41An Evaluation of the Economic, Environmental and Social Impacts of NSW DPI Investments in IPM Research in Invertebrate Rice Pests

Orr LM, Stevens MM, and Mullen JD (2008) An Evaluation of the Economic, Environmental and Social Impacts of NSW DPI Investments in IPM Research in Invertebrate Rice Pests, Economic Research Report No 41, NSW Department of Primary Industries, Orange.

Executive Summary

Evaluating the returns from investment in specific research and development projects is an important component within New South Wales Department of Primary Industries (NSW DPI) Science and Research Division. In 2006 the NSW DPI invested an estimated $5.6 million in pest management research activities related to plants. An important element has been the development and extension of Integrated Pest Management (IPM) programs. Research into IPM strategies has been carried out by NSW DPI for over 20 years. In that time, a flow of recommendations from this research for adoption by NSW primary producers have been released.

In this evaluation, we have attempted to assess some of the important benefits to industry, consumers and the wider community in NSW resulting from NSW DPI research in IPM strategies to control invertebrate pests in rice. Invertebrate pest problems impose substantial economic costs on NSW rice farmers. Pests such as bloodworms, aquatic snails and aquatic earthworms cause extensive damage to aerially sown rice crops in NSW every year. These pests result in lower plant densities at crop establishment and lower yields, and can, in severe cases, cause the loss of entire crops.

The rice industry has largely been dependant on insecticides and other costly chemicals to control these pests, which can have adverse environmental and human health effects. Since 1990, NSW DPI has committed significant resources to invertebrate pest management in rice, with research focussed on determining the most environmentally sustainable and cost-effective management practices. This evaluation looks at NSW DPI cash and in-kind expenditure (some of which is industry funded) on a suite of projects dealing with IPM research into bloodworm, aquatic earthworm and aquatic snail management in rice. The research is based at the Yanco Agricultural Institute (YAI) and has been primarily carried out by Dr Mark Stevens, Principal Research Scientist.

Approach to the evaluation

In the analysis reported here, the investments by NSW DPI in research relating to invertebrate rice pests from 1990 to 2006 have been evaluated in an economic framework. Benefits are estimated from increased profits from using IPM practices and IPM chemicals. Costs are derived from past and projected investments in research.

Two sets of results are presented in this report. The first is a comparison of industry benefits and costs of investments by NSW DPI up to 2006; the second extends the evaluation to 2020, where the benefits from research are measured from the commencement of the initial research project to 2020, to allow for the flow of benefits into the future from research already undertaken. Also included were research costs to 2020 necessary to protect the stream of benefits arising from research already completed.

The on-farm benefits of the research program are measured as the difference in the economic return from control technologies arising from the research (the ‘with’ research scenario) and those which would have resulted if the projects had not been initiated (the ‘without’ research scenario).

Funding sources

A considerable number of research projects were undertaken for this cluster of IPM research. Research costs up to 2006 were estimated to have a present value of $5.87 million and when research costs were projected to 2020 the total was $8.45 million. Of the funds invested in invertebrate rice pest research to 2006, 64% was in-kind (salaries, capital and other costs) and 36% was from industry. The main industry funding source was the Rural Industries Research and Development Corporation (RIRDC) and the Rice Cooperative Research Centre (CRC).

Economic, social and environmental effects

The benefit-cost ratio (BCR) for NSW DPI invertebrate rice pest research up to 2006 was 8.39. The net present value (NPV) of this research up to 2006 is $43.4 million. The internal rate of return (IRR) is 226% to 2006. When research benefits and costs are extended to 2020 the BCR is 9.05 the NPV is $67.98 million and the IRR is unchanged. These results indicate that research by NSW DPI into invertebrate pests in rice has generated substantial long-term economic benefits, with the projections to 2020 based on the assumption that adoption of new chemistries for bloodworm control will rise from current levels.

These economic benefits have positive social consequences, largely through their contribution to the incomes of farmers and those who provide inputs to rice production, handling and processing in NSW. Lower health risks for those in the community who are linked in some way to rice production are also of social benefit. The health risks to aerial spray operators who were once exposed to harmful chemicals while mixing seed dressings have been reduced.

In environmental terms, the invertebrate rice pest research program has had major impacts. Adoption of the recommendations from the research has led to increased use of more pest specific, efficacious and less toxic insecticides with lower rates of active ingredient used. This has resulted in outcomes such as potential for increased farm biodiversity and reduced off-farm environmental contamination. The environmental impacts of invertebrate rice pest research have not been valued in this analysis.

Funders and beneficiaries

The NSW DPI invertebrate rice pest research evaluated in this report has been partly funded by the RIRDC and the Rice CRC. Their funding is derived from industry levies and matching Commonwealth Government funds. Because Australia is largely a price taker on the world rice market, most of the benefits of the research program are likely to remain with rice producers. Benefits have flowed to consumers, transport services, processors, local towns and communities and the environment. Benefits have also flowed to chemical suppliers who have gained from research and development (R&D) of new and alternative uses for chemicals.

The strongest rationale for public funding of R&D into the control of invertebrate pests in the rice industry is based on reducing threats to environmental and human health in the community at large. We are uncertain about the size of the economic benefits from this research relative to the environmental and human health benefits but in our judgement the share of industry funding in the future for this type of research should exceed fifty percent unless the objectives of the research are specifically environmental or human health in nature.