Goyder Water Forum, University of Adelaide, 4 th July, 2017

Transcription

1 Associate Professor Sarah Wheeler Centre for Global Food & Resources Irrigator farm exit intention in the southern Murray-Darling Basin, to Goyder Water Forum, University of Adelaide, 4 th July, 2017

2 Background Water reform in Australia is held up as a leading example to the world Irrigators have benefited considerably from property right and institutional changes but this has been coupled with intense period of change and reform and the increasing need to manage uncertainty and variability Over time there has been a shift in the risk burden from water authorities to irrigators This presentation explores what drive irrigator farm exit intentions in the Murray-Darling Basin University of Adelaide 2

3 Wider Picture and Objectives. There continues to be a wider social debate about what drives farm exit, especially in the MDB Until now, there has been no large-scale study that has specifically focussed on irrigator farm exit influences. We sought to understand: 1. Does greater water scarcity increase irrigators intention to exit the farm? 2. Is greater farm financial stress associated with greater farm exit intentions? 3. Are the drivers of exit different in times of drought? University of Adelaide 3

4 Past water reform Constitution 2004 National Water Initiative & The Living Murray First Step 1914 River Murray Commission 2007 Commonwealth Water Act & Murray-Darling Basin Authority 1987 Murray-Darling Basin Commission 2008 COAG Agreement 1990 s Cap on Diversions & Water markets 2012/13 Murray-Darling Basin Plan 4

5 Study Area southern MDB ABARES on-farm survey data used, from to in the southern MDB 2,840 observations over the time period, for three main industries: dairy, horticulture and broadacre

6 Methodology: Intentions to Exit The following equation was estimated for intentions to sell the irrigation farm: Selli* = Xiβ +ɛi (1) where: individual irrigators are indexed by i, Sell i * is a latent variable ranging from to, X i is a vector of independent variables including rainfall and water related variables, β is a vector of parameters to be estimated and ɛ i is a classical error term. The observed binary variable for plan to sell is 1 if Sell i *>0 and 0 if Sell i * 0. Penalised maxiumum likelihood estimation used for binary logit model Equation (1) was estimated for: i) the whole sample; ii) sub-samples by drought and non-drought years; and iii) sub-samples by industry (horticultural industry by drought and non-drought years, and broadacre and dairy industries for the whole period). University of Adelaide 6

7 Farm Exit Influences: Four main groups 1. Socio-economic Irrigator Characteristics: Age, education 2. Farm Characteristics: Farm area (irrigated and dryland); water entitlements owned (by security); farm debt (and debt squared); farm capital (and capital squared); off-farm income; rate of return; net farm income; industry (broadacre, dairy, horticulture) 3. Water characteristics: Winter rainfall; drought period; water allocations received (by security); sold water entitlements in past five years; water market permanent and temporary prices; having sold water entitlements in the past (significant in drought and nondrought times) 4. Regional characteristics: Location (region in MDB); distance to town; SEIFA index of relative advantage/disadvantage University of Adelaide 7

8 Results: Farm Exit Intentions over time Drought years Non-drought years No plan to exit in next 3 years (n) Plan to exit in next 3 years (n) Plan to exit in next 3 years (%) University of Adelaide 8

9 Results: Farm Exit Intentions over time All Years Drought Non-Drought Age + *** + *** Age squared - *** - *** High security allocation % - * Sold water entitlement + *** + ** + *** Farm debt - * - ** Farm debt squared + ** + ** Off-farm income + * + *** Rate of return - ** - *** NSW Murray + ** + ** Goulburn - * Distance to town - * Winter rainfall - * - ** Broadacre - ** - *** University of Adelaide 9

10 Conclusions Weak evidence to suggest periods of drought increase farm exit intentions, but stronger evidence to suggest exit intentions increases by those who have suffered the most in terms of water scarcity in periods of non-drought Strong evidence that the influences on farm exit intention vary, depending on the time-period (drought versus non-drought) It is those farms struggling with very high debt levels and poor rates of return are the ones forced to exit in drought times Age is only significant in periods of drought No significant relationship found with irrigated and/or dryland farm area and exit intentions. This supports changes made to the Small Block Irrigator Exit grant package in 2009 (changed from 15 to 40 hectares). Raises questions about how best to structure public support for farms University of Adelaide 10

11 Thank you

12 Jul-93 Feb-94 Sep-94 Apr-95 Nov-95 Jun-96 Jan-97 Aug-97 Mar-98 Oct-98 May-99 Dec-99 Jul-00 Feb-01 Sep-01 Apr-02 Nov-02 Jun-03 Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16 $/ML ML Traded Eg: Water market Dynamics Goulburn Irrigation District 3, , , , , GMID Entitlement Traded GMID Allocation Traded GMID HS Entitlement Price GMID Water Allocation Price

13 Results: K10 Score: Psychological Distress % Psychological distress level Aust. Pop All Aust. nonfarmers All MDB nonfarmers All Aust. Farmers MDB farmers Sthn MDB Irrigators Hort. Irrigators Broadacre Irrigators Dairy Irrigators Livestock Irrigators (n= 49794) (n=7250) (n=555) (n=223) (n=998) (n=315) (n=270) (n=187) (n=225) Low Moderate High Very high Pearson Chi 2 statistic 4 : ** University of Adelaide 13

14 Sample % of irrigators in Local Government Areas that are at high/very high psychological distress levels Legend no data Loxton Waikerie Wakool Griffith University of Adelaide 14

15 Results: Associations between Psychological Distress and Key Stressors % 100 % of Irrigators under High/Very High Distress levels naming Individual Stressors Financial Drought Water availability Commodity price Time Electricity irrigation costs Labour supply/cost Bank pressure Family succession Community pressure University of Adelaide 15

16 Results: Key Stressors by Industry % Stressors Horticulture (n=315) Broadacre (n=270) Dairy (n=187) Livestock (n=225) Pearson Chi 2 Financial ** Time * Drought *** Water availability *** Community pressure Labour supply/cost *** Electricity irrigation costs *** Commodity price *** Bank pressure ** Family succession University of Adelaide 16

17 Results: Key associations found with farm/farmer variables Very high psychological distress was associated with: Being female Having a lower education Having a smaller farm (total hectares) Owing smaller water entitlements (ML in total) Being younger Being in a poorer financial state (eg: having less farm net income, more debt, smaller land value) Horticultural industry Location in Riverland, Wakool, Griffith University of Adelaide 17

18 Results: Key associations found with irrigator attitudes Very high psychological distress was associated with: Being less environmentally orientated Being less supportive to the government in terms of their view of the MDBA or the Basin Plan Being less favourable towards water trading Being less satisfied with the irrigation infrastructure program Being less optimistic about their future in the region Knowing more farmers with mental health issues Being three times more likely to plan to leave the farm in the next five years University of Adelaide 18

19 Water as an integral part of distress.. There s so many things, but mainly I worry about having enough water [VIC dairy irrigator, age 41]. University of Adelaide 19

20 Water as an integral part of distress.. I can never figure out what is going to happen with the water. I m thinking about having to change entire farming production to deal better with the unpredictability of water supply [NSW beef irrigator, age 63]. University of Adelaide 20

21 Water as an integral part of distress.. Water is the biggest trouble for me. We can have hungry cows and it costs us money to feed them, yet the government puts loads of water out to sea or the environment rather than give it to us. We have no certainty on water and pricing any more. The whole original point of dams and rivers was for farmers, but the rivers are overflowing and sometimes I m still paying a high price for my water. It makes no sense [VIC mixed-farmer, age 63]. University of Adelaide 21

22 Water as an integral part of distress.. The way water is allocated is breaking people. Investors should never be allowed to own water without land; when they do, the investors then control the price of water. The price is then too high and the farmers cannot recoup that price from what they make from their produce [VIC dairy irrigator, age 65]. University of Adelaide 22

23 Water as an integral part of distress.. It is the meddling of the government; buyback policies leading to the reduced amount of water availability, and hence the increased temporary water price [SA grape/olive producer, age 52]. University of Adelaide 23

24 Water as an integral part of distress.. Without water our community will not survive. It will die because there is no work and no farming. The place is a desert on so many levels without water; no schools as no families with children, less families as farmers leave the community, no sporting structures [NSW wine-grape grower, age 69]. University of Adelaide 24

25 Water as an integral part of distress.. It s like a government-induced drought in our area. Our region is underpinned by agriculture and we are very much at risk of losing it because of availability of water due to the MDB Plan [VIC dairy irrigator, age 63]. University of Adelaide 25

26 Where to from Here? Key Findings. Distress is spatially located across industry and region Irrigator psychological distress at severe high/very high levels is recorded significantly higher than Aust. population or farmers in general Although finance is the main overall driver of psychological distress, water scarcity/variability plays ongoing and intertwined role Early policy findings support the need for targeted schemes (eg: exit packages for small irrigators) and for policies that help irrigators adapt and avoid lock-in (e.g. improve water markets, support water buybacks, remove irrigation termination fees, and reduce irrigation infrastructure subsidies) More work needed. University of Adelaide 26