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(JW)(?) BUREAU OF AGRICULTURAL ECONOMICS, CANBERRA

BUNDABERG IRRIGATION SCHEME

QUEENSLAND

ECONOMICS OF WATER RESOURCE DEVELOPMENT NUMBER 3

AUSTRALIAN GOVERNMENT PUBUSHING SERVICE

CANBERRA 1975

( i i )

Printed by Union Offset Co. Pty. Ltd. Canberra

FOREWORD

This repor t i s an economjc appra i sa l of a proposed scheme t o supply surface water and conserve t h e supply of underground water t o 1239 farms containing 1265 sugar cane assignments t o t a l l i n g 47 711 hectares , which c o n s t i t u t e over 90% of t h e assigned a rea i n t h e Bundaberg region of Queensland. Exist ing i r r i g a t i o n of o the r crops and pas tures would be maintained.

The c a p i t a l c o s t of t h e scheme a s estimated by t h e Snowy Mountains Engineering Corporation i s $73.lm which i s subdivided i n t o two phases, Phase l cos t ing $36.6m and Phase 2 $36.5m. In response t o t h e Queensland Government's reques t f o r f i n a n c i a l a s s i s t ance , t h e Aust ra l ian Government provided a non-repayable grant of $12.8m f o r Phase 1 i n February 1970 under t h e Queens land Grant (Bundaberg Irrigat?:on Works) A c t 19 70. In October 1972 t h e Queensland Government requested $18.54m ass i s t ance f o r t h e const ruct ion of Phase 2 and t h i s was followed i n May 1973 by a f u r t h e r reques t f o r $4.4m f o r cos t e sca la t ions i n t h e works covered by t h e Aust ra l ian Government's o r i g i n a l grant of $ 1 2 . 8 ~ .

I t i s Aust ra l ian Government po l i cy t h a t r u r a l water development proposals such a s t h e Bundaberg I r r i g a t i o n Scheme should be evaluated by Aust ra l ian Government a u t h o r i t i e s before any f i n a n c i a l a s s i s t a n c e i s contemplated. Under t h i s po l i cy t h e Bureau of Agr icul tura l Economics i s required t o r e p o r t on t h e economic aspects of such proposals. Accordingly i t was agreed i n September 1973 t h a t t h e Department of Northern Development should co-ordinate t h e Aust ra l ian Government s t u d i e s of t h e proposal and t h a t t h e BAE would repor t on t h e a g r i c u l t u r a l economic aspects of t h e e n t i r e p ro jec t .

The economic evaluation was complicated a s t h e scheme invo1ves e igh t separa te i r r i g a t i o n systems and t h e welfare aspects of t h e proposal necess i t a t ed a survey of t h e f i n a n c i a l s i t u a t i o n of canegrowers t o b e served by t h e scheme. Fie ld work was ca r r i ed out during February 1974 and t h e evaluat ion completed i n June. Since t h e completion of t h e evaluation of t h e proposed scheme and t h e prepara t ion of an in te r im r e p o r t f o r an interdepartmental consu l t a t ive conmittee i n August, t h e Aust ra l ian Government announced i n t h e Budget. speech del ivered on 17 September t h a t it had decided t o extend i t s ass i s t ance by a grant of $4,4m of which $2m would be provided i n 1974-75. The a n a l y s i s i n t h i s r epor t includes t h e c a p i t a l works covered by t h e $4.4m.

An economic evaluation of t h i s magnitude could not be accomplished without t h e co-operation of many people, both as individuals and members of corporations. Accordingly g ra te fu l acknowledgement i s made t o t h e following:

I r r i g a t i o n and Water Supply Commission, Queensland Department of Primary Industr ies , Queensland Bureau of Sugar Experiment S ta t ions Bundaberg Sugar Company Limited Millaquin Sugar Co. Ltd I s i s Central Sugar M i l l Co. Ltd Accountants and manufacturing firms i n t he Bundab erg

d i s t r i c t Queensland Sugar Board. Central Sugar Cane Pr ices Board Bundaberg City Council Bundaberg I r r i g a t i o n Committee.

In pa r t i cu l a r , g ra te fu l acknowledg'ement i s due t o t h e co-operation of t h e Queensland Cane Growerst Council and through t h e Council, t h e sugar cane farmers and t h e Bundaberg and I s i s D i s t r i c t Executives.

During t h e process of inves t iga t ion t h e metric system of measurement was introduced. Much of t h e basic da t a avai lable t o t h e Bureau was i n imperial u n i t s and where considered useful , t h e o r ig ina l imperial u n i t s a r e shown as well as t he metric equivalents. In some cases t he conversion of imperial da t a t o metric un i t s has resu l ted i n a degree of accuracy i n t h e presenta t ion o f data which was not intended.

were t h e Section Commodi ti

The research work and the preparation of t h i s repor t respons ib i l i ty of o f f i c e r s i n t he Project Economics with advice from t h e Mathematical Services and Crop .es Analysis Sections.

Bureau of Agricultural Economics Canberra, A.C.T. 1974

N.D. HONAN Director

(v>

CONTENTS

FOREWORD

PART I

PART I 1

PART I11

Page

( i i i )

INTRODUCTION 1

1. The Bundaberg Region 1

2. Main Cl imate , Topographical and So i l Fea tu re s 3

3. Or ig ins of t h e Bundagerg I r r i g a t i o n Proposal 4

4. Events Leading t o t h e BAE I n v e s t i ga t i on 5

5. Descr ip t ion o f t h e Proposed Worlcs 7

METHOD OF ANALYSIS 13

1 . Impact o f the P r o j e c t from t h e National Viewpoint 1 3

2. General Approach t o Est imat ion o f National Bene f i t s 14

3. Impact of t h e P r o j e c t on the Financ ia l S i t u a t i o n of Cane Producers 17

4. The Impact o f t h e P r o j e c t on t h e Region 17

CURRENT SITUATION OF THE SUGAR INDUSTRY IN THE BUNDABERG SCHEME AREA 21

1. Organisa t ion o f t h e Sugar Indus t ry 21

PART I11 2. Recent Trends i n Production (Continued) i n the Region

3. P re sen t S i t u a t i o n o f Cane Growers

4. Mill S i t u a t i o n

PART IV THE ESTIMATED INCREMENTAL BENEFITS OF THE IRRIGATION PROPOSAL

1 . The Bundaberg Scheme i n Re la t i on t o t h e Queensland Sugar Indus t ry

2. Outlook f o r Sugar

3. I s i s and Gin Gin Assignment T r a n s f e r s

4. Closure o f Gin Gin b l i l l

5. Underground Water Supply

6. Other c rops 7. Extent o f Ex i s t i ng I r r i g a t i o n

by System 8. Water Requirements and

A v a i l a b i l i t y

9. Sugar Yield Response t o I r r i g a t i o n

10. Increased Sugar Product ion

11 . Economic Appraisal from the National Viewpoint

12. Resul t s o f Economic Appraisal from t h e Nat-ional Viewpoint

13. Economic Cost of Water

Page

2 2

14. Increased F inanc ia l Returns t o Ind iv idua l Farmers

Page

PART IV 15. Economic Appraisal from (Continued) the Regional Viewpoint 80

PART V SUMMARY OF RESULTS OF ECONOMIC EVALUATION 91

1 . Economic Results from the National Viewpoint 91

2. Economic Results from the Individual Viewpoint 93

3. Economic Analysis from the Regional Viewpoint 94

4. Impact Table 96

APPENDICES

A. Harvest and Sugar Production Statistics for the Bundaberg Area 1968-69 to 1972-73 9 9

B. Financial Position of Canegrowers by system 1968-69 to 1972-73 1 04

C. Potential Loss of Production without the Scheme Fol l owing Underground Water Restrictions 115

P a r t I

INTRODUCTION

1. The Bundaherg Region

Bundaberg i s the centre of Queensland's t h i r d l a rge s t sugar producing d i s t r i c t and i s s i t ua t ed on t he eoast approximately 385 kilometres north of Brisbane. Most of t he assigned sugar lands i n t h e d i s t r i c t and a l l t he farms planned t o receive water from the proposed i r r i g a t i o n scheme a r e located i n t h e sh i res of Gooburrum, Woongarra, Kolan and I s i s . A s a commercial centre , Bundaberg services a considerably wider a rea but f o r the purposes of t he present study of t he proposed i r r i g a t i o n scheme, t h e Bundaberg region has been taken t o be t h e four sh i r e s l i s t e d , along with t he c i t y i t s e l f .

Sugar production i s the major agr icu l tu ra l industry of the region. However, tobacco, vegetables, f r u i t , other small crops, l ivestock and fo r e s t ry a l so contr ibute s i gn i f i c an t l y t o the regional economy. The a rea of t he various crops, and t h e i r production expressed as a percentage of t he t o t a l cropped area, together with t h e number of c a t t l e a s a t 31 March 1971 a r e shown i n Table 1-1. The proportions of crops grown i n t h e area have not varied g r ea t l y i n recent years. There a r e no fo r e s t ry s t a t i s t i c s ava i lab le spec i f i c a l l y f o r t he Bundaberg region.

I Within t h e Shires of Gooburrum, Woongarra, Kolan and I s i s , 1359 cane growing assignments comprising a t o t a l of 50 818 hectares were a l located among 1270 farms i n 1973. The cane produced i s supplied t o s i x raw sugar m i l l s : Fairymead, M i l laquin, Bingera and Qunaba near Bundaberg; Isis near Childers; and Gin Gin a t Wallaville.

The region has a well developed i n f r a s t ruc tu r e t o service primary and secondary indus t r i es . Bundaberg i s an important centre f o r manufacturing heavy engineering equipment f o r sugar m i l l s , cane harvesting and loading, and a l so f o r small sh ip building. A sugar re f inery and a rum d i s t i l l e r y a r e associated with t he Millaquin M i l l . The Port of Bundaberg has a bulk s tarage f a c i l i t y with a capacity of 198 000 tonnes f o r sugar produced i n t h e Bundaberg and Maryborough regions.

In 1971 the estimated regional population was 43 340, of which about 27 390 people l ived i n Bundaberg.(l)

Table 1-1

BUNDABERG REGION: AREA OF CROPS AND NUMBER OF CATTLE AT 31 MARCH 1971

A: CROPPING

TYP e Area Percentage

ha %

Sugar cane

Tobacco

Fruit

Vegetables

Other

Total 48 093 100.0

B: CATTLE

Head Percentage

no. %

Beef

Dairy 4 896 5.5 -

Total 89 404 100.0 --

Somces: Austra l ian Bureau o f S t a t i s t i c s , StatisticaZ Swnmary, QueensZand Local A u t b r i t 3 Areas, $R69/71; QueensZand Government Gazette, Nos. 28, 36, 39, 41, May 1973.

2. Main Climatic, Topographic and Soil Features(2)

Average annual r a i n f a l l i n t h e region ranges between 1118 m i n t h e eas tern sector and 965 mm i n t h e western sector . The r a i n f a l l i s characterised by a high annual v a r i a b i l i t y with frequent occurrences of two o r more successive years being below average. During t h i s century t he r e have been twelve drought periods i n Bundaberg and Gin Gin, and eleven i n Childers, with an average length of around th ree years per period. Farmers and mi l le r s can normally withstand individual drought years, but two o r more i n succession of ten c r ea t e subs tan t ia l f inanc ia l d i f f i c u l t i e s and a consequent reduction i n t h e general l eve l of economic a c t i v i t y i n t h e region.

The average r a i n f a l l i s fu r the r characterised by a r e l a t i v e l y poor d i s t r i bu t i on during t he growing season r e su l t i ng i n moisture def ic iencies f o r f u l l p lant growth i n most months. High moisture def ic ienc ies i n t h e important growing months of September t o December, and t o a l e s s e r extent January, subs tan t ia l ly a f fec t t he a b i l i t y of sugar cane t o achieve maximum growth during February and March.

The general topography of the p ro jec t area ranges from f l a t or s l i g h t l y undulating areas adjacent t o t h e coast t o s teep h i l l y areas of up t o about 150 metres above sea l eve l i n t he Gin Gin and I s i s areas. Most of the a rea is served with a well defined surface drainage pa t t e rn of major and minor watercourses, except f o r the coas ta l p l a in where a r t i f i c i a l drainage systems have been provided.

Red s o i l s such as kraznozems and red ea r ths dominate the lands assigned f o r cane production. Experience i n t h e region

1 has shown t h a t with few exceptions, t h e range of s o i l s on which l cane i s cur ren t ly grown i n t h e d i s t r i c t w i l l support high y ie lds

under i r r i ga t i on . However, s o i l erosion has been severe i n many of the s teeper locat ions of the I s i s and Gin Gin m i l l areas.

S t a t e au tho r i t i e s a r e carrying out a program of s o i l conservation works on eroded slopes and a r e t rans fe r r ing cane assignments t o more su i t ab l e locat ions t o overcome some of t h e s o i l erosion problems.

Frost damage has, i n some cases, caused severe f inanc ia l losses espec ia l ly i n low ly ing areas i n t h e western sector of t h e Bundaberg d i s t r i c t . However, these losses a re being overcome through t he development and use of f r o s t r e s i s t a n t Fanes. Most of t he region under study has a sub-tropical - t rop ica l cl imate characterised by high humidity during t h e warmer months.

3. Origins of the Bundaberg I r r i g a t i o n Proposal

The v a r i a b i l i t y af natural r a i n f a l l i n t he region, which has caused wide f luc tua t ians i n sugar cane y ie lds from year t o yeat , led farmers t o seek i r r i g a t i o n water f o r t h e i r cane crops. A s a r e s u l t t he a rea of i r r i g a t e d cane expanded from 7300 hectares i n 1961 t o around 20 000 hectares i n 1972.(3) This expansion was based la rge ly on underground water supplies near t h e coast , from which t h e area i r r i ga t ed increased from 5700 hectares i n 1961 t o about 18 000 hectares i n 1972.

I Water f o r t h e balance of t h e i r r i g a t e d areas i n t he l I region was obtained la rge ly by pr iva te uumping from the Kolan and

Burnett Rivers. ~ I n t h e remaining p a r t s of t h e region, especia l ly i n t h e

Isis, Gin Gin and Bingera M i l l areas, adequate supplies of i r r i g a t i o n water a r e not avai lable , and hence cane y ie lds i n these areas depend t o a l a rge extent on t h e adequacy of na tura l r a i n f a l l .

The rapid expansion i n t he use of underground water t o above t h e s a f e annual y i e ld of t he aquifers , estimated a t 55 500 megali tres, r esu l ted i n continual f a l l s i n t he water l eve l s with s a l t in t rus ion i n some areas. The growing concern by cane growers and S t a t e Government au tho r i t i e s a t t he declining aquifer water l eve l s and increasing s a l i n e content led t o invest igat ions of t he water resources of t he region. The main purpose of these invest igat ions , by t he I r r i ga t i on and Water Supply Commission (IWSC) and t h e Queensland Department of Primary Industr ies (QDPI), was t o determine t h e f e a s i b i l i t y of surface and underground water conservation t o provide adequate supplies fo r

I i r r i ga t i on . The repor t on t he invest igat ions published i n l

1966(4) formed the ba s i s f o r t he proposed comprehensive Bundaberg I r r i ga t i on Scheme.

Following t he 1966 repor t a fu r ther study was car r ied out t o demonstrate t h e technical and economic f e a s i b i l i t y of a schene designed t o provide water from two major storages, one each on t h e Kolan and Burnett Rivers, several barrages and weirs. on t he two r i ve r s , and from the aquifers , t o i r r i g a t e almost a l l ex i s t ing sugar lands i n t h e region.(5) The f indings of t h e j o i n t invest igat ion by t he IWSC and QDPI ,were published i n a repor t dated March 1969. (6)

Essen t ia l ly t h e scheme involved two stages. S tage I , estimated t o cost a t o t a l of $47.lm, provided f o r storages and r e t i cu l a t i on works t o supply ex i s t ing cane assignments with

i r r i g a t i o n water. Stage 11 was a proposal f o r subsequent development t o provide water f o r about 13 300 hectares of land which could be assigned f o r sugar production when market condit ions permitted such expansion. A decision t o proceed with Stage I1 has been deferred by t h e Queensland Government, and consequently no fu r the r reference i s made to i t i n t h i s report .

The pr incipal object ives of State I as outl ined i n t h e 1969 *eDort were*

(a) t o el iminate t h e e f f ec t s of drought on sugar ~ r o d u c t i o n by:

( i ) providing surface and underground water for i r r i g a t i o n t o some 1265 ex i s t ing cane assignments on 1239 proper t ies , with a gross a rea of about 47 700 hectares; i n t h e s i x m i l l areas. A nurnber of cane assignments cur ren t ly being i r r i g a t e d from t h e overcommitted underground suppl ies were included i n t h i s area;

( i i ) r e s t r i c t i n g t h e t o t a l use of underground water t o t h e estimated s a f e annual y ie ld of t he aquifers . This would ensure continued adequate suppl ies t o those se lected i r r i g a t o r s who were t o remain on underground source S ;

(b) t o r a i s e t h e e f f ic iency of cane production, harvesting and processing by el iminating la rge year t o year f luc tua t ions similar t o those which had occurred i n t h e pa s t ;

(c) t o increase t h e t o t a l annual quan t i t i e s of cane produced i n t h e p ro jec t area.

4. Events Leading t o the BAE Inves t iga t ion

In April 1969 t h e Queensland Government requested from t h e Austral ian Government f inanc ia l ass i s tance f o r t h e whole of t h e estimated cap i t a l co s t ($47. lm) of constructing Stage I of the i r r i g a t i o n scheme. However, i n September of t h a t year t h e Queensland Government announced t h a t it was t o a l l o c a t e $ 8 . 3 ~ as a matter of urgency t o provide f o r a t was drtscribed as an i n i t i a l phase of t h e p ro jec t desigr,ed ta alleviate salt ilztrtlsian i n t o t he ucdergro~nd aquifers. This announcement e f f ec t i ve ly reduced t he requested Austral ian Government ass i s tance t o $ 3 8 . 8 ~ .

The Qieenslznd request was c u ~ s i d s r e d by t h e Austral ian Governnen^L under t he terms of t h e then National Resources

Development Program. The Austra l ian Government d id not offer t o provide t he $38.8m but it did agree t o provide $12,8m which, i n addi t ion t o t he $8.3m being a l located by t he Queensland Government, would f inance t h e construction of Phase 1 of Stage I. Phase l works t o be financed by the Austra l ian Government comprised t he construction of a major s torage, Monduran Dam, on t he Kolan River; a pumping s t a t i o n a t t h e dam; a main supply channel from the dam and a d ivers ion channel t o de l i ve r water t o t he Burnett River. The S t a t e ' s contr ibut ion of $8.3m would cover t h e remaining cos t s of Phase 1, two t i d a l barrages and four i r r i g a t i o n systems. In February 1970 t he Austral ian Government made the $12.8m ava i lab le by way of a non-repayable grant under

l t h e Queens land Grant (Bundaberg Irrigation Works) Act 19 70.

Construction cos t s l a t e r escala ted subs t an t i a l l y and i n addi t ion i t was found by IWSC t h a t t he o r i g ina l est imates of cos t s of t he pumping s t a t i o n were too conservative. I n May 1973 the revised t o t a l c a s t es t imate f o r Phase 1 had r i s e n from $ 2 1 . l m t o $28.5m. This resu l t ed i n a request t o t he Austral ian Government t o provide an add i t iona l $4.4m while t h e S t a t e would contr ibute the ex t r a $3m.

By January 1974 t h e IWSC fu r t he r revised i ts est imate f o r Phase 1 t o $35.3m. However, t he Austral ian Government ass i s t ance requested f o r t h e work remained a t $17.2m, i .e . , the $12.8m already given and t h e $4.4m which i s cur ren t ly under considerat ion by t h e Austra l ian Government.(7)

Deta i ls r e l a t i n g t o t h e proposed Phase 2 of t h e scheme were s e t out i n a repor t published i n August 1972. This port ion of t h e scheme involves t he construction of two weirs and two more i r r i g a t i o n systems. The repor t a l so incorporated t he r e s u l t s of t h e Isis and Gin Gin land use s t ud i e s , which examined t he f e a s i b i l i t y of re-designing Phase 2 of t he scheme, so t ha t assignments on s t e ep land could be t rans fe r red t o more su i t ab l e locat ions i n terms of s o i l erosion control and provision of i r r i g a t i o n water.

InuleAugustl972 r epo r t by the Queensland au thor i t i e s , t he est imated t o t a l c a p i t a l cos t of Phase 2 was $30.5m. (8) I n October 1972 t he Queensland Government requested t h a t $18.54m of t he t o t a l cos t of Phase 2 b e made ava i lab le from the Austral ian Government t o enable Phase 2 t o proceed following t h e completion of Phase 1. In January 1974 t he IWSC revised the estimated c a p i t a l cos t of Phase 2 t o $34.2m, bu t t h e request f o r Austral ian Government ass i s t ance fo r these works remained unchanged.

Rural water development proposals such a s t he Bundaberg I r r i g a t i o n Scheme a r e required t o be evaluated by Austral ian

Government au tho r i t i e s before f inanc ia l ass is tance f o r t h e cap i t a l works is made avai lable t o t h e S ta tes . The Bureau of Agricultural Economics is required ta repor t on t he economic aspects of a l l such praposals a f fec t ing t h e r u r a l sectax f o r which f inanc ia l assistance from t h e Austral ian Government has been sought by State Governments. In view of t he several requests f o r a id by t h e Queensland Government s ince 1969 f o r both Phases of the Bundaberg I r r i g a t i o n Scheme, it was agreed i n 1973 t ha t t he Department o f Northern Development should co-ordinate a l l aspects of t he Austral ian Government evaluation of the proposal, and t h a t t h e BAE would repor t on t h e ag r i cu l t u r a l economics aspects of t he whole of Stage I , i . e . Phases 1 and 2.

5. Description of the Proposed Works(9)

Two major r i v e r s , t he Kolan t o t he north and t he Burnett t o t h e south flow through the project area. A s previously mentioned, Monduran Dam and i t s associated la rge pumping s t a t i o n a r e located on t h e Kolan River. A major channel i s being constructed t o convey water from the dam t o Gin Gin with a connecting channel t o t he Burnett River. Further water s torage and r i v e r flow control w i l l be provided by Bucca Weir and t he Kolan Tidal Barrage on t he Kolan River and Gayndah Weir and the Bundaberg Tidal Barrage on t he Burnett River.

The above cap i t a l works w i l l allow f o r t h e supply of water t o ex i s t ing sugar cane assignments which have been grouped i n t o e ight i r r i g a t i o n systems. S ix of the e igh t i r r i g a t i o n systems, namely Abbotsford, Gooburrum, Givelda, Woongarra, Bingera, and I s i s w i l l be served by a r e t i cu l a t i on system of channels, p ipel ines and a number of pumping s t a t i ons t o convey water t o cane farms. For the purposes of t h i s analysis the Bingera system has been sub-divided i n t o the Bingera and Gin Gin systems.

The remaining two i r r i g a t i o n systems were defined as:

( i ) Pr ivate Pumpers, t o cover those who would draw watpr d i r e c t l y from t h e Burnett and Kolan Rivers, the main channel and diversion channel and

( i i ) Underground, f o r those farmers who would draw water from the aquifer system near t he coast .

The t o t a l c ap i t a l cost of Stage I estimated i n January 1974 pr ices i s $69.537m. Detai ls of t h e works and t h e associated cos t s a r e as follows:

Descript ion of Works Estimated Capi ta l Cost

$ ' Q 0 0

Phase 1

(a) Storages

. Monduran Dam; 585 900 M 1 s torage capacity on Kolan River

l 9,000

. Kolan Tidal Barrage; 4900 M 1 s to rage capaci ty on Kolan River

. Bundaberg Tidal Barrage; 32 100 M 1 s to rage capaci ty on Burnett River 2,042

~ (b) Main Pumping S t a t i o n and Channels

. Monduran Pumping S t a t i o n 2,400

. Main channel from Monduran Dam t o Gin Gin 5,390

. Diversion channel t o Burnett River 375

(c) m Including pumping s t a t i o n s and water r e t i c u l a t i o n channels

1 . Abbotsford

, . Gooburrum

Givelda

. Woongarra

(d) Other

. Metering - bores and r i v e r supp l ies

. Office and housing establishment 39 0

Total Phase 1 35,347

(a) Storages

. Gayndah Weir; 16 000 M 1 s torage capacity on Burnett River

Bucca Weir; 20 600 M 1 s torage capacity on Kolan River

(b) I r r i ga t i on Systems

Including pumping s t a t i ons and water r e t i cu l a t i on channels

. Gin Gin 5,136

. Bingera 5,624

Other I c>

. Office and housing establishment 284

Total Phase 2 34,190

I Total Stage I 69,537

1 The costs of land resumption a r e included i n t he cap i t a l costs .

A s t h e co-ordinating Department of t he Austral ian Government appraisa l of t he scheme, the Department of Northern Development requested t h e Snowy Mountains Engineering Corporation (SMEC) t o provide advice on t h e design and cost est imates of t h e engineering works. A repor t by SMEC dated April 1974(10) suggested t ha t a t o t a l c ap i t a l cost of around $73m may he more appropriate. Detai ls of t h e SEIEC estimates a r e as follows:

Phase 1

l Monduran Dam, Monduran Pump S t a t i o n and

Gin Gin Main Channel

Kolan Barrage l ~ Burnett Barrage l

Metering - bores and r i v e r suppl ies l

Gooburrum I r r i g a t i o n System

Woongarra I r r i g a t i o n System

Givelda I r r i g a t i o n System

Abbotsford I r r i g a t i o n System

Off ice and housing establishment

Increase i n on-costs

Total Phase 1

1 Phase 2

Gayndah Weir

Bucca Weir

Bingera I r r i g a t i o n System

Isis I r r i g a t i o n System

Off ice and housing establishment

Increase i n on-costs

SblEC Estimate of Capital Cost

Total Phase 2

Total Stage I

The Department of Northern Development forwarded t h e SMEC repor t t o t h e BAE i n August 1974. I t was subsequently agreed by t h e departments concerned with t he Austra l ian Government evaluat ian t h a t t h e economic analys is should be based on t h e SMEC est imates of t h e c a p i t a l cos ts . This necess i t a ted a rev i s ion of the r e s u l t s of t h e Bureau's analys is , which had been completed a t t h a t s t age on t he b a s i s of t he IWSC est imates. The e f fec t s on the economic outcome of t h e analys is using both cap i t a l cos t est imates a r e discussed l a t e r i n the repor t .

The S t a t e has estimated t h a t t h e t o t a l annual su r face water requirements from the scheme would be some 249 000 megali tres. A s a f e annual y i e ld of 169 000 megali tres would be provided from t h e above s torages , with a f u r t he r 6000 megali tres from t h e already constructed Wuruma Dam on t he Nogo River, an upstream t r i bu t a ry of t he Burnett River. The d i f fe rence of 74 000 megali tres between t h e estimated requirements (249 000 M1) and t h e supply from s torage (175 000 M1) would be met by unregulated flow i n t he Burnett River. Further d e t a i l s of t h e demand and supply of water a r e contained i n Par t I V .

Footnotes P a r t I

(1) Austra l ian Bureau of S t a t i s t i c s , Preliminary Results of Census, 30 June 1971.

(2) For a d e t a i l e d t rea tment of p r o j e c t a r e a s o i l s , c l imate and sugar cane water requirements r e f e r t o Report on Water Conservation, Underground Water Supplies and Irrigation - Bundaberg Region, Queensland Department of Primary I n d u s t r i e s and I r r i g a t i o n and Water Supply Commission, March 1969.

I (3) Aus t ra l i an Bureau o f S t a t i s t i c s , Irr igat ion. on Rural Holdings, Queensland, 19 71- 72, Brisbane.

(4) Queensland Department of Primary Indus t r i e s and I r r i g a t i o n and Water Supply Commission, Report on Water Conservation, underground Water Supplies, and Irrigation; Gin Gin - Bundaberg - I s i s Region; Burne tt/KoZan Section, December 1966.

(5) The l o c a t i o n o f t h e i r r i g a t i o n systems and t h e main c a p i t a l works a r e shown on t h e map i n t h e f r o n t i s p i e c e .

(6) Queensland Department of Primary I n d u s t r i e s and I r r i g a t i o n and Water Supply Commission, Report on Water Conservation, underground Water Supp Zies and Irr igat ion Bundaberg Region,

l March 1969. . l (7) S ince t h e f i n a l d r a f t o f t h i s r epor t was prepared t h e

Aust ra l ian Government announced i n t h e budget speech de l ive red on 17 September 1974 t h a t a g ran t o f $4.4m would be provided f o r t h e Bundaberg I r r i g a t i o n Scheme.

(8) Queensland Department o f Primary I n d u s t r i e s and t h e I r r i g a t i o n and Water Supply Commission, Report on Phase 2, Bundaberg Irrigation Project, August 19 72.

(9) Information i n t h i s Sect ion has been summarised from t h e d e t a i l e d d e s c r i p t i o n s contained i n t h e va r ious S t a t e r e p o r t s on t h e scheme, a s mentioned previously. Costs a r e those cu r ren t a t January 1974.

(10) Department of Northern Development, Stage I Bundaberg I r ~ i g a t i o n Project : Review of Proposed Design and Cost Estimate of Engineering Works, prepared by Snowy Mountains Engineering Corporation, Apr i l 1974.

Par t I 1

METHOD OF ANALYSIS

The method of economic analysis used t o evaluate t he Bundaberg I r r i g a t i o n Scheme i s bas i ca l l y t he same as t h a t used and discussed i n d e t a i l i n an e a r l i e r repor t on t he Eton I r r i ga t i on Proposal. (l) In the present repor t , therefore , only a b r i e f descr ipt ion i s given of t h e method of analysis . For fu r ther d e t a i l s , including a discussion of contemporary issues i n p ro jec t evaluation methods, and f o r references t o recent economic research i n t h i s area, readers a re re fe r red t o t h e Eton Report.

The benef i t - cost ana lys i s of t he Bundaberg I r r i g a t i o n Scheme was undertaken to appraise t h e economic impact o f t h e scheme a t three d i f f e r en t l eve l s : nat ional ; t h e Bundaberg region including t he sugar m i l l s ; and individual cane farmers. This required the i den t i f i c a t i on and quan t i f i ca t ion of t h e major d i r ec t and i nd i r ec t monetary and non-monetary impacts f o r d i f f e r en t groups of people. The r e s u l t s obtained have been summarised and displayed i n a p ro jec t impact t ab l e s e t out i n P a r t V.

1. Impact o f the Pro jec t from the Nat ional Viewpoint

The economic analysis from t h e na t iona l point of view was confined t o an i den t i f i c a t i on and quan t i f i ca t ion o f ne t d i r ec t (or primary) cos t s and r e tu rns t o t h e scheme. These d i r ec t c o s t s and bene f i t s generally cons t i tu te the major fac tors t o be taken i n t o account i n an appra i sa l a t the nat ional l eve l and t h e i r analys is provides an indicat ion of t h e contribution t h a t the scheme would make t o nat ional income.

The d i r ec t cos t s considered were publ ic and pr iva te cap i ta l , operating and maintenance costs . (2) The d i r ec t benef i t s taken i n t o account were those t ha t a r i s e from: increased product ivi ty associated with higher l eve l s of output of sugar cane and grea te r s t a b i l i t y i n annual farm incomes; improved economic eff ic iency of sugar m i l l operations i n the Bundaberg region as a consequence of t he increased sugar cane production and the expected smaller year t o year var ia t ions i n processing levels; and the avoidance of r e s t r i c t i o n s on production from the curtailment of water usage from t h e aquifer .

The pro jec t involves a stream of gross benef i t s and a stream of gross cos t s over time. These streams were derived from the est imates o f annual gross bene f i t s and cos t s f o r each year of

t he expected l i f e of t h e project . In order t o evaluate t he proposal according t o conventional economic c r i t e r i a , t he streams of cos t s and benef i t s , with and without the scheme, were reduced t o a s ing le present day value by t h e use of a discount factor .

2. General Approach to the Estimation o f National Benefits

Under normal circumstances t he economic invest igat ion of a water resource project , f o r which Austral ian Government finance has been requested, precedes t h e commencement of construction of t h e scheme. However, as noted e a r l i e r , a Federal grant of $12.8m was a l located i n February 1970 f o r spec i f i c works under Phase 1, which were well advanced i n construction by June 1974. The cost o f Phase 1 had increased sharply due t o i n f l a t i on and a reassessment of t h e cost of t h e pumping s t a t i o n a t Monduran Dam. As mentioned previously, the Queensland Government therefore requested and was subsequently offered, a fu r ther $4.4m Federal ass i s tance t o help overcome the increased costs. In addit ion, t he Queensland Government sought $18.54m t o permit construction of the Phase 2 works t o s t a r t immediately following completion of Phase 1.

The Bureau's t ask was thus t o provide an economic evaluation o f t he whole of Stage I ( i .e . Phases 1 and 2 together) . I n doing so, i t was decided t o analyse Phases 1 and 2 separate ly and t o provide r e s u l t s f o r each i r r i g a t i o n system. The separate treatment of Phases 1 and 2 enabled t he addi t ional impact o f Phase 2 t o be assessed given t ha t Phase 1 was already well advanced and would undoubtedly be completed with or without

1 fu r the r Australian Government assistance. For t he purpose of t he separate examination of t he two Phases, c a p i t a l co s t s were not a l located according t o t h e use t o be made of t he cap i t a l items. Thus, t he cap i t a l cos t o f a l l t he works t o be completed i n Phase 1, such as Monduran Dam and pumping s t a t i on , Gin Gin Channel and the diversion channel t o t h e Burnett River, was taken i n to account i n t he analysis o f Phase 1 even though the construction of these works would a f f e c t t h e supply o f water f o r i r r i g a t i o n systems t o be constructed during Phase 2.

I n a s imi l a r way, common cos t s were not a l located during the separate analyses f o r each i r r i g a t i o n system. These analyses only took account of cos t s of c ap i t a l works d i r e c t l y involved within each system. This approach allowed comparisons of economic outcomes of individual systems t o be made t o ind ica te poss ible changes i n construction p r i o r i t i e s f o r t h e systems i f f inanc ia l o r physical resources were limited. I t i s noted t h a t soc ia l and other fac tors should be considered simultaneously with economic c r i t e r i a i n determining t h e p r i o r i t y t o be given t o t h e d i f f e r en t systems.

The ac tua l ca lcu la t ions required' f o r t he ana lys i s within t h i s general framework depend upon t he se lec ted economic c r i t e r i o n o r c r i t e r i a taken f o r evaluating t h e project . One o r more of th ree general ly accepted c r i t e r i a a r e f requent ly used i n the ana lys i s of development p ro jec t s . These a re t he Net Present Value, the Benefit-Cost Ratio, and t he In te rna l Rate of Return (IRR). A s i n most previous analyses of t h i s type ca r r i ed out by the Bureau, the I R R alone has been used t o provide an ind ica t ion of t he economic merit of t h i s project . (3)

By de f in i t i on , t h e IRR i s t ha t r a t e of i n t e r e s t which, when used as a discount f a c to r , equates t h e present values of t he income stream and t h e expenditure stream over t h e l i f e of the p ro jec t . As calcula ted by t he Bureau an I R R represents t he y i e ld of an investment i n r e a l terms, abs t rac t ing from any movement i n the l eve l o f p r ices . Hence I R R s expressed i n constant money terms involve t he e x p l i c i t assumption t ha t the re la t ionsh ip between c o s t s and re tu rns w i l l remain unchanged over t he l i f e of the p ro jec t . This procedure obviates t h e problem of including within the analys is , an est imate of t he l eve l of i n f l a t i o n which might be expected t o p reva i l f o r the duration of t h e project . In the case of t he Bundaberg I r r i g a t i o n Scheme, t h e p ro jec t l i f e was assumed t o be 75 years.

The i n t e rp r e t a t i on of an I R R cannot be so p rec i se ly s ta ted . The I R R may i n theory be used t o evaluate and compare p ro j ec t s i n r e l a t i o n t o two important economic condit ions which should be s a t i s f i e d before government investment i n one o r more of t h e p ro j ec t s being appraised is undertaken. The f i r s t condit ion is t h a t the bene f i t s from a p ro jec t should be a t l e a s t equal t o the cos t of acquiring t h e c a p i t a l invested i n it, and i f met, ensures t h a t only p ro j ec t s with I R R s a t l e a s t equal t o t h e opportunity cos t of c a p i t a l a r e considered f o r government funding. The second and more r igorous condition f o r investment i s t h a t i n any investment period, t h e group of p ro jec t s se lec ted should maximise t he overa l l bene f i t s generated by t h e t o t a l amount of investment. I n t h i s case t he IRRs from a l l the p ro j ec t s under considerat ion may be ranked t o enable t h e ' b e s t t s e t of p ro j ec t s t o be se lected, provided t h a t a l l t h e p ro j ec t s were evaluated a t t h e same time and under t h e same assumptions with respect t o length o f p ro jec t l i f e and constant cos t -pr ice re la t ionsh ips with the same base year.

A problem a r i s e s i n i n t e rp r e t i ng the meaning of an I R R with respect t o t he f i r s t condition. I t i s extremely d i f f i c u l t t o def ine the re levant r a t e of i n t e r e s t which measures t he cos t of borrowing over the l i f e of t h e p ro jec t . A s mentioned above the I R R i s expressed i n r e a l terms and consequently t he

comparative borrowing r a t e o f i n t e r e s t should a l s o be expressed i n r e a l terms. I t is considered t h a t t h e most appropr ia te r a t e of i n t e r e s t i s t h a t payable on long term government borrowings (4) which provides t h e c l o s e s t a l t e r n a t i v e r i s k f r e e investment. However, t h e long term bond r a t e i s a nonrinaZ r a t e which contains a component f o r i n f l a t i o n . The bond r a t e must the re fo re be ad jus t ed downwards by an e s t ima te of t h e long term i n f l a t i o n r a t e before i t may b e used a s a benchmark a g a i n s t which an est imated I R R f o r a development p r o j e c t can be compared.

For example, over t h e l a s t two decades a long term bond r a t e of around 5% was a s soc ia t ed with a f a i r l y uniform inc rease i n t h e p r i c e l e v e l o f about 2.5% pe r annum, i n d i c a t i n g t h a t a p r o j e c t evalua ted during t h a t time should have had an IRR of a t l e a s t 2.5% t o b e considered f o r government funding. This example has t h e advantage of h inds ight . However, when considering t h e I R R a t any s p e c i f i c poin t i n time extreme caut ion should b e exerc ised a s the cu r ren t bond r a t e and r a t e o f i n f l a t i o n may b e d i s t o r t e d from t h e long term r a t e s by s h o r t term f luc tua t ions .

Nevertheless , even i f a p ro j e c t compares favourably with t h e benchmark adopted, a q u i t e cons iderable misa l loca t ion o f resources might t ake p lace i f t h e second condi t ion i s not met. To ensure an e f f i c i e n t a l l o c a t i o n of funds f o r a number of p r o j e c t s , a l l p r o j e c t s under cons idera t ion should be ranked according t o t h e i r I R R s s t a r t i n g with t h e p r o j e c t with t h e h ighes t I R R . P r o j e c t s should then be implemented i n descending order u n t i l t h e a v a i l a b l e funds a r e used up, sub jec t t o t h e marginal p r o j e c t having an I R R a t l e a s t equal t o t h e benchmark adopted t o f u l f i l 1 t h e f i r s t condi t ion above.

I n p r a c t i c e , however, investment per iods become b l u r r e d and assumptions modified between p r o j e c t s evaluated a t d i f f e r e n t p o i n t s i n time. Furthermore, a s i t u a t i o n has never a r i s e n wi th in the l a s t 10 t o 15 years i n Aus t ra l i a , when more than one p ro jec t at a time i n t h e water resources a rea , was being subjec ted t o an economic evalua t ion with t h e ob jec t ive o f a s s i s t i n g t h e Government t o decide whether t o provide funds f o r t h e p ro jec t . In these circumstances only t h e f i r s t o f t h e abovementioned cond i t ions can hope t o be s a t i s f i e d . I t must the re fo re b e s t r e s s e d t h a t no meaningful comparisons can b e made between t h e I R R s o f water resource development p r o j e c t s o r between t h e s e and l

o t h e r government development p r o j e c t s which have not a l l been evalua ted simultaneously.

3. Impact of t he Project on t he Financial S i tua t ion of Sugar Cane Producers

Estimates o f t h e e f f e c t s of t h e proposed Bundaberg I r r i g a t i o n Scheme on the addi t ional product iv i ty and income of individual sugar cane growers i n t h e p ro jec t area were of prime importance i n t h i s analys is . Without such est imates it would not have been poss ible t o obta in r e a l i s t i c economic r e s u l t s from t h e nat ional point of view, o r t o attempt t o quant i fy some of t h e regional bene f i t s which a r e dea l t with l a t e r i n t h i s repor t .

Normally, i n a repor t of t h i s nature , d e t a i l s o f t he various budgets required t o est imate the r e tu rn s t o growers with and without t he scheme would be provided. Much of t he information provided was of a conf iden t ia l nature and only l imi ted data on farmers1 incomes with f u l l i r r i g a t i o n a re shown. However, a l l the de t a i l ed cos t s and re tu rns i n the budgetary ana lys i s were subject t o thorough checking with various sec t ions of the sugar indust ry during t h e course of t h e inves t iga t ions .

A survey of over 300 cane growers' f i nanc i a l accounts i n the Bundaberg region f o r t he period 1968-69 t o 1972-73 was ca r r i ed out t o t e s t t he hypothesis t h a t t o t a l l y i r r i g a t e d growers enjoy higher and more s t a b l e ne t farm incomes than those o f p a r t i a l l y i r r i g a t e d o r dryland cane growers. The 1968 t o 1972 seasons se lec ted were considered t o be s l i g h t l y more favourable than the average condit ions f o r growing cane i n t h e region. The survey a l so took i n t o considerat ion t h e importance of non-sugar income to t he t o t a l income s i t u a t i o n o f growers and whether the re were any manifestat ions of small farm problems i n the region.

l Information was obtained t o enable t h e Bureau t o est imate the impact of the scheme on t he cane grower. Essen t ia l ly the ana lys i s was concerned with est imates of t he magnitude and poss ible reduced v a r i a b i l i t y of cane production and ne t farm incomes under f u l l y i r r i g a t e d condit ions compared with t he s i t ua t i on ex i s t i ng a t t h e time of t h e survey. A range of economic outcomes was calcula ted f o r varying sugar p r ice and y i e l d assumptions.

4. The Impact o f the Project on t h e Region

An econoinic appra i sa l of a p ro jec t from the regional point of view should take i n to considerat ion two main areas of impact. These a r e the t o t a l change i n soc i a l welfare, and the d i s t r i bu t i on of the change i n welfare between various groups o f people i n the region. Many of t he f a c to r s involved i n these two concepts a r e extremely complex and d i f f i c u l t t o analyse.

An at tempt was made t o provide es t imates of s e l e c t e d mone tar j . and non-monetary impacts o f t h e i r r i g a t i o n scheme on four d i s t i n c t groups i n t h e region . These groups were farmers i n t h e proposed i r r i g a t i o n a rea , sugar nil1 opera tors , s u p p l i e r s of farm and m i l l goods and s e r v i c e s , and t h e r eg iona l labour force f o r which t h e scheme would provide employment.

A s o u t l i n e d i n Sect ion 3 above, es t imates were made o f t h e d i r e c t aggregate n e t b e n e f i t s t h a t would be rece ived by cane growers. The p r o f i t a b i l i t y o f t h e suga r m i l l e r s opera t ions is n a t u r a l l y c l o s e l y r e l a t e d t o t h e cane growing s i t u a t i o n .

A d e t a i l e d a n a l y s i s was undertaken t o examine f l u c t u a t i o n s i n m i l l income and c o s t s of operat ion over t h e 1968 t o 1972 per iod , and t o compare m i l l s which were l a r g e l y dependent on dryland production wi th those drawing on a reas with s u b s t a n t i a l a r e a s of i r r i g a t e d cane production. To re spec t t h e c o n f i d e n t i a l i t y of d a t a provided p a r t i c u l a r l y by t h e p r i v a t e l y owned m i l l s t h e r e s u l t s shown have been l a r g e l y r e s t r i c t e d t o indexes o f average c o s t s and p r o f i t a b i l i t y . However, t h e r e s u l t s of t h e a n a l y s i s o f Isis m i l l , which i s co-operat ively owned by growers and pub l i shes d e t a i l s o f i t s f i n a n c i a l ope ra t ions , have been t r e a t e d i n g r e a t e r d e t a i l .

Es t imates of t h e n e t b e n e f i t s which might b e expected t o flow t o suga r m i l l s i n t h e f u t u r e a s a r e s u l t of t h e increased p r o d u c t i v i t y wi th t h e i r r i g a t i o n scheme were c a l c u l a t e d f o r varying sugar p r i c e assumptions. These b e n e f i t s inc lude some economies o f s i z e i n m i l l ope ra t ions due t o increased sugar production wi th t h e p r o j e c t . Depending on dec i s ions made by growers and m i l l e r s , some por t ion of t h e s e b e n e f i t s would b e a v a i l a b l e f o r r e d i s t r i b u t i o n wi th in t h e region i n t h e form of personal expenditures.

Increased p r i v a t e c a p i t a1 expenditure by farmers and m i l l s would tend t o generate once over b e n e f i t s t o t h e region and t h e s e have been incorporated i n t h e r eg iona l b e n e f i t s . Est imates were made o f t h e t o t a l c a p i t a l expenditure involved i n expanding t h e p o r t f a c i l i t i e s requi red t o handle t h e a d d i t i o n a l sugar a r i s i n g from t h e i r r i g a t i o n scheme. i

Suppl iers of farm and m i l l goods and s e r v i c e s may b e expected t o b e n e f i t from t h e s i t u a t i o n a s a r e s u l t o f h ighe r and a more r e g u l a r l e v e l o f orders from t h e cane growers and m i l l e r s . Es t imates of a d d i t i o n a l n e t annual ope ra t ing c o s t s f o r farm goods and s e r v i c e s fol lowing cons t ruc t ion o f t h e scheme, which would be pa id by farmers t o a g r i c u l t u r a l s u p p l i e r s i n t h e region, have a l s o been provided. The s t a b i l i s i n g e f f e c t s on cane farmers1

incomes and i den t i f i c a t i on of t h e main r ec ip i en t s of t he bene f i t s from the p ro jec t among farmers a r e discussed l a t e r i n t h i s repor t . Corresponding est imates f o r mi l l s have a l so been provided.

For the four th group, attempts were made t o ind ica te t he addit ional income generated i n t h e region by employment i n t h e construction of t h e p ro jec t works, and f o r t h e operation and maintenance of these works.

Final ly es t imates were made of t he t o t a l expenditure on construct ion mater ia ls and o ther goods, services and plant h i r e within t he region during t h e construction period of t he proposed water storage and r e t i cu l a t i on works.

Footnotes P a r t I1

(1) Eton I r r i ga t i on Proposal, Queensland, Economics of Water Resource Development Number 2 , Bureau of Agr icu l tu ra l Economics, Canberra 1973, P a r t I1 pp. 7-18. Referred t o h e r e a f t e r as t h e Eton Report.

(2) Publ ic c o s t s were defined a s expenditures which would be met from e i t h e r S t a t e o r Aus t ra l i an Government funds. P r i v a t e c o s t s were def ined as expendi tures which would be met from farmers1 and o t h e r i n d i v i d u a l s 1 resources, inc luding borrowings.

(3) The m e r i t s and demeri ts of t h e t h r e e economic evalua t ion c r i t e r i a and t h e reasons f o r s e l e c t i n g t h e I R R as t h e appropr i a t e measure a r e presented i n t h e Eton Report, op. c i t . , pp. 13-15.

(4) I n t h e USA t h e discount r a t e t o b e used i n evalua t ing f e d e r a l water and r e l a t e d land p r o j e c t s is based on t h e concept t h a t t h e Government's investment dec i s ions a r e r e l a t e d t o t h e c o s t o f f e d e r a l borrowing. The a c t u a l r a t e i s based on t h e average y i e l d during t h e previous f i s c a l yea r on i n t e r e s t bear ing marketable s e c u r i t i e s o f t h e USA, which a t t h e time of eva lua t ion have a t l e a s t 15 years t o maturi ty. However, t h e r a t e i s not allowed t o r i s e o r f a l l more than 4% f o r any year. For f u l l d e t a i l s of t h e r e l evan t l e g i s l a t i o n and ordinances t h e r eade r i s r e f e r r e d t o Federal Register Vol. 39, No. 158, 14 August, 1974.

P a r t I11

CURRENT SITUATION OF THE SUGAR INDUSTRY I N THE BUNDAGERG SCHEME AREA

1. Organ isa t ion o f t h e Sugar I ndus t r y (1 )

Sugar farms a r e assigned t o a 'part icular sugar m i l l by t h e Cent ra l Sugar Cane P r i c e s Board. Farms a r e loca ted wi th in a c e r t a i n m i l l a r e a and t h e cane grower must d e l i v e r cane f o r crushing t o t h a t m i l l . Each sugar m i l l has an annual quota o r 'peak1 tonnage of raw sugar t h a t it may produce f o r marketing. The m i l l peak i s d i s t r i b u t e d by t h e l o c a l Sugar Cane Pr i ces Board t o a l l farms i n t h e m i l l a r ea , and hence each farm a l s o has an annual quota o r l f a rm peak1 tonnage of cane which it may produce. On each sugar farm t h e amount o f land on which cane may be grown t o meet farm peak is l imi t ed t o an a r e a known a s t h e g ross assigned a r e a of t h e farm. Up t o 85% only of an assigned a r e a per farm may be harves ted p e r yea r f o r de l ive ry t o t h e m i l l . I n some ins t ances one farm may have more than one sugar assignment.

The aggregate of a l l m i l l peaks i s s e t a t a l e v e l which w i l l allow t h e indus t ry t o be reasonably c e r t a i n o f supplying t h e requirements of t h e domestic market and t h e assured export markets each year. I f i n any p a r t i c u l a r yea r , t h e indus t ry cons iders it can market more sugar than t h e sum of t h e m i l l peaks, t he Queensland Sugar Board w i l l accept overpeak production throughout t h e indus t ry . For example, a l l m i l l s may be permi t ted t o supply t h e i r m i l l peaks p l u s overpeak production up t o 20%. I n some years , excep t iona l ly adverse weather condi t ions may mean t h a t c e r t a i n production a reas f a i l t o meet t h e i r peak production, i n which case overpeak production may be accepted from o t h e r m i l l a r e a s t o make up t h e d e f i c i t .

Within a m i l l a r ea , overpeak production f o r t h e m i l l is a l l o c a t e d t o growers who can produce sugar above t h e i r farm peak l eve l . When some farms cannot supply t h e i r farm peaks, such a s occurs f r equen t ly with dryland farms during drought condi t ions , t h e i r s h o r t f a l l s may b e a l l o c a t e d t o o the r farms (usua l ly with i r r i g a t i o n ) i n t h e same m i l l a r e a t h a t can produce overpeak sugar . Flinimal i r r i g a t i o n i n t h e Gin Gin and Isis m i l l a r eas seve re ly l i m i t s t h i s s t r a t e g y .

Sugar m i l l s rece ive payment f o r t h e raw sugar which they d e l i v e r t o r e f i n e r i e s o r wharf te rminals . These proceeds a r e divided between m i l l e r s and growers according t o a s p e c i f i e d formula ( r e f e r P a r t I V ) which determines t h e p r i c e growers r ece ive p e r tonne o f cane de l ive red t o t h e m i l l . The h ighe r t h e

commercial cane suga r (CCS) content of t h e cane, t h e h ighe r t h e p r i c e p e r tonne o f cane received by growers. A general r u l e o f thumb a l l o c a t i o n o f the proceeds p e r tonne of sugar i s about one- th i rd t o m i l l e r s and two- th i rds t o growers.

Mills a r e pa id e i t h e r a No. 1 Pool p r i c e o r a No. 2 Pool p r i c e f o r t h e sugar they produce. No. 1 Pool p r i c e is an equa l i sed r e t u r n from domestic s a l e s and t h e export s a l e s covered by peak production. Mills t h e r e f o r e r ece ive No. 1 Pool p r i c e f o r sugar up t o t h e l e v e l o f t h e i r m i l l peak. A l l overpeak production i s pa id f o r a t No. 2 Pool p r i c e which i s an equal i sed r e t u r n from f r e e export market s a l e s and i s usua l ly lower than the No. 1 Pool p r i c e .

Growers a r e pa id f o r t h e i r cane by m i l l e r s a t No. 1 Pool r a t e s f o r peak production and f o r any overpeak production which meets s h o r t f a l l s i n m i l l peak which they supply. For a l l o the r overpeak production, growers a r e pa id a t No. 2 Pool r a t e s .

2. Recent Trends in Production in the Region

The s i x m i l l a reas of t h e region have a combined m i l l peak of 356 140 tonnes o f suga r which i s produced on an assigned a r e a o f 50 818 h e c t a r e s on 1359 ind iv idua l assignments. (2)

M i l l peaks and ass igned a r e a s , f o r each o f t h e ind iv idua l m i l l s based on t h e 1973 award of t h e Cent ra l Sugar Cane P r i c e s Board, a r e shown i n Table 3-1.

The r e l a t i o n s h i p o f m i l l peak t o assigned a r e a is determined by t h e Cent ra l Sugar Cane P r i c e s Board. The aggregate l e v e l o f m i l l peaks is determined according t o sugar marketing prospects and then enough s u i t a b l e land i s assigned t o enable m i l l peaks t o b e produced with reasonable c e r t a i n t y from yea r t o year . Fac tors such a s drought s u s c e p t i b i l i t y , r a i n f a l l , i r r i g a t i o n a v a i l a b i l i t y , c l ima te and s o i l type a r e considered i n determining t h e product ive p o t e n t i a l of t h e lands involved. Table 3-1 shows q u i t e l a r g e d i f f e rences i n t h e q u a n t i t i e s of m i l l peak p e r assigned a r e a between t h e va r ious m i l l s .

As a r e s u l t o f t h e o v e r a l l expansion o f t h e sugar indus t ry , which occurred i n t h e e a r l y 1960s, t h e Bundaberg Region received an 80% inc rease i n i t s m i l l peaks from 192 033 tonnes i n 1962 t o 346 473 tonnes i n 1966. I n comparison, t h e assigned a r e a i n t h e region r o s e from 41 035 h e c t a r e s t o 51 800 hec ta res ; an inc rease of only 26%. Thus, as a r e s u l t of t h e expansion, t h e y i e l d p e r h e c t a r e o f assignment needed t o achieve m i l l peak r o s e from 4.68 tonnes i n 1962 t o 6.69 tonnes i n 1966, an i n c r e a s e of 43%.

Table 3-1

MILL PEAKS AND ASSIGNED AREAS: 1973

M i l l Peak(a) T o t a l Assigned Mill Peak/TGA M i l l Area Area ( tonnes sugar/ ( tonnes sugar)

(hec tares) hec ta re ) (b)

M i l l aquin 70 110

Qunaba 34 550

Fairymead 71 120

B i nge ra 72 650

Gin Gin 37 090

Isis 70 620

To ta l 356 140 50 818 7.01

(a) These f i g u r e s a r e based on 1973 awards. I n February 1974 t h e r eg ion ' s aggregate m i l l peak was increased by 22 860 tonnes t o 379 000 tonnes. (b) TGA - Tota l Gross Assignment .

This l a r g e i n c r e a s e i n y i e l d s was due t o an i n c r e a s e i n t h e maximum al lowable a r e a ha rves ted , from 75% t o 85% of t o t a l g r o s s assignment, and technologica l advances wi th in t h e indus t ry , inc luding t h e g r e a t e r use of i r r i g a t i o n . Other technologica l advances included b e t t e r cane v a r i e t i e s , increased f e r t i l i s e r usage, improved chemicals f o r p e s t and d i s e a s e c o n t r o l and improved farm management p r a c t i c e s . (3)

The p a t t e r n o f production f o r each o f t h e s i x m i l l a r e a s s ince t h e expansion i n t h e 1960s i s shown i n Table 3-2. The seve re e f f e c t s o f drought f o r t h e years 1964, 1965 and 1969 a r e i l l u s t r a t e d f o r t h e Isis, Gin Gin and Bingera m i l l a r e a s which have l a rge a reas of dryland production. I n t h e Mil laquin, Qunaba and Fairymead m i l l a r eas loca ted c l o s e r t o t h e coas t and which have access t o underbround water supp l i e s , t h e e f f e c t s o f drought were much l e s s pronounced.

Table 3 -?

MILL PRODUCTION AND RELATION TO PEAK : BUNDABERG REGION 1964 TO 1972

M i l l Unit 1964 1965 1966 1967 1968 1969 1970 1971 1972

hlillaquin Sugar tonnes 56 590 50 998 69 869 69 150 79 559 57 796 77 415 81 340 91 995

% Peak 100 73 100 99 113 82 110 116 131

Qunaba Sugar tonnes 29 113 28 075 35 307 32 470 38 246 29 156 35 853 41 844 40 535

% Peak 112 88 109 100 118 90 110 129 1 1 7

Fairymead Sugar tonnes 56 490 51 450 78 690 73 275 83 377 57 477 74 958 89 470 98 614

% Peak 103 76 116 108 122 84 110 131 139

Bingera Sugar tonnes 34 565 32 562 63 579 73 150 85 352 39 086 76 000 80 622 101 851

% Peak 6 1 46 8 8 101 117 54 105 11 1 140

Gin Gin Sugar tonnes 12 623 13 403 30 935 32 702 37 209 15 873 30 943 37 365 47 866

% Peak 5 1 4 1 9 5 101 114 49 9 5 115 129

I s i s Sugar tonnes 26 137 11 416 68 595 72 876 80 218 16 192 58 237 85 505 100 822

% Peak 46 17 9 7 103 114 2 3 82 121 143

Table 3-3

SUGAR YIELDS AND PROPORTIONS OF ASSIGNMENT HARVESTED: 1965 t o 1972

M i l l Area Unit 65 66 6 7 68 69 7 0 71 7 2

Millaquin A % TGA harvested 60.5 74.4 73.2 73.6 60.2 69.0 74.9 76.0 B Tonnes per hectare harvested 9.39 10.47 10.56 12.10 10.75 12.60 12.23 13.63 C Tonnes per hectare TGA 5.67 7.78 7.73 8.89 6.48 8 .69 9.14 10.37

Qunaba A 71.7 77.1 74.9 75.0 65.0 61.5 74.3 76.1 B t t 9.94 11.65 11.05 12.85 11.40 14.84 14.34 13.56 C 7.13 8.99 8.26 9.72 7.43 9.11 10.65 10.32

Fairymead A 69.4 78.7 78.4 78.2 69.0 64.3 78.3 78.1 I

B I I 7 .73 10.67 9.97 11.37 8.89 12.43 12.20 13.48

C 5.37 8.39 7.81 8.89 6.13 8.00 9.57 10.54 m I

Bingera A 49.1 70.1 71.3 73.0 44.6 75.6 74.7 78.0 B 11 6.53 8.79 9.94 11.35 8 .51 9.77 10.49 12.73 C 3 .21 6.15 7.11 8.29 3.79 7.38 7.83 9.94

-

Gin Gin A 41.0 54.5 54.0 51.0 35.9 62.2 64.5 71.8 B t t 4.22 7.36 7.86 9.54 5.82 6.58 7.91 9.36 C 1 .73 3.99 4.24 4.85 2.08 4.09 5.10 6.73

I s i s A 26.5 71.4 73.0 74.5 27.2 76.9 78.2 81.8 B t t 3.79 8.36 8.69 9.39 5.20 6.63 9.62 10.82 C 1.00 5.98 6.35 7.00 1 .41 5.10 7.51 8.86

Source: AustraZian Sugar Year Book (various Issues) .

A t t h e ind iv idua l farm l e v e l , drought not on ly depresses y i e l d s pe r hec ta re harves ted , but a l s o i n t e r f e r e s with t h e normal crop r o t a t i o n system. Some o r a l l of t h e crop may not be worth ha rves t ing and i s e i t h e r ploughed i n o r stood-over f o r the following season. This has t h e e f f e c t of reducing t h e percentage of t h e assignment harves ted and consequently, t h e y i e l d of sugar p e r hec ta re o f assignment shows even g r e a t e r f l u c t u a t i o n s than t h e y i e l d p e r hec ta re harvested. This e f f e c t i s i l l u s t r a t e d i n Table 3-3 where t h e percentage harves ted , y i e l d pe r hec ta re harves ted , and y i e l d p e r h e c t a r e of assignment f o r t h e years 1965 t o 1972 a r e presented f o r t h e s i x m i l l a r e a s . The impact of t h e 1965 and 1969 drought years on t h e y i e l d p e r hec ta re of assignment f o r t h e Bingera, Gin Gin and Isis m i l l a r eas i s q u i t e pronounced.

Largely as a r e s u l t o f t h e droughts i n 1964, 1965 and 1969, i r r i g a t i o n i n t h e p r o j e c t a r e a expanded rap id ly . Based on d a t a from t h e Aust ra l ian Bureau of S t a t i s t i c s , t h e area i r r i g a t e d increased from about 7300 h e c t a r e s i n 1961 t o 20 000 h e c t a r e s i n 1972. Most o f t h i s inc rease was based on underground water s u p p l i e s i n t h e Millaquin, Qunaba and Fairymead M i l l a r eas , where t h e a r e a i r r i g a t e d from underground water increased from around 5700 h e c t a r e s i n 1961 t o 18 000 h e c t a r e s i n 1972. The most r ecen t e s t ima tes o f t h e ex ten t of i r r i g a t i o n were made by t h e IWSC i n 1973, when farms wi th in t h e p r o j e c t a r e a were c l a s s i f i e d by i r r i g a t i o n c a p a c i t y according t o whether they were t o t a l l y i r r i g a t e d , p a r t i a l l y i r r i g a t e d , o r t o t a l l y dryland. The r e s u l t s o f these es t imates , by m i l l a r e a , a r e presented i n Table 3-4.

Table 3-4

EXTENT OF IRRIGATION : BUNDABERG IRRIGATION SCHEME AREA 1973

(Hectares)

Are a Area Area M i l l Area T o t a l l y P a r t i a l l y Dryland N o t i n To ta l

I r r i g a t e d I r r i g a t e d S ch erne

M i l l aquin 4 538 2 868 75 3 714 8 873 Qunaba 2 161 1 468 298 n i l 3 927 Fairymead 3 441 4 804 666 45 3 9 364 Bingera 1 375 4 830 2 655 1400 10 260 Gin Gin 1 217 3 044 2 565 199 7 025 Isis 239 2 707 8 082 34 1 11 369

Tota l 12 971 19 721 15 019 3107 50 818

Sowee: IWSC, Qld.

The a reas i r r i g a t e d , a s shown i n Table 3-4, may b e f u r t h e r broken down according t o source o f water , and t h e s e a r e shown i n Table 3-5. The f i g u r e s show t h a t underground water i s by f a r t h e most important source accounting f o r almost 80% of t h e t o t a l l y i r r i g a t e d a r e a s and 60% of t h e p a r t i a l l y i r r i g a t e d a r e a s .

Following d i scuss ions with a broad spectrum of sugar indus t ry r e p r e s e n t a t i v e s and a l s o tak ing i n t o account t h e fol lowing f a c t o r s :

(a) r a i n f a l l p a t t e r n s f o r Bundaberg, Chi lders and Gin Gin s i n c e recording began, wi th p a r t i c u l a r emphasis on t h e c r i t i c a l per iod January t o Apr i l ; and

(b) sugar production d a t a f o r t h e Isis and Gin Gin m i l l s which served mainly dryland assignments and hence were more sub jec t t o t h e e f f e c t s o f seasonal condit ions:

t h e seasons r e l evan t t o t h e ana lys i s i n t h i s r e p o r t were c l a s s i f i e d as:

1968 above average; 1969 seve re ly drought a f fec ted ; 1970 below average; 1971 above average; 1972 exce l l en t .

Ind iv idua l ly t h e s e seasoi?.., covered t h e f u l l ra-cgc of c m e gr-oding cond i t ions i n t h e Bundaberg region al though, t ~ k e n a s a whole, t h e pe r iod was s l i g h t l y above average. Accordingly, any d a t a presented i n t h i s r e p o r t i n t h e form of a f i v e yea r average has been q u a l i f i e d by reference t o t h e ind iv idua l yea r components. However, t h e per iod 1968 t o 1972 does have t h e advantages t h a t it rep resen t s t h e t o t a l range of seasonal condi t ions over a r ecen t per iod , and it avoids t h e complicat ions, which occurred over a longer per iod , a r i s i n g from expansions i n assigned a reas and increased p r o d u c t i v i t y through technologica l change due t o use of b e t t e r cane v a r i e t i e s , increased m i l l i n g e f f i c i e n c y and improved ha rves t ing techniques.

3. Present Situation of Cane Growers

From t h e viewpoint o f t h e ind iv idua l canegrower, t h e ob jec t ive of t h e i r r i g a t i o n scheme is t o provide s e c u r i t y a g a i n s t drought by reducing t h e yea r t o yea r v a r i a b i l i t y i n cane y i e l d s and t o inc rease cane production with consequent b e n e f i c i a l

Table 3-5

SOURCE OF IRRIGATION WATER BY MILL AREA 1973

T o t a l l y I r r i g a t e d P a r t i a l l y I r r i g a t e d

Underground Surface Other To ta l Underground Surface Farm Dams Other To ta l

M i l l aquin 4 538 N i l N i l 4 538 2 794 17 N i l 57 2 868

Qun ab a 2 161 N i l N i l 2 161 1 468 N i l N i l N i l 1 4 6 8 I

Fairymead 3 415 N i l 26 3 441 4 665 N i l 113 26 4 804 N m I

Bingera 3 7 1287 5 1 1 375 1 793 2541 29 8 198 4 830

Gin Gin N i l 1037 180 1 217 N i l 2 882 9 7 66 3 044

- - -

Tota l 10 243 2333 395 12 971 11 900 6056 1309 458 1 9 7 2 1 --

Source: IWSC, Qld.

e f f e c t s upon farm incomes. Accordingly, a survey o f canegrowerst f inanc ia l records was undertaken t o examine t h e t he s i s t h a t t o t a l l y i r r i g a t e d growers receive higher and more s t a b l e ne t farm incomes than do p a r t i a l l y i r r i g a t e d o r dryland producers. In addi t ion, the survey was used t o obtain data on cane and sugar y i e ld s under t o t a l and p a r t i a l i r r i g a t i o n and dryland condit ions i n order t o supplement t h e l imi ted knowledge ava i lab le on y i e l d responses t o i r r i g a t i o n on a l l areas of t h e proposed scheme.

The survey period se lec ted f o r examination was 1968-69 t o 1972-73, corresponding t o crop years 1968 t o i972 inclus ive .

3.1 Sampling Procedures

With a t o t a l o f 1265 individual sugar cane assigru~ients on 1239 p rope r t i e s af fected by t h e proposed scheme it was necessary t o confine the survey tu a sampie of cane growers. The population f o r t h e purpose of sampling was defined as t h e l i s t of assignments a l loca ted t o the s i x m i l l s i n the Bumdaberg region as gub l i shed i n t he Queensland Government Gazette i n 1973. (4) These 'lists were modified by excluding those assignment S iihich were outs ide t he a rea t o be served by t h e scheme. From t h e r e su l t i ng t o t a l o f 1265 assignments a f u r t he r 10 assignments, which were l a rge \ m i l l e s t a t e s o r owned by non-commercial i n t e r e s t s , were consijered a typ ica l and dele ted, thus giving a f i n a l adjus ted population of 1255 assignments on 1229 proper t i es . These 1229 proper t i es were c l a s s i f i e d by fu tu re water system(5) under t h e proposed scheme, v iz : P r iva te Pumpers, Underground, Abbotsford, Gooburrum, Givelda, Woongarra, Gin Gin, (6) Bingera(6) and Isis. The assignments i n these systems were then sub-c lass i f i ed by t h e 1973 i r r i g a t i o n s t a t u s a s no t i f i ed by t h e Queensland I r r i g a t i o n and Water Supply Commission, viz. t o t a l i r r i g a t i o n capacity, p a r t i a l i r r i g a t i o n capaci ty and dryland. Each sub-class i f ica t ion was s t r a t i f i e d according t o s i z e of assignment, v iz . l e s s than 25 hectares , 25 t o l e s s than 50 hectares and 50 hec ta res and over.

A s t r a t i f i e d random sample of 427 farms was se lec ted i n order t o provide es t imates f o r t h e main physical and f inanciaJ var iables , allowing f o r poss ible fu tu re r e j e c t i ons while co l l ec t ing the d a t a sought. However, as t h e sample included a number of assignments which would receive water under more than one system i n the proposed scheme, t he sample chosen represented 467 sample points .

The r a t e of response from cane growers was good, with only 53 growers being re jec ted due t o unwillingness t o co-operate, o r f a i l u r e t o re tu rn the au thor i ty t o allow BAE

o f f i c e r s access t o f i n w c i a l records and m i l l production da t a i n respect of the relevant assignments. Many of these l a t t e r r e j e c t i ons were caused by owners s e l l i n g t h e i r assignments and leaving the d i s t r i c t i n 1973. During t he f i e l d work there were another 78 r e j ec t i ons f o r a va r ie ty of reasons, although t he growers concerned had agreed t o pa r t i c i pa t e i n the study. A summary of t he reasons f o r t h e t o t a l of 131 r e j ec t i ons i s shown i n Table 3-6.

Table 3-6

NUMBER OF FARMS REJECTED FROM SAMPLE AND REASONS FOR REJECTION

Samp l e Proportion of Reason f o r Reject ion Proper t ies Those Proper t ies

Rejected Rejected

no. %

Unwilling t o co-operate 18 14 Authority not returned 35 2 7 Change o f ownership 3 5 2 7 Accounts too complex 15 11 Miscellaneous 2 8 2 1

Total 131 100

In addi t ion, there were modificat ions t o t he r e su l t an t sample from year t o year owing t o t he unava i lab i l i ty of f inanc ia l records fo r c e r t a i n years. Table 3-7 summarises t h e sample by proposed water systems f o r each year of t h e survey.

Table 3-7

SAMPLE OF CANE GROWERS BY FUTURE WATER SYSTEMS

System 1968-69 1969-70 1970-71 1971-72 1972-73

Pr ivate Pumpers Underground Abbotsford Gooburrum Givelda Woongarra Gin Gin Bingera I S is

Total 295 305 325 336 312

This sample was post s t r a t i f i e d t o account f o r changes i n i r r i g a t i o n c l a s s i f i c a t i on and var ia t ions i n stratum s i z e caused by amalgamations and/or d i s sec t ions of assignments. The annual population of assignments c l a s s i f i ed by i r r i g a t i o n s t a t u s i s unknown except f o r t he 1972-73 year provided by IWSC. I t would require a f u l l census f o r determining t he i r r i g a t i o n s t a t u s i n e a r l i e r years.

For the year 1972-73 a l l t h e est imates of t he f inanc ia l s i t ua t i on provided i n t ab les i n Appendix B have been calcula ted on a s t r i c t p robab i l i ty of se lec t ion basis . The f igures given i n these t ab l e s f o r t he e a r l i e r years have been weighted a t the stratum leve l using t h e o r ig ina l p robab i l i ty of se lect ion. A degree of uncer ta inty is associated with t he weights within s t r a t a f o r t he e a r l i e r years but , i n view of t h e r e l a t i v e l y large sample s izes , these est imates were judged to be reasonably re1 iable.

3.2 Yield Response t o I r r i ga t i on

Through t h e co-operation of the s i x sugar m i l l managements, production data was obtained f o r the sample of canegrowers f o r t h e seasons 1968 t o 1972 inclusive. The knowledge of the cane inspectors a t each m i l l was invaluable i n c lass i fy ing each observation i n each season according t o t h e i r r i g a t i o n capaci ty (i.e. t o t a l , p a r t i a l o r dryland) i n t he pa r t i cu l a r year. Table 3-8 condenses t h e r e s u l t s of t he analysis of the y i e ld da t a i n terms of average production of sugar over the f i ve year period. For convenience, the t ab le shows t h e r e s u l t s i n both tonnes sugar per hectare and tons sugar per acre.

For a more de ta i l ed presenta t ion of grower production data the reader i s re fe r red t o Appendix A which shows t h e annual production of sugar cane per hectare, t h e commercial cane sugar content and sugar production per hectare f o r each of t h e f i v e seasons, 1968 t o 1972.

The di f ference i n r ea l i s ed y i e ld s per u n i t a rea harvested between t h a t achieved under t o t a l i r r i g a t i o n condit ions and the dryland r e su l t s , may be taken as an ind ica tor of t h e response due to i r r i ga t i on . To the extent t ha t t o t a l i r r i g a t o r s did not on average u t i l i s e a f u l l two acre f e e t per acre harvested (6.1 Megalitres) , as proposed under t he i r r i g a t i o n scheme, the responses shown may be l e s s than t he po t en t i a l responses. Table 3-9 shows t h e estimated annual responses t o i r r i g a t i o n achieved i n each system. The r e s u l t s emphasise t he c l a s s i f i c a t i on of seasons given e a r l i e r by t h e high responses achieved i n drought a f fec ted o r below average seasons. Again,

Table 3-8

AVERAGE PRODUCTION OF SUGAR PER LAND UNIT HARVESTED 1968 - 1972

Dif ference Dif ference System To ta l P a r t i a l Dryland To ta l Less Tota l P a r t i a l Dryland To ta l Less

Dry land Dry l and

tonnes/hectare t o n s / a c ~ e

P r i v a t e 11.1 10.1 8.0 3 .1 4.4 4 . 0 3 .2 1 . 2 Pumpers

Under- 13.2 11 .5 ground

10.9 10.3 I

Gooburrum 13.2 2.9 5.2 4.3 4.1 1 .2

Woongarra 13 .6

Gin Gin 9.5(b) 8.3 6.9 2.7(b) 3.8cb) 3.3 2.7 l . l ( b )

Bingera(a) 11.6(c) 10.6 9.4 2.9cc) 4 .6 4.2 3.7 l . l ( c )

(a) Abbotsford and Givelda merged wi th Bingera System. (b) Average 1970--72 only. I n s u f f i c i e n t t o t a l i r r i g a t o r s i n 1968,1969. (c) Average 1969-72 only. I n s u f f i c i e n t observa t ions i n 1968.

Table 3-9

ESTIMATED DIFFERENCES BETWEEN TOTAL IRRIGATION AND DRYLAND SUGAR YIELDS

System

tonneshe c t m e tons/acre

Private Pumpers 3 .0 5.6 4.0 1 .8 1.1 1.2 2 . 2 1 . 6 0.7 0.4

Underground 1 .4 7 .8 3.2 2.2 2.6 0.6 3 .1 1 . 3 0.9 1.0 I

Gooburrum 2.4 6.9 3 .0 1 .9 0.4 0.9 2.8 1 . 2 0.8 0.2 W

Woong a r r a 2.9 6.3 4.3 3.4 1 .5 1.1 2.5 1 .7 1.3 0.6 , Gin Gin (a) (a)

Bingera (b) (a) 5 .3 5.0 1 . 6 -0.4(c) (a) 2 . 1 2.0 0.6 -O.Z(c)

I s i s 3.3 7.4 6.3 3.7 3 .8 1 . 3 3 .0 2.5 1 .5 1 .5

(a) Insuf f ic ien t data. (b) Includes Abbotsford and Givelda. (c) Local opinion was t h a t 1972 approximated f u l l i r r i g a t i o n conditions. Consequently t h e negative r e s u l t should be in terpreted as being equal t o a zero response i r r i ga t i on . A s t a t i s t i c a l t e s t confirmed t h a t the re was no s ign i f ican t d i f ference i n sugar production between t o t a l p a r t i a l , and dryland f o r t he Bingera system i n t ha t year.

f o r convenience, the data has been expressed i n imperial and metric measures.

The above yie ld data forms t h e bas i s f o r t he assumptions concerning po ten t ia l y ie lds i n analysing t he economic impact of the Bundaberg Scheme i n Part I V .

3.3 Financial Si tuat ion of Canegrowers

This ana lys i s examines the f inancia l r e s u l t s f o r t he sample of cane growers, c l a s s i f i ed by fu ture water supply system and current i r r i g a t i o n capaci ty over t h e period 1968-69 t o 1972-73. The ensuing discussion concentrates on t he broad trends. A summary of each i r r i g a t i o n system i s t r e a t ed separate ly i n Appendix B. This sect ion concludes with a b r i e f discussion of aspects of s i z e of assignment and d i s t r i bu t i on of net farm incomes.

Net farm income was defined as gross rece ip t s from sugar and o ther farm en te rpr i ses using farm resources l e s s a l l cash cos t s (excluding ren t and i n t e r e s t payments), associated with obtaining t h e gross rece ip t s , and imputed allowances f o r depreciat ion and family labour. The net farm income is therefore an est imate of t he re tu rn t o t h e operator 's labour and managemept.

With t he exception of t h e drought a f fec ted year 1969-70, average ne t farm incomes increased subs tan t ia l ly throughout the scheme area during the survey period. This trend i s e s sen t i a l l y t h e e f f ec t of t h e combination of r i s i n g pr ices received f o r sugar, increasing y ie lds per hectare harvested and increased a rea harvested (pa r t i cu l a r l y i n t he years 1971-72 and 1972-73). In general it appears t ha t , over t he survey period, t he low leve l s of income experienced during 1969-70 were compensated by t h e high leve l s of ne t farm income i n subsequent years. However, a combination of successive years of drought and low pr ices , such as occurred during 1964 and 1965, would ce r t a in ly cause f inanc ia l d i f f i c u l t i e s t o most farmers except those with subs tan t ia l areas of t h e i r assignments i r r i ga t ed .

The following t ab l e shows t h e No. 1 and No. 2 Pool p r i ce s received f o r seasons 1968 t o 1972 inclus ive which were then shared between mi l l s and growers according t o a spec i f i ed formula, d e t a i l s of which a r e given i n Part IV. Number 1 Pool r e f e r s t o sugar produced up t o m i l l peaks and No, 2 Pool appl ies t o over peak production.

Table 3-10

PRICES RECEIVED FOR SALE OC SUGAR BY MILLS 1968-1972 $ per tonne

Year No. 1 Pool No. 2 Pool

Sugar p r i c e s f o r No. 1 Pool increased by 35% over t h e f i ve year period and No. 2 Pool p r i c e s increased by 165%. As 1971 and 1972 seasons were character ised by considerable over peak production ( r e f e r Table 3-2) due t o high y i e ld s of cane per hectare harvested and i n some areas increases i n t h e area of assignment harvested, the impact of high p r i c e s f o r both pools on ne t farm incomes was subs t an t i a l . Appendix A provides da ta on the y i e l d per hec ta re harvested f o r each survey year by i r r i g a t i o n system and i r r i g a t i o n capacity i n 1973.

A system by system analys is of t h e f i nanc i a l s i t u a t i o n of canegrowers (see Appendix B) c l e a r l y indicated t h e bene f i t s of the availabi.1 i t y of i r r i g a t i o n water during t h e drought year 1969-70. On average, t o t a l i r r i g a t o r s managed t o maintain t h e i r level o f ne t farm income i n comparison with p a r t i a l i r r i g a t o r s and i n d i r e c t con t ras t t o dryland farmers. Only dryland farmers i n the c l ima t i c a l l y more favoured Gooburrum and Woongarra systems exhibi ted pos i t i ve average ne t farm incomes i n 1969-70. The e f f e c t o f t he drought would have been more pronounced but f o r t h e increase of almost 14% i n t h e No. 1 Pool p r i c e over t h e 1968 leve l , I n t h i s context it i s worth noting t h a t , when m i l l peaks a re not reached, sugar cane growers who can produce above t h e i r farm peaks, receive No. 1 Pool p r i c e s f o r t h e excess. This is advantageous t o t h e i r r i g a t o r and undoubtedly contributed s i g n i f i c a n t l y t o t h e f i nanc i a l r e s u l t s achieved by t o t a l i r r i g a t o r s i n t he 1969 season.

Overall average ne t farm incomes per hec ta re of assignment f o r t o t a l i r r i g a t o r s were more consis tent and general ly h igher than those achieved by p a r t i a l i r r i g a t o r s and dryland producers, In turn , t h e r e s u l t s achieved by p a r t i a l i r r i g a t o r s were l e s s va r iab le and b e t t e r than t he average ne t farm income per hec ta re o f assignment f o r dryland cane growers,

However, t h e c o n t r a s t between t h e s e ca tegor i e s was not as marked as between t o t a l i r r i g a t o r s and t h e r e s t .

With some exceptions, sugar income cont r ibuted 80% o r more of average t o t a l income and t h i s propor t ion tended t o inc rease e s p e c i a l l y i n 1971 and 1972 due t o increased sugar y i e l d s and p r i c e s . Consequently, t h e propor t ion of t o t a l farm r e t u r n s from o t h e r farm e n t e r p r i s e s such as c o n t r a c t ha rves t ing , peas, beans, tobacco, melons and o t h e r small crops dec l ined accordingly. Off farm income such a s wages, i n t e r e s t and dividends was found t o b e i n s i g n i f i c a n t throughout t h e scheme.

A system by system summary of n e t farm income, a r e a of assignment and g ross income from sugar f o r t o t a l i r r i g a t o r s , p a r t i a l i r r i g a t o r s and dryland farmers f o r each yea r of t h e survey i s provided i n Appendix B.

3.3.1 Distribution of Net Farm Income

Table 3-11 shows t h e d i s t r i b u t i o n of n e t farm income by i r r i g a t i o n s t a t u s f o r sample p r o p e r t i e s i n t h e survey period. The d i s t r i b u t i o n has been analysed on a scheme a r e a b a s i s as t h e r e a r e i n s u f f i c i e n t observat ions f o r most systems t o y i e l d s t a t i s t i c a l l y r e l i a b l e r e s u l t s f o r a d i s t r i b u t i o n a t t h e system l e v e l .

Broadly t h e d i s t r i b u t i o n r e f l e c t s t h e g r e a t e r s t a b i l i t y i n t o t a l i r r i g a t o r s ' n e t farm incomes, compared wi th p a r t i a l and dryland ca tegor i e s . During t h e 1969-70 drought yea r only 19% of t o t a l i r r i g a t o r s had n e t farm incomes of l e s s than $3,000 compared with 59% and 96% o f p a r t i a l i r r i g a t o r s and dryland producers r e spec t ive ly . I n f a c t , 39% of p a r t i a l i r r i g a t o r s and 82% o f dryland growers had negat ive n e t farm incomes.

Af te r 1969-70 t h e d i s t r i b u t i o n s f o r a l l groups become p rogress ive ly more skewed t o t h e h ighe r ranges owing t o inc reases i n p r i c e s rece ived, y i e l d s and propor t ion of a r e a harvested. By 1972-73 on ly a small percentage o f sample p r o ~ e r t i e s received l e s s than $3,000 n e t farm income.

3.3.2 Size of Assignment

Again, a s t h e r e a r e i n s u f f i c i e n t observat ions i n c e r t a i n assignment s i z e c l a s s i f i c a t i o n s i n some of t h e systems, t h i s a n a l y s i s is r e s t r i c t e d t o a whole scheme approach. Table 3-12 shows t h e average n e t farm income i n t o t a l , and on a p e r h e c t a r e o f assignment b a s i s f o r each yea r f o r t h e t o t a l , p a r t i a l and dryland c a t e g o r i e s s t r a t i f i e d by s i z e o f assignment: l e s s than 25 hec ta res ; 25 and l e s s than 50; 50 and above.

Table 3-11

DISTRIBUTION OF SAMPLE CANEGROWERS BY NET FARM INCOME BUNDABERG REGION

(1968-69 t o 1972-73) (Percentages of Sample)

P- - -

I r r i g a t i o n Category Year Range

Total P a r t i a l Dryland - -p-

1968-69 Less than $3,000 2 5 14 2 2

$3,000 - $4,999 11 24 23

$5,000 - $9,999 4 1 29 38

Greater than $10,000 23 3 3 17

1969-70 Less than $3,000 19 5 9 9 6

$3,000 - $4,999 13 17 2

$5,000 - $9,999 42 15 1

Greater than $10,000 26 9 1

1970-71 Less than $3,000 4 18 3 2

Greater than $10,000 42 3 7 14

1971-72 Less than $3,000 7 9 12

$3,000 - $4,999 6 5 9

$5,000 - $9,999 29 34 4 4

Greater than $10,000 58 5 2 3 5

1972-73 Less than $3,000 3 3 5

$3,000 - $4,999 2 - 5

$5,000 - $9,999 19 14 2 7

Greater than $10,000 76 8 3 63

Tab le 3-12

AVERAGE NET FARM INCOME OF SAMPLE PROPERTIES

BY STRITUbI SIZE AND IRRIGATION STATUS

( D o l l a r s )

1968-69 1969-70 1970-71 1971-72 1972-72 I r r i g a t i o n S t a t u s S t r a tum Net Farm

Income NFI/ha NFI NFI/ha NFI NFI/ha NFI NFI/ha NFI NFI/ha

T o t a l I r r i g a t i o n 1 5,701 270 5,173 216 7,295 340 6,343 1 2 9 7 9,117 416

P a r t i a l I r r i g a t i o n 1 4,237 176 1,679 70 4,182 175 7,214 313 9,283 386 I

Dry land

1 = l e s s t han 25 h e c t a r e s 2 = 25 and l e s s t h a n 50 h e c t a r e s 3 = 50 h e c t a r e s and above

A s expected, t he absolute l eve l o f average ne t farm income rose as t he s i z e of assignment increased. Dryland producers with l e s s than 25 hectares recorded t h e lowest incomes. However, i n 1969-70 it appears t h a t t he drought had a more devastat ing impact on the l a rger dryland growers with over 50 hec ta res than the intermediate and small farmers i n descending order. This e f f e c t i s a l so not iceable between t he medium and la rge groups o f p a r t i a l i r r i g a t o r s but did not e x i s t f o r t o t a l i r r i g a t o r s .

The average ne t farm incomes of dryland farmers with l e s s than 25 hec ta res o f assignment suggest t h a t , over t h e survey period, the re was no small-farm problem. However, some farmers would undoubtedly have experienced d i f f i c u l t i e s but f o r t h e good seasons and high p r i c e s i n t h e l a t e r years.

When t he da t a on average ne t farm income a r e converted t o per hectare of assignment, it appears t h a t t he r e is no consis tent o r conclusive evidence of t h e exis tence o f any economies o r diseconomies of s i z e over t h e s i z e range of assignments examined f o r any of t h e i r r i g a t i o n c l a s s i f i c a t i ons . Although ne t farm income includes the e f f e c t s of o ther farm en t e r p r i s e s t h e i r e f f e c t is small as t h e same pa t t e rn emerges from an ana lys i s of gross income from sugar pe r hectare . Th is suggests t ha t s i z e of assignment has a major influence on t h e absolute l eve l o f ne t farm income except i n drought years f o r dryland proper t ies .

4. Mill S i t u a t i o n

The v a r i a b i l i t y of production, as i l l u s t r a t e d i n Section 2 of t h i s Chapter, is a l so r e f l e c t ed i n t he p r o f i t a b i l i t y of mi l l ing operations. Although t h e p r o f i t a b i l i t y of opeyating a sugar m i l l depends on many f ac to r s such a s p r i c e s received and paid, the q u a l i t y of cane f o r crushing, e f f i c i ency of management, and e f f i c iency of machinery operations, t h e maj o r contr ibut ing factors t o t he p r o f i t o r loss incurred a r e t he p r i c e s received f o r sugar sold , and t he seasonal m i l l throughput. A s t h e quan t i ty of sugar produced increases , t h e proport ion o f t o t a l co s t s t h a t a r e f ixed becomes smaller and hence t o t a l average cos t s pe r ton decl ine , thereby enhancing p r o f i t a b i l i t y , Theoret ica l ly , i f p r o f i t s a r e t o be maximised, sugar m i l l s should continue t o increase production u n t i l t h e marginal revenue i s equal t o the marginal cos t , However, t h e a b i l i t y of m i l l s t o achieve t h i s i s l imi ted by the supply of sugar cane f o r crushing ava i lab le within t he confines of a p a r t i c u l a r m i l l a rea ,

- 40 - Annual opera t ing cos t d a t a were provided by each o f t h e

s i x r eg iona l sugar m i l l s . I n t h e case of t h e Isis m i l l , which is a grower co-operat ive, t h i s information w a s obtained from published r e p o r t s . Operating cos t information i s not a v a i l a b l e i n a published form from t h e o t h e r mills but w a s provided on a conf iden t i a l b a s i s . To ensure t h a t t h e c o n f i d e n t i a l i t y o f t h e information was maintained, it was necessary t o pool t h e r e s u l t s f o r ind iv idua l m i l l s i n t o two groups, viz . t h e predominantly i r r i g a t e d m i l l a r eas o f Fairymead, Millaquin and Qunaba, and t h e predominantly dryland m i l l a r eas of Gin Gin, Bingera and Isis. These r e s u l t s a r e shown i n Tables 3-13 and 3-14. The u n i t c o s t s and p r o f i t a b i l i t y f i g u r e s a r e expressed i n index form with t h e base of 1968 = 100.

I n genera l , t h e t h r e e m i l l s nea r t h e coas t , Millaquin, Qunaba and Fairymead (which a l s o have a more favourable cl imate) show much g r e a t e r seasonal s t a b i l i t y , i n terms of p r o f i t a b i l i t y and average t o t a l c o s t s pe r tonne of sugar produced, than Bingera, Gin Gin and Isis.

An examination o f t h e d a t a f o r t h e Isis M i l l i l l u s t r a t e s t h e kelatGonship between m i l l throughput and p r o f i t a b i l i t y i n a s i t u a t i o n where p e r i o d i c droughts and lack o f i r r i g a t i o n d r a s t i c a l l y reduce t h e amount of cane a v a i l a b l e f o r crushing i n some years .

Table 3-15 shows t h e tonnages of sugar and cane processed, t h e No. 1 and No. 2 Pool sugar p r i c e s , t h e average t o t a l c o s t s p e r tonne of sugar produced, and t h e p r o f i t a b i l i t y of t h e Isis Mil l ing opera t ion f o r t h e pe r iod 1965 t o 1972, which included two maj o r drought S.

Average t o t a l c o s t s p e r tonne of sugar r o s e sha rp ly i n t h e drought yea r s of 1965 and 1969 as t h e f ixed c o s t component of t o t a l c o s t s i s spread o v e r s e v e r e l y reduced throughputs. A s t h e m i l l r ece ives roughly one- th i rd o f t h e pool p r i c e s , t h i s c o s t e f f e c t caused s u b s t a n t i a l l o s s e s i n income i n t h e 1965 and 1969 seasons. These years con t ra s t ed wi th t h e 1972 season which r e s u l t e d i n l a r g e p r o f i t s due t o t h e high l e v e l of production (43% over peak) combined wi th h igh p r i c e s f o r both pools and low average ope ra t ing cos t S.

Table 3-13

PROFITABILITY AND AVERAGE PRODUCTION COSTS 1968-1972

(Average f o r Millaquin, Qunaba and Fairymead)

Average Tota l Cost P r o f i t per tonne Cane Sugar per tonne Sugar Sugar

Year processed Produced Index 1968 = l00 Index 1968 = 100

tonnes tonnes 1968 445 316 67 056 100 100

Table 3-14

PROFITABILITY AND AVERAGE PRODUCTION COSTS 1968-1972

(Average f o r Isis, Gin Gin and Bingera)

Average Total Cost P ro f i t per tonne Cane Sugar per tonne Sugar Sugar

Year Processed Produced Index 1968 = 100 Index 1968 = 100

tonnes 1968 489 308

tonnes 67 596 100

Table 3-15

PROFITABILITY AND AVERAGE PRODUCTION COSTS; ISIS MILL

1965-1972 SEASONS

P r o f i t o r Cane

No* l No* Average Pre-tax Loss per sugar Tota l P ro f i t / Tonne

Year C w h e d Produced Sugar Sugar p r i c e p r i c e Costs Loss Sugar

(tonnes) (tonnes) $1 tonne $1 tonne$/tonne $ $

S o m e : The Annual Reports and the General Manager's Half Yearly Reports of the Isis Central Sugar M i l l Company Limited, 1965-1973.

Footnotes Part I11

(l) Detailed descr ipt ions of t h e organisation of t h e sugar industry and sugar marketing arrangements a re provided i n - F. J. McAvoy , Chairman, Austral ian and Queensland Cane Growerst Councils, 'The Organisation of t h e Austral ian Sugar Industry1, an qddress t o Ayr Junior Chamber of Commerce, Farm Management Course, June 1968; J .R . Winders, The Sugar Board, 'Sugar Marketingt, a paper presented a t a Marketing Seminar, Mackay Development League, October 1970; Queensland Cane Growers1 Association, Annual Reports (various i s sues ) ; Regulation of Sugar Cane Prices Acts, 1962 t o 1972, Queensland.

(2) The ac tua l scheme area covers an assigned a rea of 47 711 hectares on 1265 individual assignments on 1239 proper t i es leaving 94 assignments (3107 hectares) not involved i n t h e scheme.

(3) For a discussion on t he impact of technological advance on y i e ld s per hectare , t h e reader i s re fe r red t o t h e Eton I r r i ga t i on Proposal r epo r t pp. 84-91.

f

(4) Fairymead: Queensland Government Gazette, No. 28 of 17 May 1973; Millaquin: No. 36 of 22 May; Bingera: No. 37 of 22 May; Qunaba: No. 38 of 22 May; Gin Gin: No. 39 of 22 May: Isis: No. 41 of 24 May.

(5) Future water system was determined by t he IWSCts p ro jec t design. Pr ivate Pumpers r e f e r s t o those assignments which w i l l draw water from t h e Kolan River, Burnett River, Gin Gin Main Channel o r Burnett diversion channel. Underground r e f e r s t o those assignments which w i l l continue t o draw water from t h e underground aquifer . The remaining correspond t o t h e names of t h e i r r i g a t i o n channel systems. Some assignments w i l l receive water from more than one of t he nine systems.

C6) The Bingera system as designed by t h e IWSC has been sub-divided on the ba s i s of Gin Gin and Bingera M i l l areas t o d i ssoc ia te di f ferences i n s o i l types, topography, erosion and f r o s t su scep t ib i l i t y of Gin Gin when compared t o

P a r t I V

THE ESTIMATED INCREMENTAL BENEFITS OF THE IRRIGATION PROPOSAL

1. The Bundaberg Scheme i n R e l a t i o n t o t h e Queensland Sugar I n d u s t r y

The production and marketing of sugar i n Queensland is subject t o a number of i n s t i t u t i o n a l cons t ra in t s a t various levels . One important fea tu re of these arrangements concerns t he a l loca t ion of increased peaks and assigned areas whenever it is desired t o expand t h e industry.

In the pas t , t h e general philosophy has been t h a t a l l d i s t r i c t s and m i l l s should obtain an equitable share i n any major expansion. This policy was based on t he assumption t ha t each d i s t r i c t , regarded as a whole, would have t he capacity t o achieve t he increased production. While t h i s assumption was reasonable i n the pas t , it has become evident i n recent years t ha t as each expansion has occurred, the po t en t i a l f o r f u r the r expansion has been considerably reduced, L i m i t s t o production a r e being imposed by factors such a s topography, s o i l types, and competition f o r o ther forms of r u r a l production o r urban growth, while proximity t o adjacent m i l l a reas i s l imi t ing t he capacity f o r some m i l l areas t o expand.

The method t o be adopted i n a l loca t ing peaks i n fu ture expansions has important implications f o r t h e analysis o f t he Bundaberg Scheme. I f t he addi t ional production which i r r i g a t i o n could provide is not incorporated i n t o new peak a l locat ions , then it would have t o be marketed within t h e over-peak acquis i t ion l eve l s which a re f ixed annually by t h e Central Sugar Cane Pr ices Board according t o t h e expected demand f o r sugar. Under t h i s arrangement, acquis i t ion of t he f u l l +aunt of such addi t ional sugar could not be r e l i e d upon with ce r ta in ty , On the other hand, i f t he increased production were t o be incorporated i n to m i l l peaks, then t h e percentage increase required would vary widely among t h e m i l l areas of t h e region, and i n some cases could be as high as 70%.

From discussions with sugar industry organisations it appears t h a t , i n t h e future , it w i l l be necessary t o d i r e c t expansions i n peaks t o areas with t h e be s t prospects f o r expansion r a the r than by across t h e board a l locat ions . This suggests t h a t m i l l a reas which have t he capacity t o expand i r r i g a t i o n , o r which have areas of su i tab le , unassigned land i n favourable c l imat ic locations, w i l l take precedence over other areas.

For t h i s reason, it has been assumed f o r t h i s repor t t ha t t he addi t ional sugar product ion from t h e Bundab erg D i s t r i c t would progressively be incorporated i n to m i l l peaks without any necessary flow-on t o other sugar d i s t r i c t s . A s a j u s t i f i c a t i o n f o r t he adoption o f t h e assumption, it should be noted t ha t it would be another 11 t o 12 years before t h e proposed scheme reaches f u l l development; t h i s app l ies pa r t i cu l a r l y t o t h e I s i s and Gin Gin m i l l areas, where t h e highest percentage increases i n peak would be required. A consequence of t h i s assumption is t h a t f o r t he ana lys i s o f t h e impact of t h e Scheme on individual producers, most of t h e addi t ional cane can b e taken t o be so ld a t the higher No. 1 Pool pr ices .

2. Outlook for Sugar

A t present , only some 25% of Aus t ra l i a ' s sugar production i s consumed loca l l y with t h e remainder being exported, e i t h e r under long term contracts o r so ld on t h e f r e e world market. The current sugar marketing pol icy i s t o obtain as many long term contracts as poss ible f o r export sugar. However, it i s unl ikely t ha t a l l export sugar w i l l be so ld under long term contract condit ions as some res idual amount w i l l be necessary t o f u l f i l 1 domestic and contractual obl igat ions i n poor seasons. Hence, i n any season unless severe droughts occur, it i s expected t ha t the re w i l l be sugar avai lable f o r s a l e on t he open world market.

From t h e nat ional point of view, t h e e x t r a sugar produced with t h e Bundaberg I r r i ga t i on Scheme w i l l r e s u l t i n an equivalent increase i n t o t a l exports from Austral ia. A s t h i s ex t ra product ion represents t h e marginal addi t ion t o t o t a l exports, i t i s valued a t open market export p r i ce s f o r the evaluation of t h e scheme from t h e nat ional viewpoint.

The Bureau of Agricultural Economics ( l ) has recen t ly published project ions of production, domestic consumption and export o f Austral ian sugar f o r t h e period t o 1978-79. These proj e c t ions point t o continuing expansion i n production, increases i n domestic consumption i n l i n e with population growth, a continuance of 'assured export markets1 f o r about t h e same volume of sugar a s a t present and thus, by implication, an increase i n exports t o t he f r ee world market.

That repor t a l so po in t s t o t he p o s s i b i l i t y t h a t t he r e may be an in te rna t iona l sugar agreement incorporating 'economic provisions ' ( t ha t i s , provisions r e l a t i ng t o export quotas and/or pr ices) bu t , separate ly from t h i s , sugar p r i ce s on f r e e world

markets a r e expected t o f a l l as t he present t i g h t world supply s i t ua t i on eases i n response t o ex i s t ing high pr ices .

An appraisa l of t h e various fac tors t ha t a f f ec t t h e s t a t e of t he world markets i nd i ca t e s t ha t , f o r t h e present ana lys i s of t h e Bundaberg Scheme, it would be appropriate t o make ca lcu la t ions based on t he assumption t h a t the delivered terminal p r i c e s of sugar shipped t o f r ee world markets would range over the long term from $80 t o $100 per tonne. A range of $70 t o $110 -- has been adopted f o r t he analysis t o t e s t t he s e n s i t i v i t y of t h e r e s u l t s t o r e a l p r i ce changes. I t i s recognised t ha t continued i n f l a t i o n on a world-wide b a s i s would have t h e e f f e c t of tending t o r a i s e the l eve l of money pr ices bu t , t h e influence of t h i s i n

l assess ing t h e n e t r e tu rns from the Scheme would a l so tend t o be o f f s e t by corresponding changes i n production cos t s within Austral ia. The ana lys i s given i n t h i s repor t is based on cos t s prevai l ing i n t h e l a t t e r ha l f of 1973 and, f o r t h i s reason, no account i s taken of t he poss ible e f f e c t t h a t continued i n f l a t i on may have on f r e e world market p r i ce s f o r sugar.

3. Isis and Gin Gin Assignment Transfers

For many years cane growing has been pract ised on Land which i s too s t eep t o adequately control erosion i n t h e Gin Gin and Isis areas. Consequently, loss of topso i l , declining y ie lds , and d i f f i c u l t i e s associated with mec'rlaqical harvesting have forced many growers t o e i t h e r abaqdon o r t rans fe r t h e i r assignments t o more su i t ab l e locations.

In the i n i t i a l planning of the i r r i g a t i o n scheme proposal, it was found t h a t t h e cost o f supplying water to these higher areas would be very expensive. Land use studies(2) were ca r r ied out i n these areas with a view t o ident i fying the des i rab le long term changes i n land use, including t he t r ans f e r of the s teeper assignments t o more su i t ab l e locations. The Land Use Study committees i n both t he Gin Gin and I s i s areas concluded t h a t erosion control and the provision of i r r i g a t i o n were t he two most important changes which could provide f o r s t a b i l i s a t i o n and improvement i n cane production. To achieve these changes t h e following s teps were proposed by the committees:

. The S t a t e So i l Conservat ion Authority take appropriate s teps t o have t h e area declared an a rea of s o i l erosion hazard.

. Land with s lopes i n excess o f 8% (6% f o r black s o i l s i n Gin Gin) should cease t o be used f o r cu l t iva t ion and should not be supplied with i r r i g a t i o n water. This

involves some 5800 acres (2350 hectares) of assigned land i n Isis and around 2200 ac res (890 hectares) o f assigned land i n Gin Gin.

. Sui tab le unassigned land be provided o r acquired by government ac t ion t o f a c i l i t a t e t h e t r a n s f e r of t he s teeper assignments t o more su i t ab l e locations.

. The proposed I s i s and Gin Gin I r r i ga t i on systems be constructed with appropriate rearrangement of t h e i r r i g a t i o n works t o s u i t t h e proposed assignment t r ans fe r s .

. Areas vacated a s t he r e s u l t o f t h e t r an s f e r s be used f o r en t e rp r i s e s which w i l l f a c i l i t a t e erosion control , such as government control led fo r e s t ry operations o r p r i va t e ly control led pas to ra l a c t i v i t i e s .

The Gin Gin and I s i s I r r i g a t i o n Systems were subsequently redesigned and the consequent lower publ ic c a p i t a l and annual operating costs have been included i n the ana lys i s contained i n t h i s repor t .

The question a r i s e s , however, t o what extent t h e o ther changes proposed by t he Land Use committees should be included i n t h e analys is of the i r r i g a t i o n proposals. These would include the bene f i t s and t he cos t s associa ted with t h e t r an s f e r of assignments, t h e s o i l conservation measures t o be taken on t h e remaining h i l l y areas , t h e en t e rp r i s e s t o be displaced by t h e assignment t r a n s f e r s , and the en t e rp r i s e s which w i l l replace sugar on the s teep areas.

I n recent years, t he t r an s f e r of assignments has been occurring qu i t e r ap id ly without government intervention. By 1985-86, when the i r r i g a t i o n scheme i s scheduled t o reach f u l l development, it is conceivable t h a t al l t h e t r an s f e r s may have been effected i n the normal course of events. This process would be accelerated i f t h e af fected areas were declared t o be areas of s o i l erosion hazards. I t is therefore argued t ha t t h e i r r i g a t i o n scheme may merely a c t a s a c a t a ly s t t o t h e t r an s f e r of a few remaining assignments. Hence, the benef i t s and cos t s r e l a t i n g t o t h e implementation of the Land Use committees1 recommendations, a r e taken t o be independent of t h e bene f i t s and cos t s o f t h e proposed i r r i g a t i o n scheme. I t has thus been assumed t h a t t h e without-scheme s i t u a t i o n i s one where a l l t h e changes proposed i n t he land use s t ud i e s have occurred.

4. Closure o f Gin G i n Mill

In December 1973 t he Bundaberg Sugar Company Limited, which owns the Fairymead, Bingera and Gin Gin mi l l s , announced i ts in ten t ion of c los ing the Gin Gin m i l l a t the end of t h e 1974 season. This would be accomplished by re-zoning t h e ex i s t ing m i l l areas i n to two m i l l a reas , Bingera and Fairymead, and s i gn i f i c an t l y increasing the crushing capac i t i es of these mil ls . The company, through i t s subsidiary company, Gibson and Howes Ltd, which owns t he Gin Gin and Bingera mi l l s , made an appl icat ion t o t he Central Sugar Cane Pr ices Board t o have t he land assigned t o Gin Gin m i l l re-zoned t o Bingera m i l l and t o have ce r t a in Bingera m i l l assignments re-zoned t o Fairymead m i l l . The Board conducted a hearing of a l l in te res ted p a r t i e s i n April 1974 and subsequently, i n August 1974, approved t he re-zoning proposals, subject to Bingera and Fairymead m i l l s having adequate t ranspor t f a c i l i t i e s and mil l ing capacity t o implement the proposal.

This decision, which i n e f f e c t approves t he closure of t h e Gin Gin m i l l , has considerable implication f o r t h e analysis of the i r r i g a t i o n scheme with respect t o m i l l c ap i t a l requirements and p r o f i t a b i l i t y . I t was assumed tha t t he closure of the m i l l and the associated upgrading of t h e mill ing capacity a t Bingera and Fairymead, a r e independent of t he i r r i g a t i o n scheme, and hence the without-scheme s i t ua t i on has been taken a s one where t he re-zoning has a l ready occurred. In pract ice , t he upgrading of t he Bingera and Fairymead m i l l s t o cope with the re-zoning and t he increased production emanating from the i r r i g a t i o n scheme w i l l occur concurrently. An attempt has been made t o separate t h e e f f ec t , i n terms of c ap i t a l cos t s and p r o f i t a b i l i t y , a t t r i bu t ab l e t o t h e i r r i g a t i o n scheme.

5. Underground Water Supply

I f Phase 1 of t h e scheme had not proceeded, it would have been necessary t o r e s t r i c t underground water usage t o the long term sa f e annual y ie ld of t h e aquifers. The I r r i ga t i on and Water Supply Commission has advised t h a t t h i s r e s t r i c t i o n would be 50% of the proposed supply under t h e scheme, i .e . one acre foot per acre (3.0 megali tres per hectare) of sugar cane o r other crops harvested. This would have been control led through t he use of meters and would have taken e f f ec t i n 1974-75 i n t h e absence of the scheme.

The provision of surface water from the scheme has therefore been assumed t o aver t a po ten t ia l loss of production of both sugar and other crops, r e su l t i ng i n an annual ne t benef i t

a t t r i bu t ab l e t o t h e scheme. Detai ls of t h e assumptions used and the methods of est imating these bene f i t s a r e given i n Appendix C.

6. Other Crops

In the Report t o t he Queensland Parliament, provision was made t o supply up t o two acre f e e t pe r acre (6.1 megal i t res per hectare) f o r production other than sugar cane on unassigned land, where such production presen t ly e x i s t s , i n areas to be supplied with surface water o r continuing t o use groundwater.(3) I t was estimated by IWSC t h a t the re were 7387 acres (2989 hectares) of tobacco, vegetables, pas ture and fodder crops and other crops i n t h i s category i n 1973. Of t h i s f igure 5416 acres (2192 hectares) were cur ren t ly being i r r i g a t e d from the main underground water suppl ies around Bundaberg and t h e remaining 1971 acres (798 hectares) from streams, farm dams and loca l i sed underground sources.

I t i s assumed tha t t h e current water usage on crops, other than sugar, was two acre f e e t per acre per annum (6.1 megal i t r e s per hectare) on average and accordingly, product ion would remain unchanged i f t he scheme i s completed. However, as discussed above, when dealing with t h e underground water supply, usage of underground water from t h e main aqu i fe r would be r e s t r i c t e d by 50% t o one acre foot per acre i f t he scheme lapsed, thus a f fec t ing 5416 acres (2192 hectares) . Production from t h e other 1971 acres (798 hectares) would be unaffected without t h e scheme.

Gross margins f o r tobacco derived from BAE survey data(4), and f o r other crops provided by t h e Queensland Department of Primary Industr ies(5) , a r e generally well above t he gross margin f o r sugar production. This suggests t h a t owners of mixed proper t i es would attempt t o maintain t h e ex i s t ing leve l of production of o ther crops by applying 2 acre f e e t of water per acre, and use t h e remainder of t he r e s t r i c t e d a l loca t ion on the sugar cane assignment. Consequently, it was assumed t h a t production of o ther crops t o t a l l i n g 3279 acres (1327 hectares) would be maintained a t t h e expense of sugar production on proper t i es with cane assignments and which i r r i g a t e from the Bundaberg aquifer .

The production of o ther crops on proper t i es without cane assignments, and which i r r i g a t e from the Bundaberg aquifer , t o t a l 2137 acres (865 hectares) . In t he absence of any known production functions r e l a t i ng y i e ld t o water usage, it was assumed the reduced water a v a i l a b i l i t y would r e s u l t i n a diminished gross margin proportional t o t h e f a l l i n t o t a l water

ava i l ab i l i t y , i .e . average r a i n f a l l p lu s two acre f e e t pe r acre (approximately 69 inches = 1750 mm). Using t he current est imates of land u t i l i s a t i o n by o ther crops supplied by IWSC, gross margins were derived f o r t h e r e s t r i c t e d water use condition. This yielded an annual bene f i t of $58,642 commencing i n 1974-75.

7. Extent of Existing Irrigation by System

Table 4-1 shows t h e extent of i r r i g a t i o n by systems a t 1973. This data was used as t he bas i s of calcula t ions of benef i t s and c o s t s of t h e proposed scheme.

8. Water Requirements and Availability

The IWSC recen t ly made a reassessment of t h e Stage I water requirement S, including the requirement S of cane, o ther crops, and urban suppl ies which w i l l be supplied from both surface and underground sources. The s a f e annual y ie ld of t he underground aquifers has been assessed a t 45 000 acre fee t per annum (55 500 megali tres) , and t h i s water w i l l be used f o r cane, other crops and urban supplies. After f ix ing t h e underground usage a t 45 000 acre f ee t , t h e balance of the water requirements w i l l be supplied from surface sources. Total surface water requirements have been assessed a t 202 000 acre f e e t (249 000 megalitres) a t storage, which i s some 3500 acre f ee t (4317 megalitres) higher than t he previous est imate made i n t he August 1970 report . A breakdown of these requirements i n t o t he various systems i s given i n Table 4-2.

The surface water requirements f o r sugar a re based on a proposed a l loca t ion of 2 ac re f e e t per acre (6.1 megali tres per hectare) on 75% of gross assigned area. Requirements f o r other crops a r e based on a proposed a l locat ion of 2 acre f ee t per acre (6 ,l megali tres per hectare) f o r production on unassigned lands where such product ion current l y ex i s t S. The underground sys tem requirements o f 45 000 acre f e e t (55 500 megalitres) are based on a proposed a l loca t ion of 2 acre fee t pe r acre (6.1 megali tres per hectare) on 80% of gross assigned area.

The a b i l i t y of t h e system of storages p lus unregulated flow i n t he Burnett River t o meet the above surface water demand, i s cur ren t ly being re-analysed by t h e IWSC i n l i g h t of t he increase i n demand s ince t he l a s t es t imates were made. The expected annual y i e l d of t h e s torages i n t he system, based on a l eve l of 61.5% of normal suppl ies being avai lable during t h e worst recorded periods of stream flow, a r e given i n Table 4-3.

Table 4-1

EXTENT OF IRRIGATION BY SYSTEM : BUNDABERG SCHEME 1973

(Hectares)

Area Are a System Total ly P a r t i a l l y Dryland Tota l

I r r i g a t e d I r r i g a t e d

Pr iva te Pumpers 1 225.7 3 852.6 594.4 5 672.7

Underground 5 174.9 3 485.4 322.4 8 982.7

Abbotsford 81.4 81.4

Gooburrum 977.3 3 131.5 646.0 4 674.8

Give l da 35.4 138.5 105.6 279.5

Woongarra 4 156.2 2 956.5 728.8 7 841.5

Gin Gin 1 728.3 2 497.0 4 225.3

Bingera

Tota l

Source: IWSC.

Table 4-2

ANNUAL SURFACE WATER REQUIREMENTS

(Megali t res)

Sys tem Sugar Other Crops Urban ( inc l . m i l l s ) Total

P r i v a t e Pumpers 28 022 2453 - 30 476

Abbotsf ord 4 35 - - 435

Gooburrum 29 266 1101 - 30 367

Givelda

Woongarra

Urban Supplies - - 7648 7 648

Sub To ta l : Phase I 108 316 6924 7648 122 889

Bingera)

Gin Gin)

Isis

Sub Tota l : Phase I 1 234 453 6924 7648 249 026

Source: IWSC, Queensland.

Table 4-3

ANNUAL Y I E L D OF STORAGES

Storages Annual Yield

ac. f t . M 1

Monduran Dam ) Bucca Weir ) Gayndah Weir 5 OOQ 6 167 Burnett Tidal Barrage 11 000 13 568 Wuruma D a m Allocation 5 000 6 167

Total 142 000 175 153 -- -

Somce: The Queensland Report, March 1969, op. cit.

An addi t ional 74 000 megali tres w i l l therefore be required t o meet the surface demand of 249 000 megali tres, and t he IWSC estimates t ha t t he system of s torages operated i n conjunction with unregulated flows i n t h e Burnett River should be capable of meeting the scheme requirements.

9. Sugar Yie ld Response t o I r r i g a t i o n

As discussed i n Par t IT1 of t h i s repor t , t he r e has been i n su f f i c i en t research ca r r ied out so f a r t o provide a c lo se indicat ion of t he re la t ionsh ip between inputs of water and output of sugar cane i n t h e Buntiaberg region. This i s , no doubt, due p a r t l y t o t he r e l a t i v e l y recent development of much of t he i r r i g a t i o n i n the d i s t r i c t and t he d i f f i c u l t i e s experienced i n measuring t h e exact amount o f i r r i g a t i o n \vater used by Farraers cn p a r t i c u l a r crops and areas. To date, water from aquifers 2nd streams has been avai lable without charge and thus there has been no need t o meter water usage.

However, there have been a number of attempts t o ascer ta in t h e response t o i r r i g a t i o n using t h e two acre f e e t pe r acre harvested (6.1 megal i t res per hectare harvested) which would be avai lable under t h e proposed scheme. B.J. White i n t h e Queensland Report(6) estimated a response of 1.9 tons sugar per acre (4.77 tonnes per hectare) from a combination of water-use models based on evaporation and survey data f o r t he Millaquin and I s i s m i l l areas f o r t h e s i x years ended 1967, which included two drought years where t h e response t o i r r i g a t i o n would be qu i t e considerable. The est imate was modified t o t ake account of higher f r o s t incidence and e f f e c t s of erosion i n t h e Gin Gin m i l l a rea and f o r t h e e f f e c t s of poor i n t e rna l and surface drainage i n

some sec t ions o f t h e Fairymead m i l l area. I t was assumed by White t ha t t h e response from p a r t i a l i r r i g a t i o n t o f u l l i r r i g a t i o n under t h e scheme was 0.6 tons per acre (1.51 tonnes per hectare) .

More recent research has been ca r r ied out by t h e Bureau of Sugar Experiment S ta t ions (BSES). Studies of y i e ld da ta from t h e Gin Gin a r ea f o r t h e period 1967-1970 revealed a di f ference of 1.7 tons per acre (4.27 tonnes per hectare) between i r r i g a t e d and dryland proper t ies . Fur ther work, using Millaquin m i l l a rea da t a f o r 1962-67 i n water balance models, indicated a range of 1.2-1.7 tons per acre (3.01-4.27 tonnes per hectare) . A l a rge sample of wel l - i r r iga ted farms i n t h e South Kalkie s ec to r of Millaquin m i l l a r ea averaged 5.4 tbns per acre (13.56 tonnes per hectare) over t h e period 1968-1972. A response of 1.7 tons per acre (4.27 tonnes per hectare was subsequently obtained by deducting t he mean estimated dryland y i e ld o f 3.7 tons per acre (9.29 tonnes per hectare) . The BSES concluded t h a t a mean response of 1.7 tons sugar per acre (4.27 tonnes per hectare) would be p rac t icab le if e f f i c i e n t i r r i g a t i o n and farm management were ca r r ied out. (7)

From a sample of growers i n t h e I s i s d i s t r i c t t he Department of Primary Industr ies , Queensland, estimated a response of 1.9 tons sugar per acre (4.77 tonnes per hectare) t o i r r iga t ion(8) f o r t h e per iod 1965-1969.

As discussed i n Par t 111, a considerable amount of data on sugar y i e ld s was obtained i n t he course of t h e survey of a sample of cane growers throughout t h e region, i n order t o supplement ava i lab le research information. The r e s u l t s of t h e ana ly s i s of t he sample da t a a re shown f o r t h e th ree groups, t o t a l i r r i g a t o r s , p a r t i a l i r r i g a t o r s and dryland sugar cane growers i n Table 3-8 and Table 3 - 9 of Par t I11 and i n Appendix A. I t w i l l be noted t h a t t h e maximum differences on average between sugar y i e l d under t o t a l i r r i g a t i o n condit ions and t h a t under dryland conditions, f o r t h e period 1968-69 t o 1972-73, with t h e exception of Isis, was 1.46 tons per acre (3.67 tonnes per hectare) i n t he proposed Woongarra system and 1.37 tons per acre (3.44 tonnes per hectare i n t h e proposed Underground system. These a re areas where i r r i g a t i o n i s mainly from underground sources, and t h e d e t a i l s r e f e r t o a period somewhat b e t t e r than average. The r e s u l t s of water balance models suggest t h a t t o t a l i r r i g a t o r s may have used l e s s than 2 acre f e e t pe r acre harvested during 1968-1972. The average di f ference i n Isis was 1.96 tons per acre (4.92 tonnes per hectare) .

The various research r e s u l t s have been discussed i n d e t a i l which t h e I r r i ga t i on and Water Supply Commission, Department o f Primary Indus t r i es and t he Bureau of Sugar Experiment Sta t ions . Bearing i n mind t ha t t h e ac tua l amount of water used by t o t a l i r r i g a t o r s i n t h e various surveys was unknown and may have been more o r l e s s than t h e amount which would be supplied under t h e scheme, and t h a t i t was d i f f i c u l t t o examine data f o r a recent period f o r the Bundaberg region which could be considered typ ica l , t h e general consensus was t h a t a response of around 1.4 tons per acre (3.51 tonnes per hectare) achieved by t r ad i t i ona l i r r i g a t o r s i n s l i g h t l y b e t t e r than average condit ions should be the lower limit o f y ie ld response on average. A response of 1.9 tons per acre (4.77 tonnes per hectare) was taken as t h e lower l i m i t i n I s i s . There was a l s o general agreement, with f u l l use of t h e avai lable water and with e f f i c i e n t i r r i g a t i o n prac t ices , a sugar y i e ld response of 1.7 tons per acre (4.27 tonnes per hectare) was pract icable . For t h e I s i s system, a y i e l d response of 2.1 tons per acre (5.27 tonnes per hectare) was considered prac t icab le on average over time.

In est imating t h e bene f i t s from t h e proposed scheme, the sugar y i e ld under f u l l i r r i g a t i o n was determined by adding t h e assumed response t o t h e average dryland y i e ld f o r each system over t he period 1968-69 t o 1972-73. Table 4-4 shows t he various est imates of t he sugar y i e ld used i n t h e analysis .

Table 4-4

ASSUMED SUGAR Y I E L D RESPONSES AND TOTAL YIELDS PER LAND UNIT HARVESTED

(Tonne s/Hectare - Tons/Acre)

Yield Response Sys tem t o I r r i g a t i o n Total Yield

with Scheme with Scheme -

Private pumpers Underground Abbotsford Gooburrum Givelda Woongarra Gin Gin Bingera Isis

Bearing i n mind t h e d i f f e r i ng s i t ua t i ons t h a t ac tua l ly prevailed on individual p roper t i es during t h e f i v e year survey period, t he y i e ld response t o introducing o r increasing i r r i g a t i o n on these p roper t i es was estimated by deducting t h e y i e ld s ac tua l l y achieved from the assessed t o t a l y i e ld s s e t out i n Table 4-4. The t o t a l y i e ld s under t h e scheme i n t ha t t ab l e were a l s o applied t o t he new areas on which t he expansion i n proportion of area harvested w i l l occur under t h e scheme.

10. Increased Sugar Production

The expected addi t ional sugar production r e su l t i ng from i r r i g a t i o n i n t he various systems and phases of t he scheme i s shown i n Table 4-5. The ca lcu la t ions were based on da t a obtained from t h e BAE survey i n t h e region and from t h e assumed yie ld responses i n each system shown i n t h e preceding sect ion.

l ~ 11. Economic Appraisal from the National Viewpoint

A s s t a t e d i n Part 11, t h e analysis of t h e scheme from the na t iona l viewpoint has been undertaken i n four sect ions . F i r s t , t h e p ro jec t is examined i n i t s en t i r e ty , t h a t is, Stage I. Second, Phase 1 i s examined on i t s own, and includes the major cap i t a l works of Monduran Dam and i t s associated Pumping Sta t ion, Gin Gin main channel and diversion channel t o t he Burnett River, Bundaberg and Kolan Tidal Barrages and t h e Abbotsford, Givelda, Gooburrum, Woongarra, Pr ivate Pumpers and Underground systems. Third, Phase 2 i s examined t o provide an est imate of t he marginal impact of the Bucca and Gayndah Weirs p lu s the Isis, Gin Gin and Bingera systems, taking Phase 1 as given. Finally, t h e marginal impact of each individual i r r i g a t i o n system i s considered, taking a l l c a p i t a l co s t s o ther than those s p e c i f i c t o a pa r t i cu l a r system as given.

In addi t ion t o t h e general assumptions and t h e bas ic information on water supply, y i e ld responses and sugar production a l ready provided i n t h i s P a r t , many o ther est imates of inputs, cos t s and p r i c e s had t o be made i n order t o derive t he annual cash flows over t h e expected l i f e of t h e p ro jec t and a r r i v e a t i n t e rna l r a t e s of re tu rn t o ind ica te t he economic outcome of the scheme. The more important of t h e assumptions and background information used i n t he analysis taken from t h e nat ional viewpoint were as follows:

- Project Life

Although the ac tua l l i f e of the works, excepting pumping equipment, i s expected t o exceed 100 years, t h e IWSC

Table 4-5 ESTIMATE OF INCREASED SUGAR PRODUCTION FROM ADOPTION OF

THE BUN DABE RG I RRI GAT I ON SCHEME (Tonnes)

System

Average Prod;lction i f Estimated Increase underground Water Production with Average i n

Production i s r e s t r i c t e d (b) the scheme (c) Production

1968-72 (a) Low Low Low -

High Response Response Response Response Response Response

- -- - - -

Underground 79 795 72 349 74 362 95 628 101 041 23 279 26 679 Woongarra 7 1 430 6 4 5 1 1 6 6 3 8 2 70 732 84 161 15 221 17 780 Gooburrum 39 351 37 848 38 254 4 8 4 1 2 5 1 0 5 1 10 564 12 797

1 975 1 975 1 975 2 689 2 848 531 873 Give lda I

Abbotsford 523 523 523 52 3 82 8 82 8 305 W

Private Pwnpers 39 234 38 968 39 040 49 150 52 355 10 183 13 315 I -p

Sub Total : Phase 1 232 309 216 174 220 536 276 394 292 284 60 036 71 749

Bingera 37 829 37 437 37 543 50 445 53 402 13 007 15 859 Gin Gin 19 274 1 9 2 7 4 1 9 2 7 4 32 622 35 009 13 348 15 735 I s i s 65 168 65 168 65 168 100 919 104 956 35 751 39 788

Sub Total : Phase 2 122 271 121 879 121 985 183 986 193 367 62 106 71 381

Total : Stage I 354 580 338 053 342 521 460 380 485 652 122 142 143 130

(a) Derived from the BAE Survey. (b) For the assumptions involved here, see Appendix B, (c) Derived by adding the assumed i r r i g a t i o n response t o t he dryland yie lds obtained from the BAE Survey. (d) Based on 75% of TGA harvested (80% f o r underground system),

assumed a p ro jec t l i f e of 75 years i n i t s repor t . (9) The same pro jec t l i f e was adopted fo r t h i s repor t commencing i n 1970-71 when construction began on t he Monduran Dam. However, it should be noted t h a t cos t s and r e tu rns occurring beyond say 50 years a r e ins ign i f ican t due t o t h e e f f e c t s of discounting.

- Public Capital Costs

The t o t a l publ ic cap i t a l costs of t h e p ro jec t were estimated by t he Snowy Mountains Engineering Corporation i n i t s repor t (10) , dated April 1974, t o be $73.057m and an i temisat ion of t h i s f igure i s s e t ou t i n Par t I. These est imates include works which have been completed o r i n progress, a s well as works planned f o r the future . Because of t h e need t o express a l l cos t s and p r i ce s i n terms of a base year l eve l f o r t h e purposes of t h e economic analysis , t h e ac tua l amounts expended on t he Scheme p r i o r t o 1973 were indexed forward t o provide est imates i n terms of 1973 pr ices . The index used was one r e l a t i n g t o dam cos t s of construction provided by t h e S t a t e Rivers and Water Supply Commission of Victoria.

I n order t o t e s t t he s e n s i t i v i t y of t h e r e s u l t s t o changes i n t he c a p i t a l co s t est imates, t h e e f fec t of using the lower IWSC estimate of $69.537m was included i n t h e analysis and these r e s u l t s were compared with those obtained by using t h e SMEC estimates.

- Public Operating Costs

Public operating cos t s f o r t he whole of Stage I were estimated by t he IWSC a t $1.202m per annum a t f u l l development by 1985-86. A de ta i l ed breakdown of these cos t s by t he various i r r i g a t i o n systems was provided by t h e IWSC i n January 1974 and these a re shown i n Table 4-6.

Table 4-6

ESTIMATED ANNUAL OPERATING COSTS AT FULL DEVELOPMENT: 1355-86

(Dollars)

Sys tem Mainto Contin- E l ec t r i c of E Water gencies

Tota l D i s t r i b . Power Works

Pr ivate Pumpers 7,000 Underground 7,000 Gooburrum 53,000 Woongara 81,000 Civelda 4,800 Abbotsf ord 2,700 Bingera 54,000 Gin Gin 44,000 I S is 95,000

Total 348,500

Note: the annual operation and maintenance cos t s f o r Monduran Danl md the pump s t a t i o n have been spread among t h e individual sec t ions of development.

- Sub-division of Bingera System in to Bingera and Gin Gin Sub-Systems

A s indicated e a r l i e r t h e Bingera System has been s p l i t i n t o Bingera and Gin Gin systems by RAE on t h e bas i s o f m i l l areas. An est imate of t he c a p i t a l cos t of each sub-system was no t provided by the SMEC. However, f o r the purposes of t h e ana lys i s the cos t was divided, according t o an apportioning provided by the IWSC, as follows: Bingera $5.997m and Gin Gin $5.477m. Public operating c o s t s were apportioned on the bas i s of t o t a l gross assignment served by each sub-system.

- Rate of Development

Table 4-7 shows t h e r a t e a t which t he proposed s ~ ~ p p l y of surface water w i l l be developed at t he farm leve l i n each system by a rea of t o t a l gross assignment. On the advice o f IWSC, it was assuned t h a t t h e Gin Gin sub-system would be constructed before the Bingera sub-system: t h e Gin Gin sub-system of 4225 hec ta res w i l l b e developed during 1983-84 and t h e balance of t he Bingera system i n 1983-84 (488 hectares) and 1984-85 (4746

Table 4-7

PROGRESSIVE DEVELOPMENT OF SURFACE IRRIGATION BY

SYSTEM AND AREA OF ASSIGNMENT

(Hectares)

YEAR

5 6 7 8 9 10 11 12 1 3 14 15 16 System 1974- 1975 1976- 1977- 1978- 1979- 1980- 1981- 1982- 1983- 1984- 1985-

75 76 77 78 7 9 80 81 82 83 84 8 5 8 6

Pr ivate Pumpers 1575 5673 5 673 5 673 5 673 5 673 5 673 5 673 5 674 5 673 5 673 5 673 I

m Abbotsford 8 1 8 1 8 1 8 1 8 1 o

I

Goodurrum 1441 2881 4 675 4 675 4 675 4 675 4 675 4 675 4 675 4 675 4 675 4 675

Givelda 279 279 279 279 279 279 279 279

Woongarra

Gin Gin

Bingera 488 5 234 5 234

1sis 1 926 4 553 7 203 9 186 10 719

Total 3016 8554 1 0 348 1 0 348 10 627 12 549 1 8 550 20 476 23 103 30 466 37 195 38 728

Source: IWSC.

hectares) . I t is f u r t h e r assumed t h a t the Underground system would be f u l l y developed i n 1976-77 when t he metering of bores would be completed.

- Bundaberg City Water Supply

The Bundaberg City water supply is cur ren t ly obtained by pumping from the aquifers , with usage i n the v i c i n i t y o f 5300 acre f e e t (6537 megali tres) pe r annum. I n l i n e with proposed fu tu re r e s t r i c t i o n s on o ther users of underground water, t he c i t y w i l l be l imi ted t o an annual usage o f 5000 acre f e e t (6167 megalitres) whether the\ scheme proceeds o r not. Thus, fu ture growth i n water demand would have t o be met by providing an addi t ional surface supply source regard less of the i r r i g a t i o n scheme.

Before the present scheme was designed, t h e Bundaberg City Council had planned t o pipe water from the ex i s t i ng Bingera weir upstream on the Burnett River, and 5000 acre f e e t (6167 megalitres) would be re leased from Wuruma D a m by t h e IWSC f o r t h i s supply. However, Phase 1 of t h e present scheme provides f o r the construction of t he Bundaberg Tidal Barrage from which t h e City Council has been a l loca ted t h e same amount of water. As the t i d a l barrage is 6 miles (9.6 km) c lose r t o t h e c i t y than Bingera Weir, the c a p i t a l c o s t of the p ipe l ine t o t h e City Council would be reduced by an estimated $700,000.

I n est imating the ne t benef i t t o Bundaberg Ci ty resu l t ing from the scheme, it has been assumed t h a t the bene f i t s t o consumers and the c o s t s o f providing a treatment p lan t and a r e t i cu l a t i on system, as well as water charges and o ther operating costs , would be common t o both t h e with-scheme and t he without-scheme s i t ua t i ons . The only di f ference between the two would be t h e reduced cap i t a l cost o f t he p ipe l ine from t h e Tidal Barrage. Thus, the net e f f e c t would be a benef i t t o t h e c i t y of $700,000 which has been assumed t o accrue i n 1976-77 (year 7 of the development per iod) , the year when construction of t h e barrage i s due f o r completion.

- C o s t o f W a t e r A l l o c a t e d fromWurumaDam

Wuruma Dam i s s i t ua t ed on the Nogo River i n the Upper Burnett catchment with a s a f e annual y i e ld of 27 000 acre f e e t (33 304 megali tres) . Wuruma Dam i s t o provide 5000 acre f e e t (6167 megali tres) per annum under t h e scheme f o r i r r i g a t i o n i n the Bundaberg region i n Phase 2. This quant i ty of water from t h e Wuruma Dam i s not being u t i l i s e d at present . However, i t has been planned t h a t t he 5000 acre f e e t (6167 megali tres) t o be

supplied t o Bundaberg c i t y from Wuruma D a m w i l l occur i n the future , regardless of whether the Bundaberg I r r i ga t i on Scheme i s completed o r not. Hence, it was considered t ha t water from Wuruma D a m would be used t o supply Bundaberg City i n both t h e 'witht and without-scheme s i t ua t i ons f o r t h e purposes of the economic analysis .

There were a number of ways of estimating the opportunity cost of Wuruma water depending upon i t s future use i n t he absence of t he Bundaberg Scheme. Very l i t t l e information was avai lable on the fu ture use of water from Wuruma Dam, pa r t i cu l a r l y i n r e l a t i o n t o t h e poss ible suppl ies of water and t he areas t o be i r r i ga t ed . Two of the most l i k e l y a l t e rna t i ve uses appeared t o be sugar production along t h e Burnett River on ex i s t ing assignments, o r i r r i ga t ed cropping i n t he Eidsvold - Mundubbera area. However, the problem is e s sen t i a l l y academic as the opportunity cos t i s common t o t he 'witht and 'withoutt s i t ua t i ons and consequently, t h e cost of t he a l loca t ion of water from Wuruma D a m t o t h e Bundaberg Scheme is zero.

l - Bundaberg Sugar Terminal

This terminal services t h e Bundaberg and Maryborough Di s t r i c t s . I t has a s torage capacity of 198 000 tonnes, which is j u s t under ha l f of the combined m i l l peaks of both d i s t r i c t s . During t h e 1972 season, the terminal handled 540 000 tonnes which was some 35% above t he peak f o r t h a t year, which was generally accepted a s approximating t h e suppl ies of sugar under f u l l y i r r i g a t e d conditions. Based on information supplied by t h e Queensland Sugar Board and t he IWSC, it is estimated t ha t t h e increase i n capacity needed a t t h e terminal due t o t h e Bundaberg Scheme would be only about 30 000 tonnes, a t a c ap i t a l cost of $1.268m, which comprises $1.200m fo r addi t ional storage, and $68,000 f o r 40 ex t r a sugar boxes.

- Private On-farm Capital Requirements

Pr ivate investment at t h e farm level has been estimated at $2.44m f o r Phase 1 and $5.69m f o r Phase 2, giving a Stage I t o t a l of $8.13m. These f igures were calcula ted from information supplied by t h e IWSC using the following assumptions:

Farmers who at present a r e c l a s s i f i ed as t o t a l i r r i g a t o r s , w i l l not incur addi t ional expenditure with the exception of cases where the source of water with t he scheme i s t o change. I n these cases a small amount of expenditure w i l l be necessary t o rearrange t h e i r ex i s t i ng equipment t o s u i t t he new water source.

Present p a r t i a l i r r i g a t o r s w i l l incur expenditure i n providing i r r i g a t i o n equipment to t h a t pa r t of t he assignment which i s present ly not i r r i ga t ed , p lus t he rearrangement expenditure f o r ex i s t ing equipment mentioned above, i f the re i s a change of water source.

Present dryland farmers w i l l incur t he f u l l cost of i r r i g a t i o n equipment, and t h i s w i l l depend on both the method of i r r i g a t i o n (e.g. f lood o r spray) and the type of system chosen within each method: e.g. pressurised o r gravi ty d i s t r i bu t i on i n t h e case of flood; sprayline o r t r ave l l i ng i r r i g a t o r s i n t he case of spray. The choice of flood o r spray i r r i g a t i o n depends l a rge ly on t he topography and s o i l type of a pa r t i cu l a r location, and based on t h i s type of data the IWSC estimates t ha t t h e following proportions of each i r r i g a t i o n system could be f lood i r r i ga t ed :

Pr ivate Pumpers Underground Woongarra Gooburrum Bingera Abbotsford Give l da Gin Gin Is i s

Some examples of t h e l eve l of c o s t s which w i l l be incurred f o r some selected individual s i t ua t i ons a r e as follows:

(a) Farms t h a t p r ac t i s e i r r i g a t i o n a t present: t o convert ex i s t ing systems based on deep well turbine pumps t o a system based on surface supply a t t he farm boundary - approximately $25 per hectare.

(b) Farms without i r r i g a t i o n at present:

. furrow i r r i g a t i o n with pressur ised underground mains - approximately $295 per hectare;

. furrow i r r i g a t i o n with gravi ty d i s t r i bu t i on f o r underground mains - approximately $345 per hectare ;

spray i r r i g a t i o n using sprayl ine - approximately $450 per hectare.

- Private On-Farm Net Benefits

The on-farm ne t benef i t s of individual producers were assessed by using t h e following formula f o r each individual i r r i g a t i o n system: -

Net Benefit t o I r r i g a t i o n = Net Returns with t he Scheme - Net Returns without the scheme

= As (YS PS - CS) - P t - C,) - A (Y P - Cp) P P P

- Ad(Yd Pd - Cdl

where A = Y = P = C = S = t = P = d =

where As =

area o f assignments involved i n hectares y i e l d pe r hectare of assignment p r i c e pe r tonne of sugar t o t h e farmer t o t a l co s t s per hec ta re of assignment fu tu re with scheme s i t u a t i o n present t o t a l l y i r r i g a t e d s i t u a t i o n present p a r t i a l l y i r r i g a t e d s i t u a t i o n present dryland i r r i g a t e d s i t ua t i on and

As mentioned previously, the y i e ld s and cos t s used f o r the present t o t a l l y and p a r t i a l l y i r r i g a t e d and dryland s i t u a t i o n s were obtained from t h e r e s u l t s of the survey. For t he with-scheme s i t ua t i on , y i e ld s were calcula ted using t h e assumed responses shown i n Table 4-4, with t h e percentage of TGA harvested a t 75% (80% f o r t h e Underground system).

The p r i c e per tonne of sugar t o t he grower was calcula ted using the p r i c e range of $70 t o $110 per tonne, with the growers share being determined by t he following formula, which has been derived from t h e formula used by the sugar industry t o determine t he p r i c e per tonne of cane payable t o the grower.

P = c . 0 0 9 ~ (CCS - 4) + .2380]x 100 1 O C - - ZCS X COW

where P = p r i ce pe r tonne of sugar t o t he grower p = gross sugar p r i c e received by mi l l e r s f o r

94nt sugar

CCS = commercial cane sugar content of t h e cane COW = coef f ic ien t oE work.

For t h i s ana lys i s it i s assumed t h a t t h e coef f i c ien t o f work is 100 and thus the ec&ation reduces to :

100 P = [. 0 0 9 ~ (CCS - 4) + .2380] - CCS

Total cos t s i n the with-scheme s i t u a t i o n were based on the survey da t a f o r present t o t a l i r r i g a t o r s i n each system, with appropriate adjustments f o r t h e following f ac to r s :

. changes i n t he percentage of TGA t o be harvested following t h e scheme's introduction;

. changes i n t he harvest ing cos t component of t o t a l cos t due t o t h e var ious y i e ld assumptions;

. changes i n the c o s t s of pumping water under t h e scheme where relevant .

The survey da t a f o r the Isis and Gin Gin Systems were a l s o modified t o remove some anomalies r e su l t i ng from t h e small sample s i z e o f t o t a l l y i r r i g a t e d farms i n these areas .

A summary of t he r e s u l t s o f t h e ca lcu la t ions t o a r r i v e a t t h e estimated t o t a l ne t annual bene f i t s t o i r r i g a t i o n a t t he farm l eve l , based on a sugar p r i c e of $90 per tonne, which was the midpoint o f t he range of sugar p r i c e s taken f o r t h e analys is ,

1 appears i n Table 4-8.

- Capital Costs of Flill Expansion

The t o t a l expenditure on increasing the capacity of t h e f i ve sugar m i l l s was estimated at $1.45m, when water becomes zva i lab le i n t he major p a r t of each m i l l area. This c ap i t a l does not include t he increases i n c a p i t a l which would be necessary t o upgrade Fairymead and Bingera m i l l s with thB closure of Gin Gin m i l l . I t :i.s assumed t h a t the increased cap i t a l caused by t he proposed c losure i s independent o f t he scheme and i s thus common t o both 'with' and 'without' s i t ua t i ons .

12. Results of Economic Apprai s a l from t h e Nat ional Viewpoint

12.1 Overall Results f o r Stage I , Phase 1 and Phase 2

The i n t e rna l r a t e s of re tu rn (IRRs) ca lcula ted f o r t h e f i v e l eve l s of sugar p r i c e and two l eve l s of i r r i g a t e d y i e ld

Table 4-8

TOTAL NET ANNUAL BENEFITS TO IRRIGATION AT VIE FARM LEVEL AT FULL DEVELOPMENT : BY SYSTEM

(Dollars)

Sys tem Total Net Benefi ts

Low Yield Response High Yield Response l l ~ Phase 1:

Underground Pr iva te pumpers Woongarra Gooburrwn Abbotsford Givelda

Phase 2:

Isis Bingera Gin Gin

Total

Note: 1. These f igures allow only the ne t bene f i t s resu l t ing from f u l l i r r i g a t i o n f o r each system. They do not include t he e f f ec t of avoiding t he po t en t i a l l o s s ,of production due t o t he expected underground water r e s t r i c t i o n s which would apply i n t h e absence of t he scheme. Both e f f e c t s a r e incorporated i n t h e r e s u l t s of t he economic appraisa l from t h e nat ional viewpoint.

2, The high and low y i e ld responses f o r I s i s becane 2.1 and 1.9 tons per ac re (5.27 and 4 .7 tonnes per hectare) harvested respectively.

response adopted, a re presented i n Table 4-9, f o r t h e e n t i r e project , Stage I, and t he two phases of construction, Phase 1 and Phase 2. I t w i l l be reca l led t h a t t he IRRs shown below a re r e a l r a t e s of re tu rn and not nominal r a t e s of return.

The r a t e s ranged between 1.1% and 8.0% f o r the low y ie ld response and between 2.3% arid 9.5% at t h e higher l eve l f o r the p ro jec t as a whole. Similarly, t h e r a t e s f o r t h e component phases show a broad range of r e s u l t s with those f o r Phase 1 well above the r e s u l t s f o r Phase 2. Over the ranges of p r i ce s and y ie lds shawn i n Table 4-9 t h e r e s u l t s ind ica te t ha t t h e I R R s a re very s ens i t i ve t o both changes i n t he export sugar p r i ce and t o changes i n t h e i r r i g a t e d yie lds . For example, f o r Stage I a t $90 per tonne of sugar a 1% change i n the IRR occurs with only about a $5.70 per tonne change i n t he sugar p r ice , and with about a 12% change i n t he i r r i ga t ed y ie ld response. Pr ice s e n s i t i v i t y is pa r t i cu l a r l y important a t t he lower l eve l s of export pr ice , outweighing t h e e f f e c t of y ie ld change f o r t he ranges used. For instance, from the pos i t ion of a low y i e ld and a p r i ce of $70 per tonne, an increase of $10 i n t h e p r i ce would boost the I R R by 2.1% compared with 1.2% i f ins tead there was a s h i f t t o t he higher yie ld . Examination of these d i f f e r e n t i a l changes can provide, i f required, a c lose indicat ion o f t h e appropriate I R R t o take f o r p r i ce and y i e ld assumptions within t h e range of those s e t out i n Table 4-9. I t would a l s o provide a good indicat ion of what the I R R i s l i k e l y t o be, supposing values f o r t he assumptions were taken somewhat outside t h e range. Thus, f o r instance, i f t he high y ie ld response assumption was re ta ined but it was f e l t t h a t the p r i ce assumptions adopted were too opt imis t ic o r too pess imis t ic and r e s u l t s were required f o r a p r ice of say $60 per tonne a t t h e lower end, o r $120 per tonne a t the upper end, then by extrapolation t h e following approximate est imates of the I R R may be obtained:

Stage I Phase 1 Phase 2

I t w i l l be r ea l i s ed of course t h a t such extrapolat ion cannot be taken much beyond the range shown, without running t he r i s k of introducing an appreciable e r r o r i n t o t h e r e su l t s .

Although the IRRs have been shown i n Table 4-9 f o r two leve l s o f y i e ld responses and a range of f i ve p r ice l eve l s , it has been argued e a r l i e r t h a t it would be appropriate i n assessing

Table 4-9

INTERNAL RATES OF RETURN: STAGE I , PHASE l AND PHASE 2

Yield Response Low Yield Response High Yield Response

I

Sugar PricelTorine 110 100 9 0 80 70 110 100 90 80 70 CI\ m I

Stage I

Phase 1.

Phase 2

t h e scheme from a na t iona l viewpoint t o devote t h e main a t t en t i on t o the r e s u l t s based on t he high y i e ld response assumption and a narrower range of assumed pr ices , namely from $80-$100 per tonne. Taking t h e midpoint value of t h i s p r ice range, t he I R R s a r e i n the v i c i n i t y of 6% f o r Stage I and around 8% and 4% f o r Phases 1 and 2 respect ively .

I f the lower publ ic c ap i t a l co s t s estimated by t h e IWSC a t $69.537m a r e used, t he r e su l t i ng I R R s a t $90 per tonne a t t he high y ie ld response a r e 6.6% f o r Stage I, 8.1% f o r Phase 1 a d 4.1% f o r Phase 2.

Table 4-9 shows; a marked di f ference i n t he r e s u l t s of Phase 1 and Phase 2, desp i te t h e i r s im i l a r amounts of publ ic c ap i t a l expenditure, and t h e i r s im i l a r amounts of addi t ional sugar production due t o i r r i ga t i on . A breakdown of t h e individual components of the benef i t s and cos t s which contr ibute t o t h i s d i f ference i n r e s u l t s , on a per hec ta re o f TGA watered bas i s , i s shown i n Table 4-10.

T8.ble 4-10 ind ica tes t h a t the ne t benef i t s t o i r r i g a t i o n f o r both farmers and mi l l e r s a r e higher i n Phase 2 than i n Phase 1, which r e f l e c t s t h e f a c t t h a t most of the current i r r i g a t i o n a c t i v i t y i s located i n Phase 1 areas. However, contrary t o t h i s s i t ua t i on , Phase 1 brings s i gn i f i c an t bene f i t s from the avoidance of l o s s of production due t o underground water r e s t r i c t i o n s and fu r t he r , it has much lower annual publ ic operating c o s t s than Phase 2. The overa l l r e s u l t , i n terms of ne t annual surplus pe r hectare of TGA watered, is t h a t t h e r e s u l t s f o r Phase 1 a r e some $25 per hec ta re g rea te r than f o r Phase 2 a t $90 per tonne.

S ign i f i can t d i f ferences i n both pub l ic and p r i va t e c ap i t a l requirements between t he two phases a r e a l so evident. Figures i n Table 4-10 show tha t t h e t o t a l c ap i t a l co s t s pe r hectare i n Phase 2 a r e almost 50% higher than those f o r Phase 1. The main reasons f o r t h i s d i f ference a r e as follows:

1. Most of t he current i r r i g a t i o n i s p rac t i sed on areas i n Phase 1, and hence the p r i va t e c a p i t a l investment on farm i r r i g a t i o n equipment w i l l not be as high as t h a t required f o r Phase 2.

2. Phase 2 areas a r e i n general more h i l l y and var iab le i n nature than Phase 1 areas , and t h i s a f f e c t s c ap i t a l requirements i n a number of ways:

Table 4-10

COMPARISON OF COSTS AND BENEFITS FOR

PHASE 1 AND PHASE 2 (a)

(Dollars Per Hectare)

Benefits/Cos ts per Hectare Phase 1 Phase 2 Stage I

Net benef i ts t o i r r i g a t i o n 82.07 97.06 88.41

Net mi l l ing benef i t s 24.71 38.67 30.61

Net benef i t s t o underground Water s t a b i l i t y 27.81 0.84 16.40

-

Total net benef i ts

Less publ ic operating cos t s 13.98 40.49 25.19

Net annual surplus (b) 120.61 96.08 110.23

Capital cos t s :

Public - individual systems 560.69 1,548.32 978.39

- cap i t a l works common t o a l l systems 787.74 320.46 590.11

Private - on farm 88.63 282.04 170.42

- m i l l s 28.30 33.03 30.30

Total c a p i t a l costs 1,465.36 2,183.85 1,769.22

Internal Rate of Return 7.8 3.9 6.3

Total Area of TGA t o be watered 27,532.6 20,178.4 47,711.0

(a) Table based on export p r i ce of $90 a t high yie ld response. (b) Net annual surplus = t o t a l net benef i t s minus annual public operating cos t s .

(a) Public cap i t a l

. Expensive pumping s t a t i o n s need t o be es tabl ished f o r r e l i f t areas .

. The h i l l y topography means t ha t t h e areas t o be served occur i n more i so l a t ed pockets which a r e more expensive t o r e t i c u l a t e per un i t area.

(b) Pr ivate cap i t a l

. Spray i r r i g a t i o n is required, which i s more expensive than flood i r r i ga t i on . ~

3. Contrary t o t he above fac tors , t h e publ ic cap i t a l which i s common t o a l l systems is much higher i n Phase 1, due mainly t o t he f a c t t ha t Monduran Dam, t h e Main Pumping S ta t ion , Gin Gin channel and t h e divers ion channel, t o t a l l i n g $18.25m are charged t o Phase 1 works. In r e a l i t y , a large proportion of these c a p i t a l co s t s would be a t t r i b u t a b l e t o t h e Phase 2 watered areas with a consequent reduction i n t h e IRR fo r Phase 2.

I n summary, t h e main reasons f o r t h e di f ference i n r e s u l t s between Phase 1 and Phase 2 would b e t h e higher publ ic and pr iva te c a p i t a l costs , and publ ic operating cos t s per u n i t a r ea i n Phase 2, and t he contribution o f t h e without-scheme loss of production due t o underground water r e s t r i c t i o n s i n Phase 1.

12.2 Analysis of Individual Systems 1

Table 4-11 s e t s out t h e I R R s f o r t h e individual systems. A s out l ined e a r l i e r t h i s ana lys i s is e s sen t i a l l y a marginal analys is i n t h a t only benef i t s , cap i t a l and operating c o s t s spec i f i c t o a p a r t i c u l a r system a re included.

The I R R s spanned a very wide range and varied appreciably with both p r i ce and y i e l d assumption changes. With t h e exception of t he Woongarra system,(l l) t h e higher sugar y i e l d assumption always gives a higher r a t e of re tu rn than t he lower sugar y ie ld at any one pr ice .

A ranking o f t h e i r r i g a t i o n systems on economic grounds i s provided by t he I R R s . S t a r t i ng with t h e highest IRR t h e following ranking i s obtained: Pr ivate Pumpers and Underground, Givelda, Woongarra, Gooburrum, Bingera. Gin Gin, Isis and Abbotsford. Apart from t h e small ~ o t s f o r d system, a l l t h e proposed Phase 1 systems have higher I R R s than t h e Phase 2

Table No. 4-11

INTERNAL RATES OR RETURN FOR INDIVIDUAL

IRRIGATION SYSTEMS

(Percentages)

Low Yield Response High Yield Response System

$110 $100 $90 $80 $70 $110 $100 $90 $80 $70

Phase 1

Pr ivate Pumpers > l00 '100 98.6 60.5 35.4 > l 0 0 > l00 '100 > l00 60.9

Woongarra 14.5 12.0 9.6 7.4 5.3 14.2 12.0 9.9 7.8 5.7

Givelda 16.3 12.4 8.4 4.4 -ve 23.1 18.2 13 .4 8.6 3.6

Abbotsford 2.7 1 .0 -ve -ve -ve 4.7 3.0 0.9 -ve -ve

Phase 2

Bingera 9.4 7.5 5 .5 3.4 0.8 12.0 9.9 7.7 5.4 2.9

Gin Gin 5.8 4 .1 2.1 -ve -ve 7.8 6.1 4 .1 1 . 6 -ve

-ve, negative.

systems. A s mentioned e a r l i e r t h i s is due t o t h e bene f i t s from reducing usage of underground water which accrue almost e n t i r e l y t o Phase 1, and a l s o t o t h e higher c ap i t a l and publ ic operating cos t s i n Phase 2.

To h igh l igh t t he reason f o r t he p a r t i c u l a r ranking obtained, Table 4-12 provides d e t a i l s of t he annual surplus and c a p i t a l requirements f o r each system based on a p r i c e assumption of $90 per tonne a t t he high y i e ld response.

Both t he Pr ivate Pumpers and t he Underground systems exh ib i t large I R R s due t o t he small amount of addi t ional c a p i t a l and minimal publ ic operating costs , i n r e l a t i o n t o t h e annual surplus generated.

The Gooburrum and Woongarra Systems have r e l a t i v e l y low net benef i t s t o i r r i g a t i o n due t o an already high l eve l of ex i s t ing i r r i g a t i o n development. These systems, however, benef i t from t h e avoidance o f reduced production which would occur i f water r e s t r i c t i o n s had been imposed; thus, t h e overa l l ne t ben e f i t s a r e s im i l a r t o those of o ther systems, and t h i s combined with r e l a t i v e l y low publ ic c ap i t a l and operating c o s t s i n comparison with Phase 2 systems, r e s u l t s i n a t t r a c t i v e I R R s .

Although Givelda has a low annual surplus , t h e l imi ted c a p i t a l required gives high re turns . The remaining Phase 1 system, Abbotsford, is character ised by low bene f i t s combined with pa r t i cu l a r l y high publ ic operating cos t s and cap i t a l expenditure, giving unsat is factory re turns . In t h i s regard, the IWSC has advised t h a t it is inves t iga t ing a l t e rna t i ve s t r a t e g i e s o f supplying i r r i g a t i o n water t o t he farmers i n t h e Abbotsford system.

Gin Gin and Bingera systems d i f f e r mainly i n t he ne t bene f i t s t o i r r i g a t i o n , owing t o divergences i n present and fu tu re y ie lds r e su l t i ng from s o i l and c l imat ic fac to rs . While t he cu l t u r a l p r ac t i c e s i n the two systems a r e s imi la r , the lower y i e ld s i n Gin Gin mean t h a t t he cost per tonne of cane produced i s higher i n t h a t system. Pr ivate c ap i t a l expenditure on i r r i g a t i o n equipment on a per hectare TGA bas i s is g rea te r , i n Gin Gin than i n Bingera because i r r i g a t i o n i s more common i n Bingera a t present , and t he need f o r g r ea t e r use of t he more expensive spray i r r i g a t i o n i n Gin Gin, owing t o t h e h i l l y t e r r a in .

I f the two systems (Bingera and Gin Gin) a r e merged, t h e r e su l t an t I R R f o r any p r i c e and y ie ld assumption is s l i g h t l y l e s s than the mean calcula ted from the I R R s of t h e two separate systems.

Table 4-12

COMPARISON OF COSTS AND BENEFITS OF IRRIGATION SYSTEMS

P r i v a t e Under- G i n Pumpers ground Gooburrum Woongarra Givelda Abbotsf . Bingera

G i n

$/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha $/ha TEA TGA TGA TG A TGA TGA TGA TGA TG A

Net b e n e f i t s t o i r r i g a t i o n 85.60 68.26 105.09 77.23 113.07 90.08 108.45 73.35 100.86

M i l l b e n e f i t s 23.39 27.42 24.08 22.66 29.04 35.04 28.38 38.74 43.66

Underground b e n e f i t s 2.01 37.09 19.41 42.13 - 3.25 - -

Tota l n(et b e n e f i t S 111.00 132.77 148.58 142.02 142.47 125 . l 2 140.08 112.09 144.52

Less p u b l i c ape r . c b s t s 3.17 2.00 25.24 26.65 53.67 86.00 31.08 31.08 48.79

To ta l afinual s u r p l u s 107.83 130.77 123.34 115.37 88.80 39.12 109.00 81.01 95.73

Publ ic Cap i t a l 24.64 24.63 1,117.87 1,212.84 536.15 2,334.15 1,154.25 1,294.45 1,840.82

P r i v a t e c a p i t a l 116.57 43.50 140.95 84.67 140.83 320.23 201,19 335.15 300.58

M i l l c a p i t a l 11.11 34.99 22.97 37.15 3.96 23.23 19.13 4.72 50.98

T o t a l c a p i t a l 152.32 103.12 1,281.79 1,334.66 681.46 2,667.61 1,374.57 1,634.32 2,192.38 % % % % % % % % %

Area involved ha ha ha ha ha ha ha ha ha (hec tares) 5672.7 8982.7 4674.8 7841.5 279.5 81.4 5234.1 4225.3 1 0 719.0

(a1 Table based on exDort rice of $90 a t high v i e l d i r r i g a t i o n resDonse.

High Yield Response

Export Pr ice per Tonne

Bingera sub-system 5 . 4 7.7 9.9 Gin Gin sub-system 1.6 4 .1 6.1 Combined Bingera, and Gin Gin systems 3.5 5.8 7.7

The Isis system has l a rge r ne t bene f i t s pe r hectare of TGA than other Phase 2 systems, p a r t i c u l a r l y Gin Gin. However, t he publ ic c a p i t a l and operating cos t s a r e much higher i n Isis due mainly t o t h e h i l l y t e r r a i n , r e su l t i ng i n a lower IRR.

I t must be s t ressed t h a t t h e analysis of t h e ipdividual systems i s r e s t r i c t e d t o those benef i t s , c ap i t a l and operating cos t s which a r e spec i f i c t o a p a r t i c u l a r system. The IRRs would f a l l i f t he common public c a p i t a l co s t s of t he various dams and weirs, p lus t h e main pumping s t a t i on , main channel and diversion channel were apportioned among the individual systems.

13. Economic Cost of Water

Another method of examining t h e r e s u l t s f o r t h e various po ten t ia l users of t he i r r i g a t i o n water is t o consider t h e economic cost of providing t h i s water. The charges f o r i r r i g a t i o n water t o Eanrlers vary markedly from S t a t e t o S t a t e and from region t o -region bu t , a s a general r u l e , t h e p r i ce charged i s f a r l e s s than t h e f u l l economic cos t of t h e water. Pr ic ing po l i c i e s , i n general , have been aimed at recovering from farmers only the aimual c o s t s of operation and maintenance of a scheme. However, the f ixed cos t s of public i r r i g a t i o n schemes a r e r e a l co s t s t o be borne by t he community i n general, and i n calcula t ing the rea l economic cost o f water, an annual charge which covers i n t e r e s t and redemption on t h e cap i t a l co s t s should a l so be included .

In t h e case of the Bundaberg I r r i g a t i o n Scheme, t he water i s t o be used predominantly by farmers f o r i r r i ga t i on . However, some of t he water w i l l be used f o r urban and i ndus t r i a l purposes as well as providing recreat ion f a c i l i t i e s f o r t h e genor:~l regional population. The IWSC has proposed a sca le of charges fo r farniers, urban users, and sugar mi l le r s as follows:

Farmers $ per ac. f t . $ per megal i t re

(a) Channel Supply 12.00 (b) Stream Supply 3.60 (c) Underground Supply 1.80 Urban u s e r s 10.00

Mi l l e r s w i l l b e charged $1.20 p e r ton o f m i l l peak ($1.18 pe r tonne m i l l peak).

The appropr ia teness of p r i c i n g p o l i c i e s o r t h e a l l o c a t i o n of c o s t s among t h e var ious use r s of t h e water and r e c r e a t i o n f a c i l i t i e s , a r e no t mat ters f o r cons idera t ion i n thi-S r epor t . liowever, a c a l c u l a t i o n o f t h e r e a l economic c o s t o f t h e water and how t h i s c o s t v a r i e s between t h e var ious systems, i s useful f o r gaining a b e t t e r understanding of t h e f a c t o r s behind t h e economic outcome of each system.

I f it i s assumed t h a t t h e scheme i s t o b e financed by government borrowing of funds a t say 8% i n t e r e s t p e r annum, then t h e annual c o s t o f i n t e r e s t and redemption of t h e pub l i c c a p i t a l c o s t s assessed a t t h i s r a t e , t oge the r with t h e annual cos t s o f opera t ion and maintenance of t h e works, r ep resen t s t h e t o t a l cos t of de l ive r ing water t o t h e v a r m u s end use r s .

The scheme a s a whole i s expected t o c o s t $73111 from pub l i c funds; t h e t o t a l annual pub l i c opera t ing cos t is est imated a t $1.202m a t f u l l development; and t h e t o t a l y i e l d of water ( a t s torage) i s 249 000 ~! .egal i t res p e r annum. I f i n t e r e s t and redemption i s ca lcu la t ed a t 8% over 75 years , then t h e annual t o t a l average c o s t of water is $39.58 pe r megal i t re . In a1 loca t ing t h e c o s t s between t h e var ious systems, a r b i t r a r y assumptions regarding t h e aJ.location o f t h e cos t of works common t o a l l systems, such a s Monduran Dam, need t o b e made. Table 4-13 provides an i l l u s t r a t i o n o f t h e l i k e l y d i f f e r e n c e i n t h e est imated cos t o f water , de l ive red t o t h r farm ga te o r equivalent pick up po in t , i n each of t h e systems, based on 8% per annum f o r i n t e r e s t and redemption.

14. Increased F inanc ia l Returns t o Indi v i dual Farmers

The est h a t e d incremental b e n e f i t s t o indiv idual farmers were ca lcu la t ed from budgetary analyses, using t h e d a t a on c o s t s and r e t u r n s from t h e preceding s e c t i o n on t h e na t iona l analys j S.

Budgets cons t ruc ted d i f f e r e d from those ca lcu la t ed from the na t iona l po in t o f view, by t h e fol lowing adjustments:

Table 4-13

ESTIMATED COSTS AND CHARGES FOR PROVIDING WATER

UNDER THE SCHEME

(Dollars Per Megalitre)

System Cost of Water (a) IWSC Charges (b)

Pr iva te Pumpers

- Kolan River

- Sheep S ta t ion Ck.

- Burnett River

Gooburrum

Woongarra

Abbotsford

Givelda

Bingera

Gin Gin 50.92 9.73

I s i s

Underground

Urban Supply

(a) Based on i n t e r e s t and redemption being a t 8% p e r annum. (b) Based on proposed s ca l e of charges shown above and excluding the charge of m i l l usage.

- charges f o r i r r i g a t i o n water were included i n the farm budgets a t the following r a t e s - Source

Channel Underground River

$ per ac. ft. $ per megalitre

- F e r t i l i s e r p r i c e s were adjusted t o include t he bounty applicable t o nitrogenous f e r t i l i s e r s ($78.72 per tonne of pure nitrogen content) .

The individual cane grower was assumed t o receive some combination of No. 1 and No. 2 Pool p r i c e s f o r e x t r a sugar produced. The combined p r i c e w i l l be higher than the f r e e market export p r ice used i n t he analys is from t h e na t iona l level . I t i s extremely d i f f i c u l t t o p red ic t t h e fu tu re level o f Pool p r ices but it is expected t h a t , i n t he long term, they w i l l b e l e s s than the buoyant 1973 season l eve l s o f $132.40 per tonne f o r No. 1 Pool and $128.65 per tonne f o r No. 2 Pool. Accordingly, t he incremental benef i t s have been ca lcu l s ted f o r a range of $80 t o $120 per tonne f o r a mixture of No. 1 and No. 2 Pool pr ices .

To the individual cane grower t he main benef i t s a r i s e from the s t a b i l i s a t i o n of h i s production a t a higher l eve l with t h e scheme. The increased production stems from the response t o i r r i g a t i o n and t h e expansion i n t he area of assignment harvested. Although grower re tu rns w i l l f l u c tua t e according t o movements i n pool p r ices , t h e reduction i n t h e v a r i a b i l i t y of production with f u l l i r r i g a t i o n w i l l have a s t a b i l i s i n g e f f e c t on t h e level o f grower re tu rns and ne t farm income. The s t a b i l i s i n g impact w i l l be g r ea t e r f o r current dryland producers than p a r t i a l i r r i g a t o r s and t o t a l i r r i g a t o r s i n t h a t order.

Table 4-14 shows t h e estimated increase i n net farm income per hectare of assignment when t h e ex i s t ing s i t u a t i o n is converted t o f u l l i r r i g a t i o n under t he proposed scheme. Improvements i n t o t a l net farm income w i l l depend on t h e absolute s i z e of assignment and t h e l eve l and s t a b i l i t y of sugar pr ices . As the re appears t o be l i t t l e evidence of economies of s i z e i n cane growing, the f igures presented can be t rea ted as a constant f o r est imating t h e bene f i t s f o r any p a r t i c u l a r s i z e of assignment within t h e s i z e range examined. I t should be noted t h a t the es t imates a r e based on averages from farm survey da t a and w i l l not necessar i ly r e f l e c t individual farm circumstances. Further,

Table 4-14 ESTIMATED INCREASES IN NET FARM INCOMES PER HECTARE ASSIGNMENT WITH THE SCHEME

(Sugar Pr ice Dollars Per Tonne)

System Low Yield Response High Yield Response 80 90 100 110 120 80 90 100 110 120

Totally I r r iga t ed t o Scheme I r r iga t ion Phase 1

Private Pumpers Underground Gooburrum Woongarra

Phase 2 Gin Gin(a) Bingera (b) I s i s

Phuse 1 Private Pumpers Underground Gooburrum Woongarra

Phase 2 Gin Gin Bingera (b) I s i s

P a r t i a l l y I r r iga t ed t o Scheme I r r iga t ion

Dryland t o Scheme I r r iga t ion Phase 1

Private Pumpers 16 39 62 85 108 3 8 64 91 117 144 Underground -3 7 -6 25 56 87 -1 2 23 58 93 128 Gooburrum 2 22 41 60 79 26 49 72 95 117 Woongarra 14 3 7 60 84 107 3 6 63 90 117 144

Phase 2 Gin Gin -26 -3 21 44 67 -4 23 50 76 103 Bingera (b) 14 36 58 79 101 3 7 ,62 87 112 138 I s i s 11 3 6 62 87 112 26 53 81 109 137

(a) There a r e no t o t a l i r r i g a t o r s i n Gin Gin System. Cb) Abbotsford and Givelda, although i n Phase 1, have been linked with Bingera where appropriate.

t hese e s t ima tes a r e based on f u l l i r r i g a t i o n of 75% o f t o t a l gross assignment f o r a l l systems, except t h e underground where 80% of assignment w i l l be f u l l y i r r i g a t e d . Farmers may choose t o grow cane under dryland condi t ions o r use water from non-scheme sources t o i r r i g a t e cane up t o t h e maximum l e v e l o f 85% of assignment harvested. I t i s impossible t o quan t i fy t h e s e poss ib le s t r a t e g i e s without f u r t h e r i n v e s t i g a t i o n , and hence t h e incremental n e t farm income f i g u r e s do n o t account f o r t h e s e s t r a t e g i e s .

I t i s assumed t h a t Isis t o t a l i r r i g a t o r s , who a r e c u r r e n t l y i r r i g a t i n g and ha rves t ing 81% of assignments, w i l l continue t o use non-scheme water t o supplement t h e IWSC a l l o c a t i o n s , i n o rde r t o maintain t h e 81% harves ted l e v e l . Thus, t h e n e t farm income i s expected t o remain a s a t present and zero f i g u r e s a r e shown i n t h e t a b l e .

For a l l systems, except Woongarra, p a r t i a l i r r i g a t o r s e x h i b i t h ighe r c o s t s p e r tonne than dryland o r t o t a l i r r i g a t o r s . For example, i n t h e Underground system, t h e c o s t pe r tonne of sugar f o r p a r t i a l i r r i g a t o r s was $1.36 h igher than f o r t o t a l i r r i g a t o r s and $13.60 h ighe r than f o r dryland producers. S imi la r ly , f o r t h e Is is system t h e s e f i g u r e s were $8.28 and $4.73 re spec t ive ly , and f o r t h e Bingera System $3.24 and $4.91 re spec t ive ly . A t t h e lower suga r p r i c e s , t h e order i n expected ga ins i n n e t farm income i s reversed. A diagnosis o f t h e exact cause o f t h i s h igher cos t s t r u c t u r e would r e q u i r e a d e t a i l e d s tudy of farm machinery i n v e n t o r i e s and farm p r a c t i c e s on t h e sample p r o p e r t i e s . Without t h i s , it i s reasonable 6 specu la t e t h a t p a r t of t h e answer could l i e i n t h e ' lumpinesst of investment i n some i r r i g a t e d equipment. I t fol lows, t h a t p a r t i a l l y i r r i g a t e d farms may b e l e s s e f f i c i e n t ( i n an economic r a t h e r than t echn ica l sense) i n r e spec t t o t h e use of t h e s e inpu t s . Fur ther , t h e farmer opera tes i n a dynamic economic environment and long range p l a n s o r expecta t ions might d i c t a t e t h e purchase of i r r i g a t i o n p l a n t with temporary excess capaci ty .

15. Economic Apprai s a l from t h e Regional V i ewpoi n t

15.1 Net Benef i t s t o Mills

The ne t b e n e f i t s from t h e scheme t o t h e sugar m i l l s were taken as t h e d i f f e rence i n p r o f i t a b i l i t y 'wi th ' and 'withoutd t h e scheme. /

I t has been assumed t h a t b e n e f i t s w i l l accrue t o mi l l ing i n t e r e s t s a s a r e s u l t o f t h e scheme, due t o t h e s u b s t a n t i a l i nc rease i n average sugar production emanating from

i r r i g a t i o n . The b e n e f i t s would r e s u l t from t h e normal p r o f i t margin on c rushing o p e r a t i o n s f o r t h e inc reased throughput , and i n a d d i t i o n , t h e increased throughput would have t h e e f f e c t of s h i f t i n g t h e whole m i l l i n g ope ra t ion t o a new, lower p o i n t on t h e average t o t a l c o s t curve.

I n t h e s h o r t run, a h igh p ropor t ion of t o t a l m i l l i n g c o s t s could b e regarded a s f i x e d , and as t h e q u a n t i t y of suga r produced i n c r e a s e s , t h e f i x e d c o s t component becomes s m a l l e r and hence t o t a l average c o s t s p e r tonne dec l ine . I n t h e s h o r t run s i t u a t i o n , it i s assumed t h a t t h e e x i s t i n g s u r p l u s p l a n t c a p a c i t y i s capable of handl ing t h e inc reased product ion. However, i n t h e longer run a p o i n t w i l l be reached where f u r t h e r i n c r e a s e s i n product ion would n o t b e p o s s i b l e wi thout some i n c r e a s e s i n p l a n t capac i ty . Thus, i n t h e longer run, t h e p ropor t ion o f t o t a l c o s t s which could b e considered a s f i x e d d e c l i n e s , and e v e n t u a l l y i n t h e extreme case , t h e r e s u l t could b e t h a t a l l c o s t s become v a r i a b l e .

The s i x m i l l s i n t h e reg ion have cons ide rab le s u r p l u s c a p a c i t y a t p re sen t because, due t o t h e wide f l u c t u a t i o n s i n dry land product ion , capac i ty has t o be s u f f i c i e n t t o handle crops i n e x c e l l e n t seasons w i t h i n t h e usua l c rush ing pe r iod , i n o r d e r t o ha rves t t h e crop during t h e pe r iod when t h e CCS content o f t h e cane i s high. I n many cases , t h e product ion dur ing t h e 1972 season was c l o s e t o t h e l e v e l expected under t h e f u l l y i r r i g a t e d scheme cond i t i ons and t h e r e f o r e , on ly r e l a t i v e l y smal l i n c r e a s e s i n p l a n t c a p a c i t y w i l l b e necessary t o handle t h e post-scheme throughput. Thus, i n t h e sho r t run , s u b s t a n t i a l b e n e f i t s would accrue t o t h e m i l l s when product ion i s s t a b i l i s e d a t a p o i n t no t

1 t oo f a r above t h a t achieved a t p re sen t i n t h e b e s t o f yea r s .

The p re sen t pre-scheme s i t u a t i o n f o r t h r e e o f t h e s i x r e g i o n a l m i l l s i s , however, complicated by t h e scheduled c l o s u r e of t h e Bundaberg Sugar Company's Gin Gin M i l l , a s d i scussed above. The Fairymead and Bingera Mills w i l l b e upgraded and t h e a r e a s ass igned t o each m i l l w i l l b e reorganised. Th i s , t o g e t h e r with t h e inc reased product ion from t h e scheme, w i l l r e q u i r e cons iderable expansions i n m i l l i n g capac i ty and t h e s h o r t run s i t u a t i o n t h e r e f o r e does no t apply. The pre-scheme s i t u a t i o n i s f u r t h e r complicated by t h e need f o r r e s t r i c t i n g water u s e from underground sources , should t h e scheme not proceed. Taking t h e above f a c t o r s i n t o account , it was es t imated t h a t o n l y a minimal investment o f $1.45m, spread over t h e remaining 5 m i l l s , would b e r equ i r ed t o i n c r e a s e capac i ty t o p roces s t h e cane produced under f u l l i r r i g a t i o n cond i t i ons .

The without-scheme s i t u a t i o n was determined by c a l c u l a t i n g t h e t o t a l p r o f i t a b i l i t y o f t h e m i l l s over t h e 1968 t o 1972 seasons. Average sugar production f i g u r e s were ad jus t ed t o account f o r t h e c losu re of Gin Gin, and t h e assumption r e l a t i n g t o production r educ t ions pursuant t o underground water usage r e s t r i c t i o n s . Gross r e t u r n s were obtained by mul t ip ly ing t h e average q u a n t i t i e s of sugar produced i n each m i l l by t h e p r i c e range $80 t o $120, and adding t h e value of molasses s a l e s . Costs comprised both f ixed and v a r i a b l e opera t ing c o s t s a s we l l a s cane payments t o growers. To ta l opera t ing c o s t s f o r t h e average production from 1965 t o 1972 were obtained by reg ress ing t o t a l cos t s on throughput using d a t a suppl ied by t h e s i x regional m i l l s , f o r t h a t period. D e t a i l s of t h e r e l a t i o n s h i p obtained a r e not shown here because it was der ived from conf iden t i a l information, horever , t h e high value o f t h e c o e f f i c i e n t o f determinat ion ( r = .89) i n d i c a t e s t h a t 89% of t h e v a r i a t i o n i n mi l l ing c o s t s i s explained by v a r i a t i o n s i n t h e l e v e l of throughput.

Cane payments were der ived from t h e formula shown below f o r d i s t r i b u t i o n o f sugar r e tu rns .

I n summary, m i l l p r o f i t a b i l i t y was ca lcu la t ed a s follows:

Revenue: (Sugar Produced X sugar p r i c e ) + proceeds from molasses

M i l l Costs:

(a) Tota l opera t ing c o s t s (from regress ion equation)

(b) Cane payments

(.009p (CCS - 4) + .2380) X - cane tonnage COW loo]

p = p r i c e p e r ton o f suga r pa id t o m i l l s CCS = commercial cane sugar COW = c o e f f i c i e n t o f work

I t i s assumed t h a t t h e COW = 100. This reduces t h e equation to :

Cane payments = [.009p (CCS - 4) + .2380] cane tonnage P r o f i t = Revenue - Tota l Costs

For t h e with-scheme s i t u a t i o n , i r r i g a t e d production l e v e l s were determined us ing t h e y i e l d d a t a d iscussed e a r l i e r i n t h i s chapter , and m i l l p r o f i t a b i l i t y c a l c u l a t e d a s before.

The ne t b e n e f i t s t o m i l l e r s , a s t h e r e s u l t o f t h e scheme, was then obtained a s t h e d i f f e rence i n p r o f i t be fo re and after t h e scheme. This, i n e f f e c t , i s t h e d i f f e rence between marginal revenue ar:d niargirial c c s t i n t h e long run, i . e . t h e inc rease i n revenue due t o t h e a d d i t i o n a l production l e s s t h e incremental i n c r e a s e i n both f ixed and v a r i a b l e c o s t s . These c a l c u l a t i o n s were c a r r i e d out a t va r ious sugar p r i c e s , $80 t o $120 p e r tonne, and a t t h e two assumed l e v e l s of y i e l d response. The r e s u l t s o f t h e s e c a l c u l a t i o n s appear i n Table 4-15.

The scheme w i l l a l s o in t roduce a h igher degree of s t a b i l i t y i n t o t h e year t o year f l u c t u a t i o n s i n m i l l p r o f i t a b i l i t y . No q u a n t i f i c a t i o n of t h i s aspect was attempted, due mainly t o t h e lack of s u i t a b l e da ta , bu t t h e provis ion of i r r i g a t i o n water should g r e a t l y reduce t h e q u i t e l a r g e s h o r t f a l l s i n production which have occurred due t o droughts i n t h e p a s t . I t should b e noted , however, t h a t seasonal e f f e c t s w i l l cont inue t o produce f l u c t u a t i o n s i n sugar production and hence m i l l p r o f i t a b i l i t y , although t h e f l u c t u a t i o n s might b e expected t o b e considerably reduced.

15.2 General Benef i t s t o t h e Bundaberg Region

Table 4-16 summarises t h e d i r e c t monetary b e n e f i t s accruing t o m i l l e r s and cane growers i n t h e Bundaberg Region. F e r t i l i s e r s u b s i d i e s and IWSC water charges have been included i n t h i s r eg iona l a n a l y s i s . As it i s d i f f i c u l t t o f o r e c a s t a long run combination of pool p r i c e s , t h e range of $80 t o $120 pe r tonne, mentioned previous ly , has been used t o i l l u s t r a t e t h e p o t e n t i a l l e v e l o f d i r e c t monetary b e n e f i t s t o t h e region . I t i s considered t h a t t h e h igh l e v e l o f y i e l d response t o i r r i g a t i o n i s t h e more l i k e l y and so , t h e t a b l e i s based on t h i s l eve l . By summing t h e aggregate n e t b e n e f i t s t o cane farmers and m i l l s , a range of $2.7m t o $8.lm d i r e c t r eg iona l b e n e f i t s is obtained.

I n add i t ion , t h e r e a r e secondary b e n e f i t s t o t h e region r e s u l t i n g from c a p i t a l expenditure and annual ope ra t ing c o s t s incurred a t both pub l i c and p r i v a t e l e v e l s . A s much o f t h e m a t e r i a l s and equipment r equ i red can b e manufactured wi th in t h e Bundaberg Region, t h e b e n e f i t s a r e s u b s t a n t i a l and no t simply confined t o r e t a i l margins on goods produced ou t s ide t h e region.

P r i v a t e c a p i t a l expenditure on t h e purchase and i n s t a l l a t i o n o f i r r i g a t i o n equipment and p repa ra t ion of land f o r furrow i r r i g a t i o n was est imated t o b e $8.lm over t h e pe r iod of development. A l l o f t h i s equipment could be produced by l o c a l manufacturers. Land p repa ra t ion would provide f u r t h e r employment o p p o r t u n i t i e s f o r l o c a l con t rac to r s .

Table 4-15

ANNUAL MILL NET BENEFITS AT VARYING YIELD AND PRICE ASSUMPTIONS

(Do1 l a r s )

Low Yie ld Response High Yie ld Response

M i l1 Sugar P r i c e s Sugar P r i c e s

$120 $110 $100 $g? $80 $120 $110 $100 $30 SO I

CO

Millaquin 405,935 336,255 266,575 196,895 127,215 463,150 383,860 304,570 225,280 145,990 P I

Qun ab a 134,935 111,492 884,462 65,432 42,402 160,990 133,430 105,870 78,310 50,750

Fairymead 629,996 517,736 405,476 293,216 180,956 743,307 612,237 481,167 350,097 219,027

Bingera 525,233 434,903 344,573 254,243 163,913 670,697 556,467 442,237 328,007 213,777

Table 4-16

ESTIMATED DIRECT NET REGIONAL BENEFITS WITH THE SCHEME AT

THE HIGH LEVEL OF YIELD RESPONSE

(Do l l ars)

Net Benefit pe r Annum Pr ice pe r tonne T o T o Tot a1

Cane growers Millers Met Benefits -

I t was est imated t h a t m i l l c a p i t a l expenditure of $1.45m over t h e per iod of development would b e necessary t o inc rease t h e e x i s t i n g capac i ty o f t h e m i l l s t o process t h e increased throughput wi th i r r i g a t i o n . The type of equipment involved is wi th in t h e capac i ty o f t h e Bundaberg Foundry Company Limited o r Walkers Limited a t Maryborough, which both t r a d i t i o n a l l y supply much of t h e r e g i o n ' s mi l l ing requirements.

An inc rease i n t h e capac i ty of t h e Bundaberg Sugar Terminal would involve a c a p i t a l c o s t o f $1.27m. The bulk of t h e m a t e r i a l s could b e supp l i ed l o c a l l y , along wi th cons t ruc t ion labour.

Annual opera t ing c o s t s of cane farmers were ca lcu la t ed t o r i s e by $5.45m p e r annum f o r t h e high y i e l d assumption, and $5.11m f o r t h e low y ie ld . These c o s t s r e l a t e t o t h e c o s t s of i r r i g a t i n g a s well a s t h e increased ou t l ays , due t o t h e r i s e i n a r e a harves ted and amount of cane harvested. Increased ha rves t ing c o s t s under t h e h igh sugar y i e l d assumption accounts f o r $1.62m, and $1.27m f o r t h e low y i e l d assumption. This could accrue t o e x i s t i n g con t rac to r s and may well provide oppor tun i t i e s f o r new con t rac to r s .

Payments by growers t o t h e S t a t e f o r water t o meet annual ope ra t ing and maintenance c o s t s of t h e scheme would t o t a l $1.61m.

Assuming t h a t recommended p r a c t i c e s a r e followed, add i t iona l expenditure on f e r t i l i s e r s and chemicals on the increased a r e a harves ted was es t imated t o be $0,14m p e r annum. Regional b e n e f i t s i n t h i s in s t ance would mainly b e confined t o the r e t a i l p r o f i t margins on these goods produced ou t s ide t h e region.

The remainder o f t h e increased ou t l ay by farmers i s mainly absorbed i n labour, power and fue l and p rov i s ions f o r deprec ia t ion o f i r r i g a t i o n equipment. Ultimately, deprec ia t ion w i l l b e expended i n t h e form of new c a p i t a l which, as ind ica ted above, can be manufactured wi th in t h e d i s t r i c t . Labour is a d i r e c t b e n e f i t t o t h e community, al though power and f u e l may on ly have an impact through r e t a i l margins.

Payments by growers, m i l l s and urban use r s f o r scheme water t o t h e IWSC t o t a l $2.0m pe r annum. This revenue i s used t o o f f s e t annual opera t ing c o s t s of $1.2m which inc ludes t h e employment o f an add i t iona l 75 people, with consequent b e n e f i t s flowing on t o t h e region.

A common thread through t h e above regional bene f i t s i s t h e opportuni t ies generated f o r addi t ional employment. These opportuni t ies a r i s e from the construction of t he scheme and associated cap i t a l investment i n farm i r r i g a t i o n equipment, m i l l machinery and expansion of sugar terminal f a c i l i t i e s . Although c a p i t a l expenditure i s e s s e n t i a l l y a one-off concept (except replacements), t he scheme would not be completed u n t i l 1986, thereby providing continued employment f o r over a decade. In addit ion, t h e increased level of production neces s i t a t e s ex t r a employment per annum a t a l l l eve l s of t he sugar production process and generates employment through t h e provision of goods and se rv ices t o t h e sugar industry.

The value of loca l mater ia ls , goods and se rv ices used i n the construction of public works, as estimated by t h e S t a t e au thor i t i es , a r e s e t out i n Table 4-17. The pro jec t construction i s expected t o c rea te employment opportuni t ies valued a t $10.46m over the period 1985-86.

Although t h i s analysis has tended t o concentrate on t h e sugar industry i n t h e region, t h e e f f ec t of t h e incomes mul t ip l i e r would be t rans la ted t o t h e whole community of t h e Bundaberg region.

Table 4-17

VALUE OF LOCAL MATERIALS, GOODS AND SERVICES USED I N CONSTRUCTION OF THE PROJECT

(Do1 l a r s )

Item Estimated Cost

Materials

Reinforced Concrete Pipes G Sect ion

Ready Mix Concrete

R o c k f i l l Concrete Aggregates

Sub- t o t a l

Goods and Services Plan t Hire

Cartage of Pipes

T i t l e Surveys

( l ) 6,440,000

[l) 1,637,000

(2) 2,590,000

(1) F u l l l o c a l v a l u e of t h e s e m a t e r i a l s - va lue added i n Bundaberg would b e lower by some 25%. C2) Does no t inc lude va lue of l o c a l aggrega tes used i n supply of ready-mix concre te .

Source: Queensland I r r i g a t i o n and Water Supply Commission.

Footnotes Par t I V

( l ) Bureau o f Agr icu l tu ra l Economics, AgricuZturaZ S u p p l y Projections: AustraZia 1978-79, Occasional Paper No. 23.

( 2 ) Report on a k n d Use Study of the I s i s District , Isis Land Use Study Committee, Queensland Department o f Primary Indus t r i e s , May 1971. Report on a Land Use S t d y of the Gin Gin - Maroondun Distr icts , Gin Gin Land Use Study Committee, Department o f Primary I n d u s t r i e s , March 1972.

(3) Report on Establishment - Stage 1 Bundaberg Irrigation Undertaking, Department o f Primary I n d u s t r i e s , I r r i g a t i o n and Water Supply Commission, Queensland, August 1970, p. 7, l

(4) The Aus traZian Tobacco Growing Indus t r y : Pre Ziminary Report on an Economic Survey 1970-72 t o 1972-73, BM, Canberra, 1973. Gross margin around $1,030 pe r hec tare .

(5) Department of Primary I n d u s t r i e s , p r i v a t e correspondence. Examples o f gross margins:

Tomat oe S

Processing beans Watermelons Caps icums Cucumb e r s

$2,150 - $5,150 p e r ha $120 - $660 p e r ha $120 - $600 p e r ha

$1,200 - $2,400 p e r ha $1,100 $1,200 p e r ha

(6) Cp. c i t . Appendix D , pp 74-78.

(7) Bureau of Sugar Experiment S t a t i o n s , p r i v a t e correspondence.

(8) Report on the Land Use Study of the I s i s Dis tr ic t , Isis Land Use Study Committee, Department o f Primary I n d u s t r i e s , May 1971.

(9) Cp. c i t , p. 62.

(10) SMEC Report, op. c i t .

I n the Woongarra System, channel water and thus b e n e f i t s from i r r i g a t i o n , w i l l n o t be a v a i l a b l e u n t i l 1979-80. A s would be expected, t h e d i r e c t b e n e f i t s from i r r i g a t i o n a r e g r e a t e r under t h e h igher sugar y i e l d assumption but , when allowaqce is made f o r t h e b e n e f i t s t h a t would accrue from avoiding a reduct ion i n production through a reduced use of underground water ( see Appendix B), t h e I R R s a r e g r e a t e r under t h e lower sugar y i e l d assumptions a t each p r i c e .

This apparent anomaly a r i s e s from t h e combination o f the timing of the commencement of benef i t flows and t h e necess i ty t o take account of t he discount fac tor . As t he I R R becomes g rea te r , t h e bene f i t s a r e i n e f f e c t being discounted a t a higher r a t e , and t h i s , together with the timing fac to r , can a l t e r t he r e l a t i v e magnitudes of d i f f e r en t bene f i t streams. The e f f e c t of t h e discount f a c t o r f o r a p r i c e of $110 per ton under both sugar y i e ld assumptions, a t two discount r a t e s , 10% and 14% over 75 years i s shown below. A t t h e high discount r a t e , the ne t present value (NPV) of t h e low sugar y i e ld bene f i t s is g rea te r , while a t the low discount r a t e , t he NPV of the high sugar y i e ld bene f i t s i s greater .

NPV OF BENEFITS AT SUGAR PRICE OF $110 PER TON

(Dollars)

High Sugar Yield

Low Sugar Yield

Par t V

SUMMARY OF RESULTS OF ECONOMIC EVALUATION

The economic r e s u l t s of t he Bundaberg I r r i g a t i o n Scheme, a s proposed by the Queensland Government, have been estimated f o r a range of sugar p r i c e s and y i e ld assumptions. These r e s u l t s were considered from t h e na t iona l , regional and individual viewpoints and the main conclusions drawn from t h e anahysis a r e a s follows:

1. Economic Results from the Nat ional Viewpoint

1. When the p ro j ec t i s considered i n i t s en t i r e t y , v iz . Stage I , the i n t e rna l r a t e s o f re tu rn (IRRs) ranged between 3.2% and 8.0% f o r an export sugar p r i c e range of $80 t o $100 per tonne and f o r both high and low y i e ld response assumptions. I t i s argued t ha t t h e high y i e ld response i s the more l i k e l y and, when taken i n conjunction with a p r i c e assumption of $90 pe r tonne ( the mid-point of the range adopted), ind ica tes t h a t a re tu rn of around 6% on c a p i t a l invested might reasonably be expected from the scheme.

The two phases of Stage I were considered separate ly , i n l i n e with t he separate requests f o r f inanc ia l a ss i s t ance by t he Queensland Government, v iz . $4.4m f o r Phase 1 and $18.5m fo r Phase 2. Phase 1, which comprises t h e Monduran Dam and Pumping Sta t ion, Gin Gin channel and divers ion channel t o t he Burnett River, Kolan and Bundaberg Tidal Barrages p lu s t he P r iva t e Pumpers, Underground, Abbotsford, Gooburrum, Givelda and Woongarra i r r i g a t i o n systems, yielded I R R s ranging between 5.1% and 9.4% with around 8% a t the high y i e ld and $90 per tonne. The bene f i t s from aver t ing a l o s s o f production, due t o r e s t r i c t i o n s being imposed on t h e use of underground water, con t r ibu te subs t an t i a l l y t o these Phase 1 r e s u l t s .

3. Phase 2 , which includes t h e Bingera and I s i s systems, p lus Gayndah and Bucca Weirs, but excludes a l l t h e major works which a r e a t t r i b u t e d e n t i r e l y t o Phase 1, yielded IRRs between 0.4% and 5.5%, with about 4% being expected f o r t h e high y i e l d and $90 per tonne assumptions. Phase 2 appears l e s s a t t r a c t i v e a s an investment p e r s e from t h e na t iona l viewpoint, and t he r e s u l t s would have been lower i f some of t he cos t s of Morduran Dam, t he main pumping s t a t i on , the Gin Gin

Channel, and t h e d i v e r s i o n channel, which a r e inc luded i n Phase 1, were appor t ioned t o 'Phase 2 . The d i f f e r e n c e i n r e s u l t s between t h e two Phases i s l a r g e l y due t o t h e higher p u b l i c and p r i v a t e c a p i t a l requirements , t h e high annual ope ra t ing c o s t s p e r u n i t a r e a i n Phase 2 and t h e b e n e f i t s accru ing t o t h e underground system i n Phase 1 from t h e avoidance o f a cu r t a i lmen t of product ion.

4. Each system was considered s e p a r a t e l y i n a marginal a n a l y s i s . Again t h e c a p i t a l c o s t s of t h e headworks were n o t apport ioned among t h e component i r r i g a t i o n systems. With t h e except ions o f Abbotsford, Gin Gin and Isis, a l l systems had I R R s o f around 8% o r b e t t e r f o r t h e h igh y i e l d and $90 p e r tonne assumptions. The Gin Gin system gave a most l i k e l y r e s u l t o f 4.1%, a l though t h i s system i s p a r t o f t h e Bingera System des ign . Isis, wi th 3 .8%, i s l e s s s a t i s f a c t o r y than t h e o t h e r systems us ing t h e I R R c r i t e r i o n and Abbotsford i s c l e a r l y uneconomic on t h e s e grounds. I t should be noted , however, t h a t t h e IWSC i s recons ide r ing t h e Abbotsford system.

5. The a n a l y s i s of t h e scheme was based on t h e design p u t forward by t h e IWSC b u t i t should be noted t h a t t h i s design may n o t r ep re sen t t h e most economic one from t h e n a t i o n a l viewpoint. No a n a l y s i s o f t h e e f f e c t o f modifying t h e proposal was considered, a s t h i s would r e q u i r e making assumptions concerning t h e re -des ign o f t h e whole scheme.

6. The i n t e r n a l r a t e s o f r e t u r n ob ta ined i n t h i s s tudy should 6 e cons idered i n t h e l i g h t o f t h e d i scuss ion on t h e i n t e r p r e t a t i o n o f t h e I R R conta ined i n P a r t 11. For i n s t ance , i t i s n o t v a l i d t o compare t h e I R R o f 6% f o r t h e h igh y i e l d response and $90 pe r tonne assumptions f o r Stage I with t h e c u r r e n t long term nominal bond r a t e of 95%. Thi s l a t t e r r a t e i s n o t n e c e s s a r i l y t h e r a t e which w i l l apply f o r t h e l i f e o f t h e p r o j e c t . Furthermore, t h e bond r a t e should be ad jus t ed downwards by removing t h e i n b u i l t component f o r t h e long term r a t e o f i n f l a t i o n i f a comparison wi th t h e I R R i n r e a l terms i s r equ i r ed . The long term -- r a t e o f i n f l a t i o n i s unknown bu t , from t h e exper ience o f t h e 19705, it seems u n l i k e l y t h a t t h e r a t e w i l l b e any l e s s t han t h e 2% experienced over t h e 1950-1970 per iod .

This p r o j e c t has n o t been eva lua t ed i n comparison wi th any o t h e r schemes which might be competing f o r l i m i t e d f i n a n c i a l r e sou rces and, consequently, t h e IRR cannot be used f o r ranking purposes. However, from t h e exper ience gained by BAE o f f i c e r s i n app ra i s ing r u r a l water development p r o j e c t s dur ing t h e l a s t decade, t h e o v e r a l l r e s u l t s ob ta ined f o r S tage I might be judged r easonab le from an economic viewpoint when considered i n r e l a t i o n t o t h e r e s u l t s o f a p p r a i s a l S o f o t h e r i r r i g a t i o n p r o j e c t s , which have been i n v e s t i g a t e d and subsequent ly cons t ruc t ed .

2. Economic Resu l ts from t h e I n d i v i d u a l V iewpoint

1. The scheme involves 1239 p r o p e r t i e s wi th a t o t a l o f 1265 sugar cane assignments. A survey of t h e f i n a n c i a l s i t u a t i o n o f a l a r g e sample o f canegrowers from 1968-69 t o 1972-73 showed t h a t , except f o r t h e severe drought i n t h e 1969 growing season, growers1 n e t farm incomes have g e n e r a l l y r i s e n throughout t h i s per iod . This i s t r u e f o r a l l t h r e e c l a s s i f i c a t i o n s ; t o t a l l y i r r i g a t e d , p a r t i a l l y i r r i g a t e d and completely dryland; and can be a t t r i b u t e d t o a combination o f a number o f f a c t o r s : r i s i n g p r i c e s rece ived f o r sugar , i n c r e a s i n g y i e l d s p e r h e c t a r e harves ted , and inc reased a r e a o f assignment harves ted . Increased y i e l d s have been l a r g e l y due t o c l i m a t i c cond i t i ons a s each growing season s i n c e t h e 1969 drought has been an improvement on t h e previous year . By 1972-73, t h e lowest average n e t farm income i n any i r r i g a t i o n system was about $7,700 f o r dry land growers i n t h e Underground system. The r e s u l t s f o r t h e Is is system were h ighe r than t h e o t h e r systems, even when reduced t o a p e r h e c t a r e o f assignment b a s i s i n t h a t year .

Ove ra l l , o t h e r farm income was a r e l a t i v e l y small component o f growers1 income. There were no c o n s i s t e n t t r e n d s t o show t h e ' e x i s t e n c e o f any economies o r diseconomies o f s i z e f o r any o f t h e i r r i g a t i o n c l a s s i f i c a t i o n s , a s t h e main determinant o f n e t farm income appeared t o be t h e abso lu t e s i z e o f assignment, except f o r dry land p r o p e r t i e s i n drought years .

2 . T o t a l i r r i g a t o r s 1 n e t farm incomes showed a g r e a t e r s t a b i l i t y , compared wi th t h o s e o f p a r t i a l i r r i g a t o r s and dry land growers. These growers were l e a s t a f f e c t e d by t h e 1969 drought , when 39% of p a r t i a l i r r i g a t o r s and 82% o f dry land growers had nega t ive n e t farm incomes.

On average, it would appear t h a t , over the period of t he survey, t he low l eve l s of ne t farm income i n 1969-70 were compensated by t he high l eve l s of n e t farm income i n subsequent years. However, i f droughts occurred i n fu ture , during a per iod of low sugar p r ices , t h i s s i t ua t i on i n t he shor t run would ce r t a i n ly impose severe hardships on growers, p a r t i c u l a r l y t he dryland farmers, although the long term outlook f o r sugar production seems favourable.

Provision of i r r i g a t i o n water would undoubtedly r a i s e and s t a b i l i s e cane growerst incomes i n the future , as evidenced by the experience of t o t a l i r r i ga to r$ over t he survey period.

3. Although it i s d i f f i c u l t t o fo recas t t h e combination of pool p r ices t h a t t he cane growers would receive, it appears t h a t , under t h e high y i e ld increment assumptions, which a r e expected t o be more l i k e l y t o p reva i l , t h e r e would be subs tan t ia l increases i n ne t farm incomes. The expected l eve l s of improvement were calcula ted on a hectare ba s i s a s t he r e appears t o be l i t t l e evidence of economies o r diseconomies of s i z e .

In some cases, p a r t i c u l a r l y a t t he lower end of t h e sugar p r i c e scale , p a r t i a l i r r i g a t o r s might be expected t o gain more than dryland producers. This i s due t o the incremental benef i t s being applied t o a dynamic s i t u a t i o n i n which p a r t i a l i r r i g a t o r s appear t o have been r e l a t i v e l y i n e f f i c i e n t i n economic terms over t he survey period, probably due t o under -u t i l i sa t ion of t h e i r i r r i g a t i o n equipment. For a sugar pool p r i c e of $100 per tonne a t t he high y ie ld response, t o t a l i r r i g a t o r s might expect an improvement of $18-$68 i n ne t farm income per hectare of assignment on average, compared with $60-$102 f o r p a r t i a l i r r i g a t o r s and $50-$9 1 f o r dryland farmers. However, t h e r e s u l t s vary appreciably between t h e systems. The t o t a l annual benef i t s t o cane growers a t t h i s p r i c e would be $3.48m.

3. Economic Analysis from the Regional Viewpoint

1. Benefi ts t o sugar m i l l s a r e c lose ly r e l a t ed t o individual benef i t s , owing t o t h e a l loca t ion of proceeds under t he cane p r i c e formula. Mills would a l s o bene f i t from s t a b i l i s e d production a t a higher l eve l with t h e scheme. I t was est imated t h a t t he

annual incremental b e n e f i t t o t h e f i v e Bundaberg Region mills (excluding Gin Gin m i l l a s it i s scheduled t o c l o s e a f t e r 1974 season) would be $1.94m a t a. combined No. 1 and No. 2 Pool p r i c e of $100 pe r tonne. A s Isis i s a co-opera t ive ly owned m i l l t h e increased p r o f i t a b i l i t y would enhance dividends t o members.

The main b e n e f i c i a r i e s of t h e scheme would be cane growers and m i l l s w i th b e n e f i t s t o t a l l i n g $5.42m p e r annum, a t an average pool p r i c e o f $100 p e r tonne. Af te r t axa t ion , much of t h i s amount would be a v a i l a b l e f o r spending i n t h e region, p a r t i c u l a r l y by cane growers. With t h e except ion o f Is is , t h e m i l l s a r e p r i v a t e l y owned and company p o l i c y concerning dividends and investment would a f f e c t t h e amount o f l o c a l b e n e f i t s .

3. Capi t a l expenditure by t h e Queensland Government, a s well a s by farmers and m i l l e r s , t o implement t h e i r r i g a t i o n scheme w i l l have a s i g n i f i c a n t impact on t h e region. The IWSC es t ima tes t h a t $21.2m o f l o c a l l y produced ma te r i a l s and s e r v i c e s w i l l be used during t h e cons t ruc t ion per iod o f t h e p r o j e c t . I n a d d i t i o n , t h e IWSC es t ima tes t h a t t h e c o s t o f labour during cons t ruc t ion w i l l b e $10.46m. Addit ional p r i v a t e grower c a p i t a l requirements have been es t imated a t $8. lm and a d d i t i o n a l m i l l c a p i t a l investment a t $1.45m. These c a p i t a l requirements can a l l be produced l o c a l l y and it i s expected t h a t t h e bulk o f t h i s investment would be c a r r i e d o u t i n t h e region . Fur ther , most o f t h e e x t r a sugar terminal capac i ty c o s t i n g $1.27m could be provided from d i s t r i c t sources. A summary o f t h e t o t a l pub l i c and p r i v a t e investment i n t h e region i s given i n t h e impact t a b l e below.

4. Publ ic and p r i v a t e ope ra t ing c o s t s a s soc ia t ed w i t h t h e implementation of t h e scheme w i l l a l s o b e n e f i t t h e region e i t h e r d i r e c t l y o r through increased r e t a i l margins. The IWSC es t ima tes t h a t a permanent workforce of 75 would be r equ i red t o maintain and ope ra te t h e scheme a t f u l l development.

5. I t i s expected t h a t t h e above expenditures would have a m u l t i p l i e r e f f e c t on r eg iona l incomes and regional employment but no e s t ima tes a r e a v a i l a b l e on t h e poss ib le magnitude o f t h e s e m u l t i p l i e r s .

4. Impact Table

For i l l u s t r a t i v e and quick v i sua l appraciat ion, the r e s u l t s from t h e nat ional , individual and regional viewpoints a r e summarised i n t h e impact statement s e t out i n Table 5-1. While t h e f u l l analys is of t he scheme has been based on a range o f y i e ld and p r i ce assumptions, t h e r e s u l t s summarised i n t h e t ab le from t h e na t iona l viewpoint have been l imi ted t o those obtained with t h e high y ie ld response assumption and a p r i ce of $90 per tonne f o r export sugar. Similarly, r e s u l t s from t h e regional and individual viewpoints were obtained using t h e high y ie ld response and an average pool p r i ce of $100 pe r tonne.

lable 5-1 PROJECT IMPACTS

A. ESTIMATED MONETARY IMPACTS

Project Benefits Costs Estimated Net Economic Effec t Impact

Annual Benefits as Valued t o the Capital Costs as Valued t o the In ternal Rate of Return 6.3% Nation: $ ('000) Nation ( a t 1973 prices)$( '000) (IRRts ranged from to 8.0 %for

Sugar Production p.a. 4,921 - public 75i535 various assumptions of sugar p r i ce Other Crops p.a. 59 - pr iva t e SugarMil l ing p.a. 1,460 - m i l l i n g

and y ie ld da ta) . National

1,450

Total p + a . 6,440 Total 85,116 Once only Benefit Annual Cost of Operation

(Cost Savings) t o 700 and Maintenance 1,202 Bundaberg City Council

Scheme Benefits as Valued Scheme Costs as Valued Increase i n Net Farm Incomes per f o r Farmers: $ ('000) fo r Farmers: $ ('000) Hectare TGA ($1

Sugar Production p.a. 5,084 Farm Capital ( t o t a l ) 8,131 Present I r r iga t ion Status Other Crops p.a. 59 Cooperative Milling System T P D Cooperative Milling 5 46 Capital ( t o t a l ) Pr iva te Pmpers 69 95 91

Individual p.a. ( I s i s M i l l only) ( I s i s M i l l only) S60 Underground 63 102 S8 Water Charges p. a. 1,609 Gooburrum 34 92 72 Coop. M i l l l a t e r Woongarra 18 87 90

Charges (p.a.) ( I s i s Gin Gin - 60 50 M i l l only) 116 Bingera 56 99 87

I s i s 0 87 81 N.B. Abbotsford and Givelda included with Bingera.

Employment Opportunities Created by the Project: Man

Years $ ('000) $ ('000) - farm (p.a.) na Levy on Peak (p.a.) 540 Not quantif ied

Regional - dam construction na 10,462 - operation and

maintenance p.a. 75 na Milling P ro f i t p.a. 1,944

p.a. = per annum. na, not available. - n.e. (not estimated).

(Continued on next page)

Table 5-1 continued

B. MONETARY IMPACTS NOT QUANTIFIED AND NON MONETARY EFFECTS

Pro jec t Impact Monetary Impacts Not Quant i f i ed

National

Ind iv idua l

Regional

Increased r e l i a b i l i t y o f supply t o overseas buyers (probably a minor e f f e c t )

Secondary b e n e f i t s which would occur on a n a t i o n a l s c a l e i . e . o u t s i d e a s wel l a s w i t h i n t h e reg ion . Increased t a x revenue from farmers, m i l l e r s , l abour and

p r i v a t e firms which w i l l have a m u l t i p l i e r e f f e c t throughout t h e economy when spen t by t h e Gove~nment.

. M u l t i p l i e r e f f e c t from increased spending by t h e above groups .

. Rise i n incomes o f s e r v i c e and supply e n t e r p r i s e s .

I r r i g a t i o n farmers - may s u f f e r a f a l l i n income due t o decreased opportuni ty t o supply overpeak product ion

Industry-wide sugar farmers - may s u f f e r a f a l l i n income due t o removal o f some o p p o r t u n i t i e s f o r overpeak product ion

Probably minor n e t b e n e f i t s from p r o f i t s accruing from t h e fol lowing expenditures - dam and systems cons t ruc t ion - farm c a p i t a l - m i l l c a p i t a l - a g r i c u l t u r a l and m i l l i n g s u p p l i e s - o t h e r goods and s e r v i c e s purchased by farmers from

proport ion o f t o t a l p r o j e c t income - reg iona l m u l t i p l i e r e f f e c t s from expenditures made t o

a d d i t i o n a l labour employed

Non-Monetary E f f e c t s

Recrea t iona l f a c i l i t i e s a t dam weirs and barrages

Poss ib le adverse e c o l o g i c a l e f f e c t s from - m i l l e f f l u e n t ( P o l l u t i o n

measures t o be undertaken by m i l l s )

- f e r t i l i z e r and o t h e r chemical res idues

Appendix A

Harves t and Sugar Product ion S t a t i s t i c s f o r t h e Bundaberg Area: 1968-69 t o 1972-73

Table No. A 1 shows harvest and sugar production s t a t i s t i c s f o r t h e f i ve year survey period, c l a s s i f i e d by t h e proposed i r r i g a t i o n systems. For each of t he seven systems, t he t a b l e shows tonnes of cane cut per hectare, t he commercial cane sugar content (CCS), t he r e su l t an t tonnes of sugar per hectare and t he percentage of t o t a l gross assigned area harvested within each of t he proposed i r r i g a t i o n systems. This information was used i n the Bureau's analys is t o ca l cu l a t e t h e incremental y i e ld benef i t s t o ex i s t i ng growers, the region and the nat ion with t he extension of i r r i ga t i on .

Table No. A 1 HARVEST AND SUGAR PRODUCI'ION: BUNDABERG AREA: 1968-69 t o 1372-73

--- P r i v a t e Pwnpers I s i s

System Year 1968-69 1969-70 1970-71 1971-72 1972-73 1968-69 1969-70 1970-71 1971-72 1972-73

Tot ally I r r i g a t e d

Cane ( t o n n e s h e c t a r e ) 89.69 77.73 74.94 73.14 89.61 87.57 81.02 91.79 96.86 103.16

CCS % 14.02 13.8 14.22 13.88 12.84 14.18 13.97 13.52 13.42 13.64

Sugar ( tonnes/hectare) 12.55 10.77 10.65 10.14 11.50 12.42 11.32 12.40 13.00 14.05

Area Harvested (per cen t ) 64.6 55.5 68.8 67.5 76.0 81.1 71.3 81.2 82.3 87.6

P a r t i a l l y I r r i g a t e d

Cane ( t o n n e s h e c t a r e ) 79.34 60.23 67.34 67.71 87.57 74.66 53.35 64.85 76.70 91.21

CCS % 14.49 13.70 13.74 14.14 13.48 13.58 13.85 13.04 13.19 12.88

Sugar ( tonnes/hectare) 11.50 8.26 9.23 9.57 11.80 10.14 7.38 8.46 10.11 11.75

Area Harvested (per cen t ) 61.0 53.0 70.0 71.0 77.3 75.8 47.4 82.0 82.5 85.5

Dry land

Cane ( tonnes/hectare) 69.94 39.19 52.95 61.51 76.37 70.12 30.25 50.96 70.85 81.57

CCS % 13.69 13.32 12.49 13.65 13.70 13.08 12.98 11.91 13.11 12 .S7

Sugar ( tonnes/hectare) 9 .56 5.19 6.60 8.38 10.44 9.16 3.91 6.07 9.28 10.24

Area Harvested (pe r cent) 59.3 32.1 71.3 70.0 73.8 74.0 20.5 75.3 78.3 82.2

Table No. A1 (cont.)

Underground Gooburm Systen Year

1968-69 1969-70 1970-71 1971-72 1972-73 1968-69 1969-70 1970-71 1971-72 1972-73

Totally I r r iga ted

Cane ( t m e s / h e c t a r e ) 82.95 84.93 95.23 94.02 91.16 85.01 82.55 88.82 90.71 96.41

CCS % 15.14 14.01 15.04 14.65 14.98 15.54 13.99 15.06 14.62 14.96

Sugar (tonnes/hectare) 12 .55 11.90 14.31 13.78 13.65 13.20 11.54 13.38 13.25 14.41

Area Earvested (per cent) 76.0 71.6 61.7 76.9 76.4 77.5 74.9 62.6 77.2 77.5

P a r t i a l l y I r r iga ted

Cane (tonnes/hectare) 72.78 65.07 80.09 85.91 90.66 77.80 59.98 70.32 81.34 86.11

CCS % 15.15 13.29 14.75 14.47 14.81 15.03 13.41 14.44 14.58 14.95

Sugar (tonnes/hectare) 11.02 8.63 11.80 12.42 13.43 10.19 8.03 10.14 11.85 12.85

Area Harvested (per cent) 74.9 50.7 67.4 75.8 78.6 76.7 56.6 75.2 94.7 82.4

Dry land

Cane ( tonneshectare) 75.12 33.49 74.51 82.25 75.67 70.42 39.49 69.92 76.37 33.57

CCS % 14.83 12.27 14.87 14.10 14.69 15.41 112.08 14.90 14.90 14.95

Sugar [tonnes/hectare) 11.14 4.11 11.07 11.59 11.09 10.84 4.77 10.41 11.37 13.98

Area Harvested (per cent) 63.4 38.7 54.3 66.5 67.1 86.6 39.5 72.7 73.1 78.9

Table No. A 1 (Contd.)

Woongarra Gin Gin System Year

1968-69 1969-70 1970-71 1971-72 1972-73 1968-69 1969-70 1970-71 1971-72 1972-73

Totally I r r iga t ed

Cane ( t o ~ e s / h e c t a r e )

CCS

Sugar ( tonneshectare)

Area Harvested (per cent)

P a r t i a l l y I r r iga t ed

Cane (tonnes/hectare)

CCS

Sugar (tonnes/hectare)

Area Harvested (per cent)

Dry land

Cane (tmnes/hectare)

CCS

Sugar ( tonneshectare)

. h a Harvested (per cent)

Table No. A 1 (Cont.)

Bingera (a) System Year

1968-69 1969-70 1970-71 1971-72 1972-73

Totally I r r iga ted

Cane ( tonnehectare) 74.31 68.81 88.45 80.16 87.17

CCS 14.86 14.22 14.85 14.40 13.96

Sugar (tonnes /hectare) 11.04 9.79 13.13 11.54 12.17

Area Harvested (per cent) 80.0 49.9 69,s 75.7 50.9

Par t i a l ly I r r iga ted

cane (tOnnesfhectam)

CCS

Sugar (tonnes/hectare) 11.24 8.58 10.01 10.34 12.87

Area Harvested (per cent) 73.1 46.9 74.5 71.6 78.4

Dry land

Cane ( tonneshectare)

CCS

Sugar (tonnes/hectare) 11.82 4.49 8.15 9.96 12 .57

Area Harvested (per cent) 67.0 25.6 75.0 71,8 77.5

(a) Includes Abbotsford and Systems.

Appendix B

Financial Posit ion of Canegrowers: System by System, 1968-69 t o 1972-73

Private Pwnpers

Other than i n 1969-70, when poor seasonal condit ions had the e f f e c t of sharply reducing sugar incomes f o r growers n o t under t o t a l i r r i g a t i o n , t h e absolute level of average n e t farm income f o r t o t a l and p a r t i a l i r r i g a t o r s has not been subs t an t i a l l y d i f fe ren t when the s i z e of t h e standard deviat ion i s considered. However, when expressed i n terms of per hec ta re of assignment, t o t a l i r r i g a t o r s revealed b e t t e r r e s u l t s than p a r t i a l i r r i g a t o r s except during t he last two years which were above average. Dryland farmers received average n e t farm incomes cons i s ten t ly below t h e i r r i g a t o r s i n both absolute and r e l a t i v e terms .

Net farm incomes increased over t h e period due t o a combination o f r i s i n g p r i c e s f o r sugar, improved y i e ld s and increases i n t h e area of assignments, p a r t i c u l a r l y f o r t o t a l i r r i g a t o r s and dryland growers.

Sugar was t h e main determinant of average t o t a l farm income on t o t a l l y i r r i g a t e d proper t ies , p a r t i c u l a r l y i n t he l a t e r years of higher sugar p r i c e s and y ie lds . The o ther groups were more dependent on other farm income, which contributed up t o 20% of t o t a l farm income f o r p a r t i a l i r r i g a t o r s and up t o 25% f o r dxyland growers s ince t h e drought a f fec ted 1969-70 year.

l l

Unde rgm und

I n general , t o t a l l y i r r i g a t e d p roper t i es enjoyed higher average ne t farm incomes, n e t farm income per hectare and sugar income per hec ta re than p a r t i a l l y i r r i g a t e d p rope r t i e s which, i n turn, surpassed t h e dryland growers. A l l groups received higher l e v e l s of n e t farm iwome due t o r i s i n g p r ices , improved y i e l d s and increased a reas harvested a f t e r 1969-70. Total i r r i g a t o r s managed t o maintain t h e i r income leve l during t h e 1969-70 drought year i n marked con t ras t t o t he o ther groups, p a r t i c u l a r l y t h e dryland group which recorded negative n e t farm incomes on average.

Income from sugar contributed over 80% of average t o t a i income f o r a l l ca tegor ies i n each year except 1969-70 f o r dryland producers, when gross income from o the r farm en te rpr i ses and a l s o off-farm income exceeded income from sugar.

Table No. B1

PRIVATE PUMPERS : FINANCIAL SITUATION OF GROWERS :

AVERAGE PER PROPERTY 1968-69 t o 1972-73 Net Gross

Area F'arm % Gross Sugar Present Net Standard of Income F arm Income Year I r r i ga - No. of Farm

Per Income t i o n Deviat- Assign- Per 1ncome Hectare from Hectare Capacity ion (a) merit ASSi nment

$ $ ha $ % $ 1968-69 Total 4 6,554 2,111 29.0 22 6 80.5 4 64

P a r t i a l 17 6,256 4,686 43.6 143 86.9 421 Dry land 11 4,673 5,939 33.5 139 91.1 301

1969-70 Total 4 7,029 5,293 31.6 222 87.8 490 P a r t i a l 18 1,440 4,067 43.2 33 74.7 249 Dryland 11 -1,367 1,660 31.1 -44 69.6 76

1970-71 Total 12 11,750 7,186 39.5 297 90.1 576 P a r t i a l 17 10,679 9,001 46.0 232 87.7 463 Dryland 8 3,994 6,231 36.7 109 76.0 285

1971-72 Total 14 8,957 6,199 40.1 223 88.6 534 P a r t i a l 17 12,275 10,177 48.9 251 80.5 531 Dry1 and 9 8,755 3,802 43.3 2 02 78.9 414

1972-73 Total 12 15,430 9,586 42.5 363 91.1 684 P a r t i a l 10 18,439 9,128 44.9 411 80.1 722 Dry1 and 8 12,333 3,149 44.1 280 75.5 525

(a) The f igures i n t h i s column a r e est imates 04 the population standard deviat ion, a measure of t h e v a r i a b i l i t y of t he population around i t s mean and hence t he degree of s t a b i l i t y i n ne t farm income across farms. The lower it is , t he more s t a b l e w i l l be net farm income and v i ce versa . This comment app l ies t o succeeding Tables Nos. B2-B7.

Table No. B2

UNDERGROUND : FINANCIAL SITUATION OF GROWERS : AVERAGE PER PROPERTY : 1968-69 TO 1972-73

Net Gross F arm % Gross Present Stand- Area Strzar

No. of Net o f Incone

Farm I r r i g a - a r d I :lcol!~e

Year t ion Farm Deviat - Assign- per ha Income per ha es Income Capaci ty i on ment Assigrl- from A s s i g n -

::iect Sugar ,!lent

Tota l P a r t i a l Dry land Tota l P a r t i a l Dryl and Tot a1 P a r t i a l Dry land Tota l P a r t i a l Dryl and To ta l P a r t i a l Dryland

Gooburrum

The r e s u l t s f o r t h e Gooburrum system show p a r a l l e l t r e n d s t o t h e contiguous underground system. R i s ing average n e t farm incomes appear due t o p r i c e , y i e l d and a r e a ha rves t ed f a c t o r s a l though t h e growth i n t h e a r e a of assignment o f t o t a l i r r i g a t o r s was a l s o a s i g n i f i c a n t f a c t o r .

The e f f e c t s o f t h e 1969-70 drought y e a r were n o t a s s eve re a s i n t h e more w e s t e r l y systems as d ry l and cane growers averaged t h e h i g h e s t n e t farm income i n bo th a b s o l u t e and r e l a t i v e terms o f any system i n t h a t year .

Income from farm e n t e r p r i s e s o t h e r t han sugar made a s i g n i f i c a n t c o n t r i b u t i o n t o t h e average t o t a l income o f t o t a l i r r i g a t o r s , y i e l d i n g around $5,000 except i n 1972-73 when it f e l l t o j u s t over $300. Other farm income f o r p a r t i a l i r r i g a t o r s d e c l i n e d over t h e l a s t two yea r s from around 15% t o 5% o f t o t a l income. Dryland growers de r ived v i r t u a l l y a l l t h e i r income from suga r except i n t h e drought year when j u s t over $2,000 was rece ived from o t h e r e n t e r p r i s e s , sugges t ing d i v e r s i f i c a t i o n t o ame l io ra t e t h e e f f e c t s of t h e drought.

Woongarra

I n a l l yea r s average n e t farm income f o r t o t a l i r r i g a t o r s exceeded t h a t o f p a r t i a l i r r i g a t o r s which i n t u r n surpassed t h e dry land grower, except i n 1972-73 when t h e r e was no s i g n i f i c a n t d i f f e r e n c e between t h e p a r t i a l and dry land groups.

The drought y e a r d i d no t have t h e same impact a s i n o t h e r systems. Dryland cane growers appeared t o o f f s e t t h e l o s s i n income from sugar cane w i t h an i n c r e a s e o f $6000 i n o t h e r farm income, probably from o t h e r c rops grown i n t h e l a t t e r h a l f o f 1969-70 f i n a n c i a l year . However, t h e low average n e t farm income and l a r g e s t anda rd d e v i a t i o n i n d i c a t e s t h a t cons ide rab le d i f f i c u l t i e s were experienced.

I n common wi th t h e genera l t r e n d a f t e r 1969-70 incomes r o s e due t o a combination o f h ighe r sugar p r i c e s , improved y i e l d s and expansion o f t h e ass igned a r e a s harves ted . Apart from 1969-70, a s no ted above, income from sugar was over 90$ o f average t o t a l income f o r t h e dry land group. The h ighe r p ropor t ion of income from o t h e r farm sources f o r t h e o t h e r groups i n d i c a t e s a g r e a t e r i n t e r e s t i n d i v e r s i f i c a t i o n .

Table No. B3

GOOBURRUM : FINANCIAL SITUATION OF GROWERS : AVERAGE PER

PROPERTY : 1968-69 TO 1972-73

Net

Present Stand- Area F arm

I r r i g a - No. of Net a rd o f Income Year t i o n Farm Deviat- Assign- pe r 113

Capacity 1ncome ion ment Assign- ment

% Gross F arm Income from Sugar

Gross Sugar

Inconie per h a Assign- ment

Total P a r t i a l Dry land Tota l P a r t i a l Dry land Total P a r t i a l Dryland Total P a r t i a l Dry 1 and Total P a r t i a l Dry land

WOONGARRA : FINANCIAL SITUATION OF GROWERS : AVERAGE

PER PROPERTY : 1968-69 TO 1972-73

Net Farm % Gross Gross Present Net Stand- Area

Income F arm Sugar

Year I r r i g a - No. o f a r d o f Farm per ha Income Income t i o n Samples Devia- Assign- Income Assign- from pe r ha

Capacity t i o n ment ment Assign- Sugar ment

1968-69 To ta l P a r t i a l Dry land

1969-70 To ta l P a r t i a l Dry l and

1970-71 To ta l P a r t i a l Dry land

1971-72 Tota l P a r t i a l Dry land

1972-73 Tota l P a r t i a l Dry1 and

Gin Cin

Total i r r i g a t i o n i s a new concept i n this area and, consequently, the re were i n s u f f i c i e n t sample observations i n the ea r l y years of t he survey. Hence, it i s d i f f i c u l t t o draw any va l i d comparisons of t o t a l i r r i g a t o r s i n r e l a t i o n t o t h e other groups, p a r t i c u l a r l y as d i f ferences i n t he s i z e of assignments confuse t h e i s sue . However, i n terms of average t o t a l income from svgar per hectare of assignment, t h e general r e la t ionsh ips of t o t a l being g r ea t e r than p a r t i a l o r dryland i n t u rn seem t o hold, The more l uc r a t i ve o the r farm en t e rp r i s e s on dryland proper t i es than on p a r t i a l l y i r r i g a t e d p rope r t i e s appears t o account f o r the high average n e t farm income per hec ta re on dryland proper t ies .

The 1969 drought had a severe impact on incomes with t h e p a r t i a l group averaging $220 ne t farm income and t h e dryland group averaging minus $1,882. The associated high l eve l s of devia t ion from the average suggest t ha t many proper t i es endured q u i t e l a rge negat ive incomes. Af te r t he drought, incomes rose considerably i n common with t h e r e s t of t h e scheme area; the r e l a t i v e l y low y i e ld s i n 1970-71 being compensated by increased p r ices .

Income from o ther farm en te rpr i ses was important t o a l l groups espec ia l ly t he t o t a l and dryland ca tegor ies which derived 15%-30% of t h e i r average t o t a l farm income from sources o ther than sugar.

Bingera

Given t he low sample numbers of t o t a l i r r i g a t o r s (none i n 1968-69) and t he l a rge standard devia t ions , t he r e appears t o be no s i gn i f i c an t d i f ference between t o t a l and p a r t i a l groups i n terms of average ne t farm income, n e t farm income per hec ta re and sugar income per hectare . However, the con t ras t between these groups and t he dryland group i s qu i t e pronounced with the exception of 1965-69, when dryland marginally exceeded the p a r t i a l r e s u l t s . Incomes f e l l sharply during 1969-70 owing t o drought condit ions and then ro se subs t an t i a l l y i n l i n e with the r e s t o f t he scheme area. The proport ion of t o t a l income from sugar f luc tua ted considerably but i n general it seems t ha t the i r r i g a t e d groups were l e s s dependent on sugar than t h e dryland cane growers.

Tahle No. 85

G I N GIN : FINANCIAL SITUATION OF GROWERS : AVERAGE

PER PROPERTY: 1968-69 TO 1972-73

Net Gross Present Stand - Area % Gross

No. of Net Farm Sugar I r r i ga - ard of F arm

Year Sam- Income Income t ion Devia- Assign- Incoilie

p les Income per ha per ha Capacity t ion merit Assignment Assign- from

Sugar inent

Total P a r t i a l Dry 1 and Total P a r t i a l Dry1 and Tota l P a r t i a l Dry land Total P a r t i a l Dry land Total P a r t i a l Dry l and

Table No. B6

BINGERA : FINANCIAL SITUATION OF GROWERS : AVERAGE

PER PROPERTY : 1968-69 TO 1972-73

Gross Present Stand- Area Net S u g ~ r

% Gross Net

I r r i g a - a r d o f Farm Income Farm

N o . o f Farm Year t i o n Deviat- Assign- Income pe r ha Income

Income from Capaci ty i on ment pe r ha Ass ign- Sugar ment

T o t a l P a r t i a l Dryland To ta l P a r t i a l Dry l and To ta l P a r t i a l Dryl and To ta l P a r t i a l Dryl and Tota l P a r t i a l Dry land

Note: Abbotsford and Givelda systems a r e included i n Bingera system.

Overall average incomes i n both absolute and r e l a t i v e terms have been higher f o r t o t a l l y i r r i g a t e d farmers than f o r t h e p a r t i a l o r dryland groups. The e f f e c t s of t h e 1969 drought appear t o have been more severe i n t h e Isis region than t h e remainder of t he proposed scheme area. Average n e t farm income and n e t farm income per hec ta re f o r p a r t i a l i r r i g a t o r s and dryland growers were lower i n Isis than i n any other system i n 1969-70.

Since 1969-70 n e t farm incomes f o r a l l groups have increased rap id ly culminating with qu i t e subs t an t i a l r e s u l t s i n 1972-73 when Isis M i l l production exceeded peak by 43%. This rapid growth i s due t o subs tan t ia l increases i n y i e l d and a reas harvested (as shown i n Appendix A), combined with r i s i n g p r i c e s f o r both No. 1 and No. 2 Pools. I t i s i n t e r e s t i n g t o note t h a t i n 1971-72 and 1972-73 average n e t farm incomes f o r a l l groups were higher than t h e i r respect ive c l a s s i f i c a t i o n s i n t he o ther systems. In p a r t t h i s can be explained by Isis having assignments t ha t a r e r e l a t i v e l y l a rge on average although, wi th a few exceptions, Isis enjoyed higher ne t farm incomes pe r hec ta re and sugar income pe r hectare than o ther systems.

Apparently the re i s l i t t l e d ive r s i f i c a t i on on p roper t i es wi th sugar assignments i n Is is a s income from sugar provided over 90% of average t o t a l farm income i n a l l years except 1969-70 f o r p a r t i a l i r r i g a t o r s and dryland producers.

Table No. B7

ISIS : FINANCIAL SITUATION OF GROWERS : AVERAGE PER

PROPERTY : 1968-69 M 1972-73

Gross Gross Present Number Net Stand- Area of Farm Sugar Net F arm

a r I r r i ga t i on of Farm ard Assign- Income ~ Income Income Capacity Samples Income from pe r ha Devia- ment per ha

t ion A s s ignmerlt Sugar Assignmerit

68-69 Total P a r t i a l Dryl and

69-70 Total P a r t i a l Dry land



72-73 Total P a r t i a l Dry land

Appendix C

P o t e n t i a l Loss of Product ion wi thou t t h e Scheme f o l l owi ng Underground Water R e s t r i c t i o n s

Due to t he expansion i n use of t h e underground water resources over t he pa s t decade, mainly f o r i r r i g a t i o n purposes but a l so fo r t he Bundaberg Ci ty Water Supply and f o r sugar mill ing operations, t he water l eve l s i n t he aqu i fe r s have f a l l e n t o very low leve l s during t he d r i e r periods with evidence o f s a l t water in t rus ion occurring. This indicated t h e need f o r e i t h e r recharging t he aqu i fe r s a r t i f i c i a l l y , o r r e s t r i c t i n g t h e t o t a l water usage t o t he estimated s a f e annual y ie ld from t h e system.

Invest igat ions were ca r r ied out a s t o t he f e a s i b i l i t y of a r t i f i c i a l recharge, and although t h e r e s u l t s indicated t h a t it would be technical ly possible, the high cap i t a l and operating cos t s made the proposal uneconomic. I t was concluded t h a t i t would be cheaper and simpler t o supply surface water d i r e c t l y t o t he lands now using ground water than t o undertake a r t i f i c i a l recharge.

Annual use of water f o r i r r i g a t i o n purposes was estimated i n 1969 t o be i n t he range of 52 OOOto 70 000 acre f e e t (64 141 t o 86 343 megalitres) with a fu r the r 5 300 ac r e f e e t (6 537 megalitres) being used f o r urban and i n d i s t r i a l purposes. If Phase I of the present surface water supply scheme had not proceeded, then it would have been necessary t o r e s t r i c t water usage t o the sa fe annual y ie ld of t h e underground aquifers , which

' has been estimated a t 45 000 ac r e f e e t (S5 507 megali tres) per annum. The I r r i g a t i o n and Water Supply Commission s t a t e s t h a t t h i s would have been achieved by r e s t r i c t i n g the usage t o 1 acre foot per acre (3 megali tres per hectare) on areas f o r which i r r i g a t i o n l icences a r e current ly held.

In 1973 t h e IWSC estimated t ha t a t o t a l o f approximately 23 307 hectares was being i r r i g a t e d using underground water, a s follows:

10 228 hectares - t o t a l l y i r r i g a t e d sugar (TGA) 10 888 v - p a r t i a l l y i r r i g a t e d sugar (TGA) 1 327 l' - other crops on sugar p roper t i es

864 l! - other crops on non-sugar p roper t i es

23 307 " - TOTAL

The area o f sugar cane a c t u a l l y i r r i g a t e d d i f f e r s from the above f igures because not a l l o f the assigned area (TGA) i s harvested o r i r r i g a t e d , and i n the case of p a r t i a l l y i r r i g a t e d farms, some of t he area harvested i s dryland. An est imate of 12 041 hectares of sugar cane a c t u a l l y being i r r i g a t e d a t present was derived from BAE survey data on area harvested and est imates by m i l l cane inspectors o f t he ac tua l a reas i r r i g a t e d on p a r t i a l l y i r r i g a t e d assignments. Presumably, t h i s would correspond with the l icensed a r ea which would receive only 3.0 megali tres pe r hectare if water r e s t r i c t i o n s were introduced. However, because current water use va r ies it i s impossible t o der ive a production function r e l a t i n g sugar y i e ld s t o water usage and then deduce the po ten t ia l l o s s of production following r e s t r i c t i o n s .

In ca lcula t ing the po ten t ia l value production loss , the following assumptions were made:-

A: General Assunpt ions

( i ) Total use of underground water including urban and i ndus t r i a l use, would be r e s t r i c t e d t o 45 000 ac re f e e t (55 507 megali tres) per annum.

( i i ) For crops o ther than sugar grown on sugar proper t ies , usage w i l l continue a t 2 acre f e e t per acre (6.1 megali tres per hectare) per annum with corresponding reductions i n t h e amount of water ava i l ab le f o r t he sugar on the property, i . e . 3279 ac res X 2 ac re f e e t = 6558 ac r e f e e t (8089 megali tres) .

( i i i ) For crops other than sugar grown on non-sugar farms, t he r e s t r i c t i o n of 1 acre foot per ac re w i l l apply. ( i .e . 2137 ac res X 1 ac re foot = 2636 megali tres) .

(iv) The current usage of 5000 ac re f e e t (6167 megali tres) by t he Bundaberg Ci ty Council and 2000 ac r e f e e t (2417 megali tres) by sugar m i l l s w i l l continue.

(v) The remainder of the 45 000 acre feet (55 507 megali tres) a f t e r deduction of the above items i s ava i lab le f o r sugar cane.

Total Use 45 000 ac. f t . (55 507 M1) Less:

o ther crops on sugar farms - 6558

other crops on non- sugar farms - 2137

urban and m i l l s - 7000 15 695 ac. f t . (19 359 M1)

Remainder ava i l ab le f o r sugar cane 29 305 I' (36 148 M1)

(vi) The areas t o remain on underground water a f t e r t he scheme i s implemented a r e t o be metered, and t he cos t of metering t h i s a t $221,000, i s included i n t he publ ic c ap i t a l cos t s of Phase 1 of t h e scheme. However, i f the scheme did no t proceed, t he whole of t he ex i s t i ng underground a r ea would have t o be metered i n order t o enforce t he water r e s t r i c t i o n s . The cost o f doing t h i s has been estimated a t $323,770, using t h e scheme metering cos t s expressed on a per hec ta re bas i s , a s an ind ica t ion of t he l i k e l y cos t s involved. The cos t of metering t h e undergrcund a r ea a l ready included i n t he publ ic c ap i t a l cos t s has been excluded i n t h i s sec t ion of t he ana lys i s t o avoid double counting.

Assumptions f o r Sugar Product ion

( v i i ) Present production of sugar on t he whole of t he I underground assigned a reas can be calcula ted using da ta

from the BAE survey. This has been calcula ted a t

l 188 379 tonnes.

( v i i i ) I t i s assumed t h a t 2 a c r e f e e t (6.1 megali tres p e r hectare) of water w i l l give a response i n t he range 1.4 to 1.7 tons of sugar pe r a c r e (3.5 - 4.3 tonnes p e r hectare) harvested, and t h a t t he response function i s l i n e a r i n t h i s range ( i . e . 0 - 2 ac re f e e t ) , then 1 acre foot of water w i l l give a response o f 0.7 t o 0.85 tons (1.75 - 2 . l 2 tonnes pe r hectare) .

( ix) Production following water r e s t r i c t i o n s i s calcula ted by es t imat ing the dryland production which would be obtained from an equivalent area harvested, and adding t o it t h e response t o 29 305 ac r e f e e t (36 147 megali tres) of water.

Dryland production, using BAE survey data, i s calcula ted t o be 151012 tonnes. The response t o 29 305 acre f ee t (36 148 megali tres) of water i s calcula ted a s follows: - (a) 1.7 tons per ac re (4.3 tonnes pe r hectare) l eve1 :

29 305 X 1.7 = 24 909 tons

2 (25 309 tonnes)

(b) 1.4 tons per ac re (3.5 tonnes per hectare) level :

29 305 X 1.4 = 20 513 tons

2 (20 842 tonnes)

Thus t o t a l production a f t e r water r e s t r i c t i o n s , i s estimated t o be 173 536 tons (176 321 tonnes) (high response level) and 169 140 tons(l71 855 tonnes)~low response level) .

(X) The di f ference between t he present production a t 188 379 tonnes (calculated i n ( v i i ) ) and the production f igures i n section (ix) would represent t h e l o s s i n production resu l t ing from water r e s t r i c t i ons .

i . e . 12 058 tonnes (high response level) o r 16 524 tonnes (low response level)

(xi) Under t h e fu ture scheme arrangements, the areas cur ren t ly being i r r i g a t e d from underground water w i l l come under various i r r i g a t i o n systems, v iz . Woongarra, Gooburrum, Bingera, Pr iva te Pumpers and Underground. The above production l o s s est imates w i l l be spread over these systems and a lso m i l l a reas , and a de ta i l ed breakdown i s given i n Tables No. C 1 and No. C2.

Table No. C - l

PRODUCTION LOSS BY SYSTEM (Tonnes)

System Response Level

1.7 tons (4.3 tonnes)

1.4 tons (3.5 tonnes:

Underground

Woongarra

Goo burrum

Pr iva te Pumpers 194 2 66

Bingera 2 86 391

Total 12 058 16 524

Table No. C-2

PRODUCTION LOSS BY MILL AREA (Tonnes)

M i l l Area

Response Level



M i l l aquin

Qunaba

Fairymead

Total --

Note: These losses a l s o occur i n t he present Bingera M i l l Area, however, it was assumed that, following changes i n areas associa ted with the Gin Gin closure, t h e whole of t h e l o s s w i l l be i n Fairymead.

(x i i ) The value of t h e l o s s i n sugar production, o f f s e t by a reduction i n growing and mil l ing costs , was used i n t he analysis . The r e s u l t s a r e shown i n Table No. C 3 using a sugar p r i ce o f $90 although the f u l l range of p r i c e s - were used i n t h e analysis .

Assumptions for Other Crops

Refer t o assumptions i n Pa r t I V .

- P

Table No. C 3

VALUE OF LOSS OF PRODUCTION DUE TO WATER RESTRICTIONS

(Dollars)

1.7 ton (4.3 tonnes) 1.4 ton (3.5 tonnes) Response Level Response Level

Future Scheme Value of Loss t o : Value of Loss t o : Water Supply Total Total

Sys tem Cane Other Crop Loss Cane Other Crop Loss F armer S Producers F armer S Producers

Underground 326,763 49,388 6,431 382,582 447,802 66,471 6,431 520,704

302,861 48,000 27,521 378,382 415,070 65,446 27,521 508,037 I Woongarra CI N

Gooburrum 66,067 9,561 24,690 100,318 90,559 12,696 24,690 127,945 W

I

Private Pumpers 11,418 1,691 N i l 13,109 45,662 2,258 N i l 17,920

Bingera 17,009 2,486 N i l 19,495 23,304 3,304 N i l 26,617

Total 724,118 111,126 58,642 893,886 992,397 150,184 58,642 1,201,223

- - - P

: Sugar Pr ice = $90/tonne.

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