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2. Methodology

2.1 Waterbodies and area

 The list of waterbodies examined in this study was developed by MAF Policy regional staff, and the interdepartmental Waters of National Importance (WoNI) team. The list includes all freshwater waterbodies, including rivers, lakes and underground water reserves5, which support large areas of irrigation in each region or are under active investigation to supply new irrigated areas in the next 20 years.

For each waterbody, the area of irrigation served was identified from a combination of existing maps, Agricultural Production statistics, MAF regional staff and their contacts in regional councils. These areas are shown in Table 1. The full breakdown of the schemes served by each waterbody is contained in Appendix 1.

Table 1: Waterbodies investigated and area irrigated

 The potential irrigated areas were from a survey of the 21 community scheme development proposals currently at various stages of investigation. The scheme names are in Appendix 1. The survey was conducted by MAF regional staff by face to face interview with the scheme promoters, and included questions identifying the current land use and expected irrigation development and land use in 10 years time. In some cases, scheme promoters indicated the irrigated area would not be fully developed. Given this study is of potential in the next 20 years, in these cases the area to be irrigated has been increased to the full command area of the scheme.

Note also that the potential for new irrigation is limited in some cases by existing legislative instruments for example Water Conservation Orders. The potential areas in this study therefore reflect these restrictions, rather than the potential of the waterbody to supply enough water to irrigate other areas.

The irrigated areas and abstraction6 points are also electronically mapped in GIS format to enable the results to be attributed to specific reaches of the waterbodies, which will assist in the next stage of optimisation with other values of those waterbodies. Examples of the maps are included in Appendix 2.

2.2 Land Use

Land use of the irrigated land was determined using AgriBase to identify the farm types within the irrigated areas. In most cases, not all the land within the mapped area is irrigated, so assumptions were made by regional MAF staff about the farm types identified. The land use most appropriate for the land in the absence of irrigation was a judgement made by MAF regional staff.

2.3 Prices and costs

The value of irrigated production and the value of production from the dryland use that would be most likely if there was no irrigation were derived from MAF regional staff and their contacts in agribusiness and industry. Details of gross margins7 are in some cases subject to commercial sensitivity constraints and have been given to MAF staff on that basis. A summary of gross margins and fixed costs appears in Table A3.5 in Appendix 3. The price assumptions are summarised in Table 3.

Table 3: Price assumptions used

Valuing each waterbody follows a “with minus without” irrigation approach, adjusted for changes in farm type and scale. The result is an indication of the contribution irrigation from each waterbody makes to farm-gate GDP. Appendix 3 contains a full description of the methods considered and the reasons why this approach was adopted. Key assumptions by waterbody and land use are described in Section 2.4 with detailed assumptions in Appendix 4.

The formula is:

Farmgate GDP due to irrigation = GDP with irrigation – GDP without irrigation.

= (irrigated land use mix  x (irrigated GM – fixed costs)) – (dryland land use mix x (dryland GM – fixed costs)).

The gross margins were determined for farm types and regions throughout New Zealand by regional MAF Policy staff and their contacts. The gross margins are those for the 2002/03 season. A single season was used because the irrigated land use data available related only to that year. Prices in this year were at neither particularly high nor low levels compared to preceding years and the forecasts for future prices9. The result is therefore for a single year, but can be considered indicative of the order of magnitude of farmgate GDP attributable to irrigation.

The “without irrigation” land use is that which would now exist if irrigation had not been developed, rather than if irrigation was no longer available for that particular land. In each case, the determination of land use without irrigation was a judgement based on physical factors such as soils and climate, but also on the commercial realities of current primary production in New Zealand. For example, while vegetable crops can be grown successfully on dryland, in most cases the market demands for consistency of yield and quality means that without irrigation, that particular land use would not be commercially viable.

As a result, some land uses are likely to have occurred with or without irrigation in parts of some regions, although with lower Gross Margins e.g., dairy farming is assumed to have occurred on heavy soils in Canterbury where it currently exists. Likewise, grapes are assumed to be grown in some parts of Hawke's Bay and Marlborough even under dryland as the profitability is considerably higher than the next most valuable land use.

The revenue and cost information was derived from gross margins representing average current productivity levels by land use and region. These were adjusted to account for the different fixed costs associated with different farm types or scales, using primarily data from MAF’s Farm Monitoring models.

The same regional financial information was applied to each waterbody in the region. To improve these estimates, full budgets for irrigated and non-irrigated systems under each land use served from each waterbody should be created, but this was beyond the scope of this study.

2.4 Key Assumptions

The key assumptions adopted in the calculations are: