6 Estimated Financial Benefits
6.1 INCREASED YIELDS
The following crop yield information was obtained from the Van der Klundert’s:
- The average yield for each of the crops over the four year period 1993/94 to 1996/97 (generally average to wetter years).
- The yield for each crop for the 1997/98 year (a very dry year).
- The anticipated yield for each crop if the Option 3 was implemented.
This information then enabled the yield increase for each crop, if Option 3 was implemented, to be estimated for both average to wetter years and a dry year. Table 4 details the yields for average to wetter years, a dry year and the anticipated yield under the upgraded irrigation system.
Table 4: Crop yield data
| Crop | Yield for average |
Yield for a |
Anticipated yield with irrigation upgrade |
| Brassica seed | 1.3 |
1.3 |
1.3 |
| Cereals | 6.0 |
6.7 (a) |
8.0 |
| Clover seed | 0.4 |
0.2 |
0.4 |
| Grass seed | 1.2 |
1.2 |
1.4 |
| Peas – process | 7.0 |
4.8 |
7.0 |
| Peas – dry | 4.0 |
4.0 |
4.0 |
| Potatoes | 55.0 |
50.0 |
55.0 |
| (a) In the dry 1997/98 year the cereal crops received priority watering resulting in a greater yield than for the average to wetter years. | |||
Table 5 details the anticipated increase in yield under the upgraded irrigation system for both average to wetter years and a dry year. There is no anticipated yield increase for the brassica seed crop. This is because it is autumn sown and only requires watering until November, and hence its yield is less likely to be affected by limited irrigation system capacity and seasonal rainfall. It has been assumed that there would be no yield increase for the dry pea crop. The rational for this is that with a limited irrigation system capacity this crop would have lower priority for watering compared to the other crops.
Table 5: Anticipated increased yields under the upgraded irrigation system (Option 3)
| Crop | Yield increase for |
Yield increase for |
| Brassica seed | 0 |
0 |
| Cereals | 2.0 |
1.3 |
| Clover seed | 0 |
0.2 |
| Grass seed | 0.2 |
0.2 |
| Peas – process | 0 |
2.2 |
| Peas – dry | 0 |
0 |
| Potatoes | 0 |
5.0 |
Gross margin figures for the various crops were obtained from Farming for Profit – Crop and Livestock Gross Margins July 1997 published by Canterbury Agriculture Ltd Agribusiness Consultants. These gross margin figures were adjusted to include the actual cost of irrigation water on this property. The cost of irrigation water included the cost of electricity and the cost of labour to shift the irrigators. The gross margin figures for potatoes were obtained from Mr K Muscroft-Taylor of Agriculture NZ Ltd, Darfield.
The annual cost of capital for Option 3 has been based on a life of 15 years and an interest rate of 10 percent. Depreciation of the new equipment has been based on a straight line rate of 7 percent.
The estimated increased gross margins for both the average to wetter years and a dry year are detailed in Table 6. Table 6 shows that the increased financial benefits of upgrading the irrigation system as outlined in Option 3 ranges from $7,220 + GST per annum for average to wetter years up to $46,530 + GST per annum for a very dry year.
Table 6: Estimated increase in gross margins under the upgraded irrigation system (Option 3) (all figures GST exclusive)
| Crop | Increased gross margin |
Increased gross margin |
||
Increased gross margin |
Increased |
Increased gross margin |
Increased |
|
| Cereals | 337 | 13,817 | 187 | 7,667 |
| Clover seed | 924 | 11,088 | ||
| Grass seed | 166 | 6,806 | 166 | 6,806 |
| Peas – process | 698 | 11,866 | ||
| Potatoes | 1,250 | 22,500 | ||
| Sub totals | 20,623 | 59,927 | ||
| Less debt servicing (b) | 8,743 | 8,743 | ||
| Less depreciation (c) | 4,655 | 4,655 | ||
| Totals | 7,225 | 46,529 | ||
| (a) Based on the areas
of each crop grown as detailed in Table 2 (b) Based on a life of 15 years and an interest rate of 10% (c) Based on a straight line rate of 7% |
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