19An Assessment of the Economic Impacts of NSW Agriculture Research and Extension: Conservation Farming and Reduced Tillage in Northern NSW

Scott, J.F. and Farquharson, R.J. (2004), An Assessment of the Economic Impacts of NSW Agriculture Research and Extension - Conservation Farming and Reduced Tillage in Northern NSW. Economic Research Report No.19, NSW Department of Primary Industries, Tamworth.

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Executive Summary

Description of the Conservation Farming and Reduced Tillage program

The dryland cropping industries in northern New South Wales have developed over the past 30 years based predominantly on wheat production from fertile soils in a summer rainfall-dominant climate. Issues of crop performance and natural resource use, particularly soil erosion, initiated a number of programs of research, development and extension (RD&E) by NSW Agriculture, other public agencies, private firms and farmers into improved methods of conservation farming and reduced tillage (CFRT). Early in the CFRT investigative process it was realised that changing tillage for wheat production alone was insufficient to fully capture the potential benefits from such RD&E in a farming systems context. These programs have therefore included investigations into tillage, weeds, herbicides, crop diseases, soil water and soil nitrogen, grain legumes and farming system alternatives (including interactions between these various components), and the Department’s advisory officers have extended the results to farmers.

Approach to evaluation

In the analysis reported here the investments by NSW Agriculture in those programs from the late 1970s to 2002 have been evaluated in an economic framework. An estimation of the increased profits from using CFRT practices, together with evidence of crop areas established with these methods, is the basis for the economic benefit analysis.

Two sets of results are presented in this report. The first is a comparison of industry benefits and public costs of these investments by New South Wales Agriculture up to 2002, and the second extends the project benefits and costs to 2020. Prior to 2002 the costs related to investments in both research and extension activities, whereas the costs to 2020 are projected to be for extension purposes only. In each case the withprogram and without-program scenarios are specified and compared.

There are three main methods of preparation for crop establishment used in northern New South Wales - conventional cultivation, no till and reduced tillage. Conventional cultivation methods use mechanical means of weed control and seedbed preparation for sowing, whereas no till relies completely on herbicides for fallow weed control and uses adapted planters to sow into stubble. Reduced tillage methods incorporate one or two cultivations with herbicides for weed control. The without-program scenario was assumed to be represented by areas of conventional cultivation while the with-program was represented by the area of no till, and also by the areas of no till and reduced tillage crop establishment combined. Crop enterprise budgets and crop sequence budgets were established for each crop establishment method within each of seven sub-regions of northern NSW. These profit figures were used to estimate the difference between with-program and without-program net dollar benefits per ha, and aggregated, using survey data, to develop a total benefit estimate for comparison with RD&E costs.

Funding Sources

A considerable number of research projects and extension activities were undertaken for this cluster of projects. NSW Agriculture costs up to 2002 were estimated to have a present value of $25.6 million, and when extension activities were projected to 2020 the total was $28.3 million. Of the funds invested in research to 2002, 51% was inkind (salaries, capital and other costs) and 49% was from industry. The main industry funding source was Grains Research and Development Corporation (GRDC) and its predecessors such as the Wheat Industry Council. The advisory activities were almost all in-kind contributions of NSW Agriculture District Agronomists who spent part of their time on this work. When extension/advisory services were included to 2002, the share of total costs was 39% funded by industry levies and 61% by state taxpayers via NSW Agriculture. When the extra extension costs to 2020 were accounted for, the share of investment was 32% industry and 68% NSW Agriculture.

In assessing the industry benefits from RD&E into CFRT, it is important to acknowledge the important work and influence of other agencies (State Departments of Agriculture and Natural Resources, the universities, CSIRO and farm consultants) and farmer groups in the whole process. Nevertheless New South Wales Agriculture has been a key source of farming systems research within northern New South Wales and a substantial provider of advisory/extension activities. Inspection and assessment of the share of papers and other publications presented at conferences and other forums was the basis for claiming 35% of the adoption of CFRT within northern New South Wales as being due to the efforts of New South Wales Agriculture officers and programs.

Economic, social and environmental effects

Based on these assumptions, the BCRs (benefit-cost ratios) relating to NSW Agriculture efforts for no-till only and no-till plus reduced-tillage CFRT practices up to 2002 were 4.1:1 and 9.0:1, respectively. The NPVs (net present values) of the benefits from these efforts up to 2002 were $78 and $205 million, respectively. Internal rates of return (IRR) were 45% for no-till only to 2002 and 91% to 2002 for both no-till and reduced tillage CFRT practices. When program activities were extended to 2020 the BCRs were 11.4:1 and 20.5:1 and the NPVs were $302 million and $568 million, respectively. Internal rates of return were 46% for no-till alone and 91% for the combined CFRT practices. These are very healthy returns on investment, with the projections to 2020 based on the assumption that extension activities will continue to encourage adoption.

There are likely to be other benefits from this RD&E program besides direct economic advantages in crop production and profit. These include environmental benefits from reduced soil erosion (and reduced remediation costs) plus reduced use of machinery and fuel. Using estimates of savings on erosion losses from other research, it is likely that up to 18 million tonnes of soil are saved annually from adoption of these technologies compared to conventional cultivation in northern New South Wales. Some of these savings are included in the on-farm profit estimates listed here, but other soil losses having off-farm effects have not been included. However, there may be some potential environmental detriments associated with persistence of herbicides in soil (and possible leaching into ground or surface water), a possible shift in the weed populations, and developing weed resistance to herbicides such as glyphosate.

The social consequences from maintained or improved farm profitability include maintenance of local communities, although other social and regional initiatives have also been implemented for this purpose. Without the RD&E programs of NSW Agriculture and other agencies the slower growth in productivity is likely to have retarded farm and industry profitability, with concomitant effects on industry and community strength. It is impossible with the methods used here to quantify what would have occurred without the RD&E investments since other strategies or policies may have ensued, however the impacts of industry profitability are direct and important for farms, farm families and local communities.

Funders and Beneficiaries

The NSW Agriculture programs evaluated in this report have been partly funded by the GRDC or its predecessors. That funding is derived from industry levies and matching Commonwealth Government funds. The benefits measured here flow to farmers and industries but there are also positive impacts on consumers, transport services, processors, local towns and communities, and the environment. The use of industry and public funds to generate industry and public benefits is appropriate. While we have not been able to quantify benefits in both categories, it would not seem to be appropriate for further major RD&E expenditure in this area without industry funding. The results presented in this report show that the CFRT investments by New South Wales Agriculture in conjunction with other funders and providers have been an appropriate use of funds over the last 30 years.

Issues for New South Wales Agriculture

Some issues have emerged from this study for NSW Agriculture in its role of promoting and evaluating new technologies. While there has been a substantial increase in the areas of crop established using conservation farming methods (totals of between 15% and 40% for sub-regions in 2002), there is still a long way to go in encouraging the adoption of what is considered to be a profitable technology for many farmers. Further, the statistical information available on technology uptake from external sources (ABS and ABARE) was patchy, which meant that some bold assumptions were necessary about adoption trends over time. Future research could include a survey of farmers to find out more accurately the extent of adoption of the technology and constraints to the adoption of the technology.