Presentation to CSWS Darfield 2006 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

Presentation to CSWS Darfield 2006 Irrigation In Canterbury

Presentation to CSWS Darfield 2006 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.

Presentation to CSWS Darfield 2006 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.

Presentation to CSWS Darfield 2006 Agriculture, Irrigation and the Canterbury Economy. Canterbury's economy is more dependant on agriculture than the national average.

Presentation to CSWS Darfield 2006 Agriculture, Irrigation and the Canterbury Economy. Canterbury’s Value Added derives from 3 main sub sectors.

Presentation to CSWS Darfield 2006 Agriculture, Irrigation and the Canterbury Economy. The Agricultural sector contributes about 10-11% of Canterbury’s employment.

Presentation to CSWS Darfield 2006 Agriculture, Irrigation and the Canterbury Economy. Canterbury’s employment is more evenly distributed throughout the sectors.

Presentation to CSWS Darfield 2006 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.

Presentation to CSWS Darfield 2006 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

Presentation to CSWS Darfield 2006 Social and Economic Impacts

Presentation to CSWS Darfield 2006 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 ,000 ha )

Presentation to CSWS Darfield 2006 Social and Economic Impacts Sector location of flow on impacts. (CPWL 84,000 Ha)

Presentation to CSWS Darfield 2006 Social and Economic Impacts Rule of thumb impacts (Ford 2002 ).

Presentation to CSWS Darfield 2006 Social and Economic Impacts Location effects of CPW impacts ( 84,000 ha ).

Presentation to CSWS Darfield 2006 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

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

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)

Presentation to CSWS Darfield 2006 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