Making irrigation pay with sheep, beef

14-04-2010 | Contributor

There are many instances where sheep and beef farms are or can be partly irrigated.

With relatively low returns being the norm for sheep and beef, it is not easy to produce an adequate marginal increase to income to cover the increased costs of irrigation and in addition show a return to capital.

There are instances where irrigation is not being used profitably due to lack of intensification, with the result that the increased costs exceed the increased income. Although the highest and best use of the irrigated land is for dairying, this article will focus on sheep and beef.

The return to capital needs to be twice the current interest rate to allow for risk and debt repayment.

The annual cost of irrigation varies with the layout, but typically with, say, $4000 capital/ha the annual costs are $1030/ha (see table p29).

The highest annual cost is always interest and depreciation. To explain, the cost of the capital is interest and an annual provision for depreciation. Alternatively, and this is the cash cost for most farms, a 15-year table loan costs the interest rate plus 2.8% to amortise the loan to zero at 15 years.

The annual cost of $480/ha (see table) for interest and depreciation is a long-term rate of 9.2% interest plus principal payments totalling 12% interest and principal on capital of $4000/ha. As a rule of thumb, and to account for risk, the pre-investment predicted return to capital needs to be double the interest rate.

In any event the irrigated land must increase income over the dryland income by more than $1030 in the example. To put that in perspective, $1030/ha additional cost is equivalent to an additional 13.3su/ha at $75/su additional income. Or taking, say, 10su/ha at $75/su income to 18su/ha at $99/su income. All this is just to cover costs.

What is needed is 20su/ha at $120, or $2400/hectare income. This is being achieved on some sheep and beef farms, and in some instances this is directly from very dry land with no real carrying capacity before irrigation.

So how do we make irrigation on sheep and beef farms economic?

There is a long list of fine-tuning to improve economics as follows. One is irrigation type.

Pivots have an efficiency that other systems cannot match with an even spread of water and low infiltration rate, although a maximum pivot length of maybe 550m is needed. It also has frequency of watering - every two to three days.

Linear irrigators have the even spread of water but not the low infiltration rate, frequent watering, or low labour requirement.

Moveable pivots have higher labour requirements and less frequent watering.

Do not underestimate the increased pasture growth from frequent and even watering by pivots compared with less frequent watering and less even application with other systems.

Keep the capital cost down as much as possible. There is only one chance to get the design right, so think it through carefully. Using irrigation as an insurance is not affordable.

Use gravity pressure if at all possible. In this regard pay interest rather than energy costs because in the long term this will be more cost-effective.

Go to an all-grass system so there is no "down time" in production.

Design a precision fencing layout to allow for a rotation of 25-100 days, with stock water in every grazing cell so there is always a back fence. This will grow the maximum amount of pasture, and it will be of good quality.

Do not fence pivots as "pie wedges" for sheep and beef; have circular paddocks of equal area, not equal width.

Divide these circular paddocks up from centre to outside of the pivot to achieve the rotation length required. The circular paddocks allow for easier fertilising, access, hay/silage making, and avoid most of the (rough) crossing of pivot wheel ruts.

Where only part of the farm is irrigated, never allow capital stock to be part of the stock programme on the irrigated area - the irrigation is for higher earning finishing stock. An exception may be for flushing of ewes.

Cost is the enemy of profit, so knock out some of the major costs. Reduce energy costs with gravity water pressure, wintering costs with all-grass wintering, and lets be old-fashioned and fix the N with clovers to cut N fertiliser costs. Wintering costs must be minimised, so go to all-grass wintering, with the key annual pasture cover goal being 2000 kg/ha drymatter cover as at May 1.

Fertiliser and soils: What we need to grow top pasture from day one is a soil pH of 6.0-6.3 (not 5.8), and capital dressings of phosphate, potassium and sulphur, but after that the pasture runs on nitrogen.

Some low-fertility soils will need quite high levels of N fertilisers, as in their native state they have little N.

Keep up the N until early summer in the first year when the grass goes reproductive and the clover starts to grow well. Then back off the N to reduce grass competition and to allow clovers to fix N. Do this again in year two, then the clover fixed N will run the pasture back to a balance of grass/clover with little N fertiliser being required.

Clover fixes 4% of its drymatter as N, and we have seen up to 7500kg/ha DM of clover growth in the first two years, or 300kg N fixed naturally. Combine that with, say, 200 units of N in the organic cycle from N fertiliser, and it is easy to reduce future N fertiliser costs. Maintenance P and S fertiliser will be required, but don't forget that N "runs the show".

Pastures: Grow ryegrass and clover and do not be sidetracked by herbs and other grasses.

Use a perennial ryegrass to avoid frequent regrassing costs and down time - hybrids and tetraploids are unlikely to last as long as true perennials. Develop straight to perennial grass and clover, not through annual grasses, to avoid the regrassing "down time".

Grow late-flowering ryegrasses to maintain pasture quality through November when earlier flowering (earlier stalking) grasses would be going to stalk. Also medium-leaved clovers suit sheep and beef best.

Watch for grass grub and porina which are likely to build up in the second year.

At last, we can put some stock on the irrigated block. We need 20su/ha at a high-income per stock unit. Draw up a feed profile of the pasture supply and demand, and match the pasture supply as well as possible with demand from high-earning capacity stock.

The farm working expenses typically may be 7c/kg DM of pasture - compare this to the incomes below, hence no capital stock will be allowed on the irrigated area.

The earning capacity of stock may be (in cents/kg DM eaten):

• Ewe flock 11 cents

• Breeding cows 8 cents

• Winter hoggets 16 cents

• Dairy heifers 13 cents (dare I mention them, but a good option on a sheep and beef farm).

Summer finishing lamb income can be high, but depends on the growth rate of the lambs and their seasonal feed demand must be fitted into the feed supply/demand profile.

The sheep-cattle ratio is important for:

• Matching feed demand to the feed supply profile

• Maintaining feed quality

• Controlling internal parasites

Cattle grazing will grow more grass. Cattle are easier to intensify and therefore can be carried at higher stocking rates than sheep.

• Peter Clarke is a South Canterbury farm consultant. Contact (03) 693-9456 or 027-222-4781 or pjclarke@xtra.co.nz

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