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Farm Institute Insights Vol. 7 | No. 3 | July 2010

Farm Institute Insights - July 2010

FEATURE ARTICLE : The neglected economics of water policy

Driving through central California – and in particular the San Joaquin Valley – one is immediately struck by a number of things. Firstly, the area is technically a desert, which experiences less than 10 inches (250 mm) of rainfall per year, and has many areas receiving less than five inches (125 mm). Secondly however, because of the availability of irrigation water the area is a highly productive farming region that is the powerhouse of Californian agriculture, which in turn is the leading agricultural state of the USA. Californian agricultural production was valued at US$36.2 billion in 2008, 11.2% of the US total.

To put this in perspective, it exceeds the gross annual agricultural output of Australia. California leads US production in dairy, and produces nearly half of US-grown fruits, nuts and vegetables – virtually all of which are produced under irrigation. Cities such as Fresno (with over half a million people) have an economy that is largely based on agriculture, and major industries based on cotton, grains, dairy and horticultural products drive the economy of the entire valley. Because of its scale and concentration, the San Joaquin Valley is a very stark example of the enormous economic wealth that can be generated from agriculture when irrigation water is available.

Australian irrigation areas such as those in the Murray-Darling Basin are not as geographically concentrated, and are also much further removed from major population centres, which perhaps explains why the economic implications of water policy decisions seem to be largely ignored in current debates and processes. Economic impacts are also given scant attention under Australian Government water legislation (the Water Act 2007), which requires that economic and social considerations are given a much lower priority than environmental considerations, when it comes to making decisions about the future availability of water for agriculture.

This lack of balance in decision-making processes, in conjunction with a paucity of long-term monitoring data about environmental and socioeconomic implications of water policy decisions, will ensure that water policy will remain a highly contentious and much debated issue for an extended period, creating great uncertainty and stress for those regions of Australia that have economies heavily dependent on irrigated agriculture.

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REGULAR FEATURES

Institute Activities

A brief overview of the Institute’s key activities from May to July, and the John Ralph Essay Competition – $2500 prize.

Following on 

In 2007, AFI published a Research Report entitled Productivity Growth in Australian Agriculture: Trends, Sources, Performance. ‘Following On’ revisits the productivity challenge in light of the current review of rural R&D Corporations by the Productivity Commission.

Farm Policy Progress

A review of some Australian and international farm policy developments. In this edition: Kiwis feeling the ETS pinch; 40% rise in food prices predicted; approval system for GM crops to be overhauled; EU carbon tax proposal delayed; 2012 Farm Bill; Mercosur trade talks scuttled by Argentine food imports?; and Ohio farmers and Humane Society strike a deal.

Institute Research and Events

An overview of the Institute’s recent Research Report: Making Decisions About Environmental Water Allocations and notification of the Agriculture Roundtable Conference.

Farm Policy Journal

The August edition of the Farm Policy Journal examines the challenges created by a reduction in the availability of agricultural inputs for farming in the future.