report’s call to expand the current Basin Plan recovery target with new regulations, which would in turn reduce the economic value of water entitlements which irrigators have invested in.

“The report is being used a vehicle for Labor to recover more than 2750GL. Be aware there are significant consequences when our communities die.

“If a government is going to change the plan, do it properly, but not through underhanded legislative interpretations such as more flow embargoes and measures that prioritise Commonwealth environment water licences above the rights of privately held water.”

Ms Baker was disappointed by the Australian Academy of sciences report, which she said focused on irrigation extraction and skated over other factors that contributed to the fish kill.

“It takes single focus on irrigation, but it’s actually a far more complex issue.

“There are block banks in place downstream of Menindee and the fish were stuck because of human intervention.

“There hasn’t been significant floodplain harvesting in the Namoi since 2011, to suggest that has had a significant impact on the fish kills throws doubt over the credibility of the reviewers.

“The report said there should be a minimum of 400GL held in Menindee Lakes – I’d like to know why the panel didn’t include an expert on flow regimes.”

Dirranbandi, Queensland, cotton grower Frank Deshon said if more buybacks were conducted, the scale of roll-out would be critical.

“I’m opposed to large scale whole-of-farm buyouts,” Mr Deshon said.

“In previous rounds of buybacks we lost four farms from the area and all their money went, nothing was reinvested and businesses in town lost 30 per cent revenue overnight.

“But I don’t have an issue with small scale schemes, where a farmer exchanges water and uses the money to diversify or enhance their operation.”

View NFF’s petiton here: https://farmers.org.au/campaign/keepthecap/

Source: Farm Weekly 2019-02