1. 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

2. Presentation Outline Overview Background Benefits Costs Risks Results
Conclusion

3. 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.

4. 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.

5. 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 lambs (Nov-April).
Lambs finished on lucerne

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

7. 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

8. 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 200 stems per ha in Years 5 & 10
Supplementary feed costs of $0.03 per sheep grazing day.

9. 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.

10. 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

11. 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 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

12. 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.

13. 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

14. Results

15. 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.

16. 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.