Pipes and risers and improved
border-check irrigation system:
is it a good investment?
This fact sheet looks into the benefits and costs of
investing in improving surface irrigation system as
part of the Farm Water Program on a case study
property. The study concludes that in this case, the
investment can be economically viable, with or without
financial assistance from the Farm Water Program.
However, the magnitude of the benefit is sensitive to
the production increase from the investment.
The case study highlights that the economic
desirability of investing in irrigation improvements
depends on the individual landowner's ability to
improve production.
Case study description
The property is a 260 hectare dairy farm in the
Shepparton Irrigation Region of northern Victoria.
The landowner also operates a 65 hectares out block
property growing annuals. The dairy herd comprises
750 milking cows.
The project is part of Farm Water Round 2 which
covers 70 hectares in the home block, of which 51
hectares are under automated pipes and risers and
19 hectares are under improved border check
irrigation. The project also includes 11 hectares of
laser grading on bays serviced by the pipes and riser
system. With the project, irrigation water is pumped
to all the project area except 19 hectares under
improved border check irrigation system.
“Without” irrigation system upgrade
Without the upgrade, 11 hectares were
opportunistically irrigated but now kept as dry-land
area growing rye grass; 15 hectares of irrigated
annual pasture; 19 hectares of perennial pasture
served by nine-inch clay pipes and small sliding
doors outlets; and another 25 hectares of perennial
pasture under gravity irrigation.
“With” irrigation system upgrade
The project included the installation of an automated
and pumped pipe and riser system, an improved
border check irrigation systems and laser grading a
section of the farm.
With the project, 11 hectares of dry-land area was
converted to perennial pasture served by a pipe and
riser system, 19 hectares remained in perennial
pasture but was upgraded to an improved border
check irrigation system, 15 hectare of annual pasture
was converted to perennial pasture under pipes and
risers and 25 hectares remained as quality perennial
pasture but was converted to a pipes and risers
system.
The Farm Water Program assessed that the
improved irrigation project would save 180ML of
water, of which half were transferred to the
government. In return the landowner received a total
of $333,000; $166,500 on transfer of the 90 ML and
the balance of $166,500 on completion of the works.
The cost of the upgrade was $4,871 per ha.
Project benefits and costs
A partial "financial discounted cash flow" analysis
was applied to show the net increase or decrease in
income resulting from the proposed changes, not
profit nor loss for the whole farm. The analysis period
is 20 years which is the estimated productive life of
the irrigation infrastructure and a discount rate of 7%
has been assumed.
Project costs included the capital cost involved in the
installation of automated pipes and risers, improved
border check irrigation with structures and outlets,
operation and maintenance costs and an automation
licence fee (Table 1). The landowner reported that
there was no production loss during the
implementation of the project.
Table 1 Project costs
Capital cost
 Automated pipes and risers system
 Improved channel system with structures
 Laser grading
 Scheduling system
Annual cost
 Maintenance (2% of capital cost)
 Automation licence fee
 Extra cost of pumped water ($10/ML)
(510ML pumped)
Cost
$269,820
$40,154
$23,000
$8,000
$6,819
$700
$5,100
Pipes and risers and improved border check irrigation system: is it a
good investment?
Project benefits include the financial incentive from
the Farm Water program, productivity increase,
incremental production gains from annuals to
perennial pasture, water savings, time and labour
saving, vehicle use saving and salvage value at the
end of project life (Table 2). There is potential to use
the production gains to milk extra cows or reduce the
purchase of feed.
Table 2: Project benefits
Incentive
Farm Water Program incentive: 50% of
total funding is considered the incentive
Annual benefits
 Incremental production increase
 Water savings
 Labour savings
 Vehicle use savings
 Spraying costs saved
Value
$166,500
Value/year
$43,018
$2,431
$6,000
$766
$2,700
Findings
The irrigation infrastructure investment has allowed
the landowner to increase production through
improved irrigation management by bringing dry-land
into irrigated land, conversion from annuals to
perennial pasture and productivity improvements on
some part of the farm.
Although there has been some water savings due to
the project, the changes in land use means the
irrigator will use more water on farm. The impact of
the project is summarised in Table 3 below.
Table 3: Summary impact of the project
Impact
Increase in dry matter production
Increase in water use
Increase in pumping cost
Time saved chasing water
Vehicle travel saved
Weed spraying savings
Potential increase in milker numbers
232 t DM/year
162ML/year
$5,100/year
240 hours/year
1020 km/year
$2,700/year
39 cows
From an economic perspective and given the data
and assumptions used in the analysis, upgrading or
improving the irrigation system was financially a
viable option as indicated by three key economic
criteria – Net Present Value, Benefit-Cost Ration and
Internal Rate of Return (Table 4).
Published by the Victorian Government Department of Environment and
Primary Industries Melbourne, October 2014.
© The State of Victoria Department of Environment and Primary Industries
Melbourne 2014
This publication is copyright. No part may be reproduced by any process except
in accordance with the provisions of the Copyright Act 1968.
Disclaimer
This publication may be of assistance to you but the State of Victoria and its
employees do not guarantee that the publication is without flaw of any kind
or is wholly appropriate for your particular purposes and therefore disclaims
all liability for any error, loss or other consequence which may arise from you
relying on any information in this publication.
www.depi.vic.gov.au
Even without the financial incentive the project can
be viable. However, if the project was to be
implemented without the incentives, it will require
substantial upfront cost and will take a longer time to
break-even.
Table 4: Economic indicators
Economic indicators
Net Present Value
Benefit-Cost Ratio
Internal Rate of Return
Years to break-even
Without
incentive
$153,897
1.36:1
11.9%
12 years
With
incentive
$320,397
1.75:1
24.6%
5 years
Take home message
The combined automated pipes and riser systems
and improved border check irrigation investments in
this case is a financially viable investment especially
with the help from program like the Farm Water
Program. The size of the production improvement is
the key to the viability of irrigation infrastructure
investment.
Although there has been some water savings due to
the project, the changes in land use in this case study
means an additional water has been used on farm to
generate more production.
Energy costs could be a significant ongoing operating
cost for pressurised irrigation systems. For example
the energy cost for a pipe and riser system in this
case is reported to be $10/ML of water pumped.
The key message from this case study is that the
magnitude of the economic benefit of an investment
in farm irrigation infrastructure is particularly sensitive
to the production increase. This highlights the need
for irrigators to consider their own circumstances to
assess and determine productivity gains to be made
before considering irrigation investments.
There are intangible benefits of the investment that
are not included in a benefit-cost analysis but are
important to be considered in the decision making
process.
Farm Water :The Farm Water Program aims to achieve irrigation water
savings through improved farm irrigation systems. For details on the Farm
Water Program: www.gbcma.vic.gov.au;  (03) 5820 1100
More information
For more information regarding this project please contact:
 Rabi Maskey, Tatura  (03) 5833 5378
e- [email protected],gov.au
 Rob O’Connor, Echuca  (03) 5482 1922
e- [email protected],gov.au
 Olive Montecillo, Echuca  03) 5482 1922
e- [email protected],gov.au