Authors: Dale Ashton and Jeremy van Dijk
In 2014–15 rice production contributed 4 per cent of the total gross value of irrigated agricultural production in the Murray–Darling Basin (ABS 2017). Almost all of Australia’s rice production occurs in the NSW Murray and Murrumbidgee regions in the southern Murray–Darling Basin (Map 1). The main irrigation districts are Murrumbidgee, Coleambally and Murray Valley. These districts have clay-based soils and relatively flat land suitable for rice growing. They also have well-developed irrigation infrastructure and rice storage and milling facilities (SunRice 2015). Regionally important rice-growing centres are around Leeton, Griffith, Deniliquin and Coleambally.
Rice production in the Murray–Darling Basin
Australia’s annual rice production and the number of farms growing rice depends on the volume of irrigation water available to rice growers. The total area planted to rice increased gradually from the late 1980s to the early 2000s before declining significantly in 2002–03 because of drought and reduced availability of irrigation water (Figure 1). A return to favourable seasonal conditions in 2010–11 led to higher water allocations in 2011–12 and an increase in plantings through to 2012–13. From 2013–14 to 2015–16 declining water availability resulted in falls in the total area planted to rice.
Most NSW rice growers hold a general security water access licence. Holders of this low-reliability licence receive lower water allocations when major storages and expected inflows are relatively low. Reliability is the frequency with which water allocated under a water access entitlement can be supplied in full (NSW DPI Water 2016). Holders of high-reliability entitlements have priority to irrigation water over low-reliability entitlement holders.
Crop and livestock enterprise mix
One of the ways rice growers manage changes in their farm operating environment is by adjusting the mix of agricultural enterprises each year. Such changes are most common on farms that have annual crops such as rice or cotton. The relatively large cropping areas of these farms gives rice growers scope to grow a mix of crops depending on market and seasonal conditions (including water availability).
Most rice-growing farms produce more than one agricultural commodity, including crops and livestock. In 2014–15 most rice farms had 4 or more individual enterprises (Figure 2), including irrigated crops (such as rice, wheat, oats, oilseeds and cotton), dryland crops (such as wheat, oats, barley, oilseeds and hay) and livestock. Changes in irrigation water availability, seasonal conditions and commodity prices were key drivers of changes in enterprise mix over the period 2006–07 to 2014–15.
Rice growers’ intentions
As part of the ABARES Murray–Darling Basin Irrigation Survey irrigators were asked to describe what they expected to be doing in 3 years. Results are a guide to future intentions and can be interpreted as an indicator of grower sentiment or industry confidence at the time of the survey.
At the time of the survey in early 2016, an estimated 89 per cent of rice growers indicated they did not intend to change their farming operations in the next 3 years, compared with only 43 per cent of irrigators in 2006–07.
Around 6 per cent of rice growers surveyed in 2016 indicated their intention to retire or sell their farm over the next 3 years, compared with 37 per cent in 2006–07, the highest proportion recorded during the survey period.
Rice growers who indicated their intention to retire or sell their farms operated smaller farms with much poorer financial performance than the average. In contrast, rice growers who indicated they did not intend to change their farming operations operated farms that were larger and better performing than the average (Table 1).
Table 1 Physical and financial estimates, rice farms, Murray–Darling Basin, 2006–07 to 2014–15
|Average per farm ||Unit||Growers intending no change||Growers intending to retire/sell farm||All other farms|
|Area of irrigated crops||ha||172||48||150|
|Area of dryland crops||ha||431||192||375|
|Water applied to crops||ML||913||253||795|
|Total cash receipts||$||692,710||181,960||592,110|
|Total cash costs||$||507,520||181,150||451,540|
|Farm cash income||$||185,190||810||140,570|
|Farm business profit||$||72,140||–76,150||29,150|
|Farm debt at 30 June||$||570,980||242,840||552,800|
|Rate of return||%||3.0||–2.2||2.1|
Note: Average per farm over the period 2006–07 to 2014–15. The results for ‘all other farms’ includes farms not included in the other 2 groups shown in the table.
Source: ABARES Murray–Darling Basin Irrigation Survey
Farm performance and investment
Farm financial performance is a key driver of change in the rice-growing industry. The main measures of farm financial performance used in this report are farm cash income and rate of return.
Farm cash income is defined as total cash receipts minus total cash costs. It is a short-term measure of the cash surplus available to a farm business for reinvestment or for drawing family income after costs have been taken into account.
Total cash receipts are the cash revenues received by a farm business. In most cases the largest receipt items are sales of rice, other broadacre crops, livestock and livestock products. Other (usually minor) items include allocation water sales, contracting and government assistance payments.
Total cash costs are payments made for materials, services and administration, crop-related expenses, interest and permanent and casual labour. Capital and household expenses are not included in total cash costs.
During the drought years (2006–07 to 2009–10), rice growers’ incomes were relatively low, averaging around $56,000 per farm (in 2015–16 dollars) (Figure 3). From 2010–11 to 2014–15 increased water availability boosted crop production, resulting in higher farm incomes. Relatively drier conditions in 2015–16 contributed to an estimated fall in farm cash incomes of around 59 per cent on average. However, incomes remained well above the levels recorded before 2010–11.
Components of receipts
Rice farms tend to be diverse operations, with income sourced from a variety of cropping and livestock enterprises. Even in drier years cropping has been a major source of income for rice growers, but dryland crops have accounted for a higher proportion of cash receipts than irrigated crops (Figure 4). During the drought years, receipts from livestock enterprises were proportionally more important than in later years, accounting for around 50 per cent of total receipts from 2006–07 to 2009–10.
Some rice growers generated income during the drought (2006–07 to 2009–10) by selling their limited water allocations rather than using the water to irrigate their own crops or pasture. Other rice growers used available water allocations to irrigate crops (such as wheat) or pasture that required less irrigation water than rice. As seasonal conditions and water availability improved from 2010–11, rice was again the major source of receipts for rice growers but many farms increased the diversity of their enterprise mix to be less reliant on rice.
On average, rice-growing farms in the 1980s generated around 80 per cent of total cash receipts from rice and livestock enterprises (Figure 5). The relative importance of rice receipts was much lower from 2006–07 to 2015–16, with the exception of 2013–14, and rice-growing farms were more reliant on wheat and other crops than they had been in the 1980s. From 2006–07 to 2015–16 receipts from wheat and other crops accounted for an average of almost 45 per cent of total receipts—more than double the proportion recorded in the 1980s.
Components of costs
Farm cash incomes of rice growers are also affected by changes in total cash costs. Many rice farm costs are directly related to cropping activities, so they tend to change in proportion to changes in cropping area. When averaged over all survey years, 4 of these cropping-related costs (fertiliser, fuel, repairs and maintenance, and chemicals) were among the top 6 cash costs for rice farms (Figure 6) from 2006–07 to 2015–16. Purchases of temporary allocation water averaged 9 per cent of total costs over the same period, ranging from a low of 5 per cent in 2010–11 to a high of 16 per cent in 2014–15 (Figure 7).
Rate of return
Figure 8 shows the average annual rate of return to capital (excluding capital appreciation) for rice farms. Rate of return is a measure of the annual profit generated by a business, expressed as a percentage of the value of the capital used to generate that profit. Because it is expressed as a ratio, the rate of return for rice farms can be compared with the rate of return for other farm types or other potential investments.
For example, the average rate of return for broadacre farms in 2014–15 was 1.4 per cent (Martin 2016). In contrast, the average rate of return for rice farms in 2014–15 was 4.3 per cent. The average rate of return for rice farms from 1983–84 to 1989–90 was 2.2 per cent, with a range of 0.5 per cent to 4.9 per cent. For the 2006–07 to 2015–16 survey period the average rate of return was 1.6 per cent, with a range from –0.6 per cent to 4.3 per cent. Returns were mostly negative during the drought years (2006–07 to 2009–10). From 2010–11 to 2015–16 the average rate of return was significantly higher, fluctuating around an average of 2.8 per cent.
From 2006–07 to 2014–15, on average, around 50 per cent of rice growers each year made new capital investments, ranging from a low of 34 per cent in 2009–10 to a high of 74 per cent in 2013–14 (Figure 9).
In 2014–15 total capital additions averaged around $224,000 per farm for those rice growers making additions. Additions to plant and equipment (including irrigation infrastructure) accounted for around 79 per cent of capital additions in 2014–15, land accounted for 20 per cent and buildings and structures accounted for the remaining 2 per cent of capital additions.
Water use and irrigation technology
At the beginning of each season, rice growers make decisions about the area of rice and other annual crops to be planted based on the expected availability of irrigation water (allocations), the price of water on the temporary market, expected crop prices and other factors. For rice, water availability is a key determinant of planting area.
Figure 10 highlights the correlation between total rice area harvested and water allocations for general security licence holders in the NSW Murray and Murrumbidgee regions. Water allocations shown are an average of estimates for mid-September to mid-November. This two-month period is the recommended planting window for rice in the southern NSW irrigation districts.
At a Murray–Darling Basin Authority workshop held in Finley in early 2016, rice growers reported that they make decisions about how much water to carry over in March or April and base decisions about rice crop planting on the September allocation announcements. In future, growers who are using shorter-season rice varieties may defer rice sowing by several weeks. This would change the relative importance of the timing of irrigation allocation announcements.
During the 2006–07 to 2009–10 drought, water allocations were mostly less than 20 per cent in the NSW Murray and Murrumbidgee regions. Consequently, the total area planted to rice was low.
From 2006–07 to 2009–10 many rice growers produced dryland crops or used available water on pastures for livestock production or on crops other than rice, but the application rates per hectare were relatively low. From 2010–11 the average area planted to rice increased significantly as water availability and seasonal conditions improved.
From 2006–07 to 2015–16 the average total volume of irrigation water used on rice crops also increased (Figure 11), mainly because of increases in the area of rice grown per farm. Average water application rates per hectare for rice crops remained relatively steady over the period.
Rice growers have limited opportunities to change irrigation methods because they need to apply large volumes of water to rice crops at high flow rates. For example, the recommended flow rate into a four-hectare rice bay is at least 16 megalitres per day (Dunn et al. 2015). Traditionally farmers used flood irrigation to provide this flow rate. Consequently, all rice growers in the survey used flood irrigation for rice.
Water trading provides rice-growing farms with a tool for managing their farm businesses. In most years of the survey period, a majority of rice growers did not trade allocation water (Figure 12).
The market for permanent water access entitlements also provides rice growers with a tool for managing their farm businesses. On average, around 4 per cent of rice growers sold part or all of their entitlements in each year of the survey period. Sales of entitlements ranged from a low of less than 1 per cent in 2006–07 to more than 8 per cent in 2009–10 (Figure 13). In 2014–15 only 1 per cent of rice growers sold part or all of their entitlements.
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Data and other resources