Economic Evaluation of the Revegetation of Saline Land at Kamarooka Northern United Forestry Group Will Dalton - RMCG Hi my name is Will Dalton. I work for RM Consulting Group who are a regionally based firm specialising in Land and Water Management advice. In August last year Mal Brown and the NUFG engaged RMCG to undertaken an economic evaluation of the revegetation of saline land here on Andy Hay’s property at Kamarooka. This presentation is a summary of the project

Presentation Outline Overview Background Benefits Costs Risks Results Conclusion

Project Overview Aim: Provide farmers with improved understanding of costs & benefits associated with revegetating salt affected land Scope: Undertake basic discounted cash flow analysis of the site & determine economic viability of revegetation & grazing system.

Background - The Hay Farm 1,200 ha total size 2,400 sheep 480 ha lucerne 320 ha annual and saltland pasture 400 ha crop Forestry Lucerne is an important component of the grazing system. A good alternative to annual pasture as it provides feed over summer & can utilise summer rainfall.

Background - Study Site Study Site is approx 42ha  24ha of forestry (18,000 trees) & 18ha of saltbush. Stage 1 = 34ha. Stage 2 = 8ha. Livestock graze the saltbush and pasture in the forest understorey. In two years some grazing potential of the site has returned. Saltbush and pasture supply the feed gap for 200 lambs (Nov-April). Lambs finished on lucerne

Benefits Increased sheep grazing days Stock shelter Firewood and sawlog revenue Reclaimed crop land

Costs NUFG actual costings: Preparation of saltland for revegetation (ripping & gypsum) Revegetation costs (trees, pasture seed, saltbush) Infrastructure (fencing) Feed costs (roughage) In-kind planting and construction labour costs Costs not included: Water carting ($10,000) Project management and trial related costs (weighing lambs) Costs associated with other parts of the farming enterprise. Supp feeding is required as Saltbush alone can’t maintain stock

Costs Professional Advice: Water supply of $1000 (Kamarooka water scheme) Stage 1 & 2 Total Cost: $1,300 per ha Few on-going maintenance costs $200 per ha (thinning) @ 200 stems per ha in Years 5 & 10 Supplementary feed costs of $0.03 per sheep grazing day.

Overall risks Waterlogging Water source Poor site selection WATERLOGGING: Heavy rain may have serious implications for both the saltbush and the forestry plantation due to the low-lying nature of the project site. Ironically this is more of a risk than drought. WATER SOURCE: Clean reliable water is critical as stock require up to 11 litres per animal per day. This can be very costly if not located near a supply! Trial cost of daily carting was $10,000. This would threaten the profitability of the system. This site runs adjacent to the Kamarooka pipeline.

Valuing the benefits Sheep Grazing Days (SGD) Equivalent of a maintenance diet of hay and grain Utilises results from the trials Based on current grain and hay prices for wheat and hay a SGD is $0.13. Roughage costs are $0.03 per day Equivalent feed cost represents $0.10 per sheep grazing day Liveweight gains from trial were 50 g per day. At $2.50 per kg this equals $0.125 Based on management practice of filling the feed gap. Alternative is feeding lambs on annual pasture with supp feed Saltland grazing also reduces pressure on lucerne

Valuing the benefits Firewood - Year 15 Revenue based on contractors paying $25 per tonne (labour intensive) Current prices in Bendigo $100 per tonne Total revenue for firewood represents $625 per ha Sawlogs - Year 25 Of the original trees at planting 200/ha remain for sawlogs. Individual trees yield 0.625 cubic metres or 125 cubic metres per ha. Revenue based on contractors paying $50 per cubic metre Total revenue from sawlogs represents $6,250 per ha. Plantation matures at year 15 - yield 25 tonnes per ha (200 stems) Sawlogs mature at Year 25. $50 per cubic metre is a 100% markup Mulch from thinning not valued

Valuing the benefits Shelter 20% premium to livestock gross margin. Lockwood et al (2000) $15 per ha Reclaimed Crop returns 0.5 ha per year (analysis period) of affected land returned to arable production. Valued at $150 per ha per year. Directly after shearing 250 ewes graze a well sheltered area for 3 weeks. They do not put on weight but are protected to reduce mortalities. 12 ha of previously salt affected land was sown to a barley crop last year.

Results Net Present Value range $20,000- $40,000 Benefit Cost Ratio (25 yrs) 1.5 Internal Rate of Return (Yield) 12% Years to payoff (cumulative cash flow): 13 years Environmental/aesthetic benefits not valued but normally drive investment. NPV is a commonly used indicator to guide investment decisions. Through discounting, future streams and benefits can be expressed in present day terms using a discount rate! The NPV is then the discounted present day benefits minus the discounted costs over the life of the project. A positive NPV (i.e benefits are greater than costs) indicates the investment is worthwhile. The discount rate used in the analysis was 9% which is based on the opportunity cost of the investment (I.e value of an alternative investment) and it’s risk. The IRR is the return on the investment over the life of the project. And represents the point at which the NPV is equal to zero

Results

Results Profitability depends on a number of factors: Site specifics Cost of establishment - site selection Cost of infrastructure Chance of failure Timing Productivity & utilisation The value of a grazing day (prices at the time) Other important drivers Environmental Saline revegetation provides additional management options Remember the farm stocking rate & grazing system is based on the number of sheep the Hay’s were able to run over their pasture and crop area. This will differ under each situation.

Conclusion Revegetating decisions driven by environmental rather than commercial imperatives. Saltland pastures provide important grazing benefits. Landholders should assess any investment against a range of on and off farm investments Aesthetic benefits are likely to have equal or higher importance than the commercial outcomes from investing in saltland revegetation. Grazing benefits include ability to fill feed gaps, higher stocking rates, improved livestock management & marketing flexibility.