Economics - South Australia

South Australia

Economics - returns to the land and water resource base and costs of degradation

New data sets have been developed through the National Land and Water Resources Audit that relate to economic aspects of natural resource management in Australia. There is a focus on resources used to support agriculture and resources impacted by agriculture. The Australia-wide report provides:

An overview of the economic returns from the Nation's land and water resources used in agriculture;
An agricultural or within pa.gifk perspective on economic aspects of salinity, sodicity and acidity;
A "beyond the farm gate" perspective on impacts of agriculture on local infrastructure and downstream water users;
Information on willingness to pay to slow rural population decline and improve environmental attributes that are not part of the market for agricultural products;
An overview of how the databases developed for this project are organised and observations about ways they can be developed further to assist decision makers.

Consistent with protocols used by the Australian Bureau of Statistics and the Australian Bureau of Agriculture and Resource Economics, the database provides a new capacity to integrate natural resource information in Australia. The data sets are primarily built for the 1996/97 financial year, the year of an agricultural census. Except where stated otherwise, all dollar values given are in 1996/97 dollars.

Most of the data is represented on a 1km by 1km grid covering agricultural land. Whilst modelled at this level of spatial detail interpretation should generally occur at coarser levels. Data on downstream infrastructure costs of deteriorating water quality has been assembled by river basin.

River basin scale aggregate information may be viewed to by selecting a river basin from the menu at the top of this page or by using the links in the table or map below.

Agricultural profitability in South Australia

Economic returns to natural resource base from agriculture are measured using profit at full equity. This is the economic return to land, capital and management after the value of labour provided by managers has been deducted. It does not include any debt payments to financial institutions. Estimates of profit at full equity differ from gross margins, a commonly used measure of agricultural financial performance, by including fixed costs of production (e.g. depreciation of capital assets, labour).

Profit at full equity measures presented in this report are derived from survey data, satellite data, government reports, gross margin handbooks and other sources. Profit has been mapped on a 1km by 1km grid covering the nation, although underlying source data is accurate at coarser levels of spatial detail. The twelve variables relating to prices, yields and costs used to derive profit at full equity are also mapped to a 1 km grid. A shortened version of the profit equation reads:

Profit At Full Equity=Price x Quantity - Variable Costs - Fixed Costs

To gain an appreciation for how economic returns to agriculture varied across Australia, profit at full equity was computed based both on 1996/97 prices and at average prices over the period 1992/93 to 1996/97.

Using 1996/97 prices and yields, the estimated total profit at full equity was roughly $6,555 million for the Nation. An area of 311.5 million hectares, 66% of agricultural land, made a loss and 159.9 million hectares, 34% of agricultural land, made a profit. The bulk of the loss-making areas were the low-rainfall sheep/beef grazing lands. The following map shows profit at full equity for 1996/97.

River basin name	1996/97 Gross revenue	1996/97 Profit at full equity	5yr (1992/93 - 1996/97) Profit at full equity
Broughton River	399,479	190,700	168,094
Coopers Creek	194,294	-45,359	-3,122
Diamantina River	56,257	-35,964	-20,825
Eyre Peninsula	24,072	7,742	9,719
Finke River	9,243	-14,193	-11,504
Fleurieu Peninsula	49,292	20,456	22,304
Gairdner	266,762	35,777	36,172
Gawler River	189,641	89,217	77,181
Georgina River	86,703	536	16,403
Glenelg River	179,699	28,273	36,028
Hay River	3,928	-1,054	-963
Kangaroo Island	40,631	4,947	4,884
Lake Frome	57,925	-33,432	-20,082
Lake Torrens	9,535	-205	4,774
Lower Murray River	768,287	295,304	302,864
Mackay	15,695	-1,751	2,940
Mallee	818,232	276,198	283,720
Mambray Coast	11,727	1,174	2,139
Millicent Coast	601,783	96,859	88,419
Myponga River	12,820	5,623	6,194
Nullarbor	4,714	-2,152	-1,116
Onkaparinga River	143,345	46,348	46,688
Spencer Gulf	65,162	23,408	16,896
Torrens River	51,961	14,446	13,834
Wakefield River	63,198	30,787	26,141
Warburton	2,518	-3,848	-2,753
Willochra Creek	34,492	5,533	8,379

Click on the river basin name or map below to view a report on the returns to the agricultural resource base and costs of degradation.
Map of SA's river basins

Soil resources: economic opportunities in South Australia

An assessment was made of the economic opportunities associated with managing saline, sodic and acidic soils. This assessment did not contrast current soil conditions with pristine soil conditions. Rather, it focused on the economic opportunities arising from future changes to soil condition.

In the assessment measures of gross benefit and impact cost are provided. The gross benefit is the additional profit at full equity attainable in a given year if the soil constraint were removed without cost. It can be considered an approximate investment ceiling for soil treatment. Impact cost measures the decline in profits due to worsening salinity extent and severity over the next 20 years (2000 to 2020). In addition to these measures, a benefit cost analysis of lime and gypsum application to ameliorate acidic and sodic soils was undertaken.

The table below places this State/Territory in context:

	Salinity $m	Sodicity $m	Acidity $m	Limiting factor $m
New South Wales	6.3	280.3	378.7	624.1
Victoria	18.5	342.5	471.1	757.4
Queensland	10.2	180.3	232.5	392.9
South Australia	39.1	126.4	2.9	162.0
Western Australia	111.0	89.7	226.1	341.6
Tasmania	1.9	12.3	214.8	220.3
Northern Territory	0.0	3.0	58.2	61.1
Australian Capital Territory	0.0	0.0	0.2	0.2
Australia	187.0	1,034.6	1,584.5	2,559.5

Costs beyond the farm gate in South Australia

In addition to the agricultural productivity impacts, increasing concerns are being voiced about the effects of land and soil degradation on water quality, landscape amenity values, biodiversity, the environment and other attributes. The direct market impacts of agriculture that occur beyond the farm gate fall into two categories:

Local impacts on infrastructure; and
Downstream impacts on urban and industrial water users.

Local Infrastructure Costs of Salinity and Watertable Rise

In order to estimate local infrastructure impacts, unit cost functions for salinity and water table rise were developed for three levels of impact: slight, moderate and severe for the following infrastructure categories:

General urban and minor infrastructure in non-metropolitan towns and rural areas including minor roads, bridges, underground drainage, aerodromes, public buildings, parks and gardens, and sporting fields;
Private non-agricultural assets in non-metropolitan towns: domestic buildings, commercial/retail buildings, industrial buildings, septic systems and service stations;
Major roads, including national highways, rural arterials and urban arterials and bridges associated with these;
Railways; and
Power and communication infrastructure: power transmission, pipelines etc.

The current impact of water table rise and dryland salinity in non-metropolitan Australia is estimated to range between $30 million/yr and $125 million/yr with a best-bet estimate of $89 million/yr as shown in the following table.

Table: Estimated current impacts on local infrastructure of watertable rise and salinity in non-metropolitan areas (millions/yr)
	Low estimate	Best-bet estimate	High estimate
New South Wales	4.4	14.0	19.7
Victoria	3.9	12.2	17.3
Queensland	0.7	2.2	3.1
South Australia	4.5	6.7	8.3
Western Australia	16.3	51.8	73.8
Tasmania	0.6	1.9	2.7
Australian Capital Territory	0.0	0.0	0.0
Total	30.3	88.8	124.9

Further information

View the Australians and Natural Resource Management 2002 (theme) report.

View other Audit assessments by clicking the links below:

View "Natural Resource Economics" project and technical reports:

A project report has been prepared by CSIRO Land and Water Policy and Economic Research Unit in the development of this work:

"Values of returns to land and water and costs of degradation" Edited by S.A. Hajkowicz and M.D. Young (PDF - 2.8 MB)

The technical appendices of "Values of returns to land and water and costs of degradation" report contain detailed descriptions of the methods used in this work:

"Values of returns to land and water and costs of degradation" Edited by S.A. Hajkowicz and M.D. Young (PDF - 2.8 MB)

The technical appendices of "Values of returns to land and water and costs of degradation" report also includes a number of component project reports. These report may be viewed separately:

Case study: View or download a technical report and appendices on dryland salinity:

View "People" project and technical reports:

This report does not contain maps and needs to be read in conjunction with:

Link to the Map Maker to view economic data.

Link to the Australian Natural Resources Data Library - to download economic and social data

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