Water use efficiency and profitability on an irrigated dairy farm in northern Victoria: a case study

Abstract

A study was conducted to look at water use efficiency and profitability on an irrigated dairy farm in northern Victoria. For this case study farm, an economic evaluation was performed for various development options that could result in higher water use efficiency, increased profit, and meet the farm owners' objectives. Water use efficiency was defined as the amount of milk (kg milk fat plus protein) produced from pasture per megalitre of water (irrigation plus effective rainfall).

The case study farm data indicated that between 1995–96 and 1998–99 there was no simple, direct association between water use efficiency and profitability. The development options considered included building a new dairy and increasing herd size and either increasing the area of irrigated pasture or intensifying on the existing irrigated area. The likely water use efficiency and economic efficiency were estimated for the various development options. The development budgets suggested that intensifying on the existing irrigated land was the most attractive option, if the predicted improvements in water use efficiency were achieved. This option had an internal rate of return of 64%, broke even after 5 years and was compatible with the objectives of the farm owners.

Options that resulted in simultaneous increases in water use efficiency, profitability and labour efficiency appear to be more likely to be adopted than options that focus solely on increasing water use efficiency.