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A major South Island irrigation scheme, Hunter Downs, is struggling to get all-farmer support for the second instalment on its shares.
However, the scheme’s chairman, deer and dairy farmer Andrew Fraser, says it will go ahead in one form or another regardless of the reticence of about 60 shareholding farmers to pay $87.50/ha for further planning, consent and land access work.
The scheme is pivotal to the region’s environmental plan which relies on HDI coming to fruition to augment rivers and streams to enhance the Wainono coastal lagoon. Fonterra is also planning a two-dryer expansion of its Studholme plant in the scheme’s command area.
Without naming names, Fraser says alternative funders are now being sought to progress the scheme. “We are looking at several big companies that may have a long-term requirement for irrigation in the region.”
Meanwhile there is a possibility farmers who haven’t paid will forfeit their shares. “We will have to look at it but it certainly won’t be our top priority.”
HDI’s initial share issue saw 27,390ha signed, subscribers paying $25/ha share as the first instalment on $200 shares to fund the design phase of the scheme. Second payments of $87.50 were originally due March 31 but the deadline was extended to May 1.
“We’re still talking to a couple of shareholders. There were 151 originally and I think we’ll have over 90 paid up [on May 1],” Foster told Rural News last week.
HDI’s design could water 32,000ha between Waimate and Timaru. It already has consent to take water from the Waitaki River which means the scheme would be near 100% reliable. A total cost of $9700 to $11,500/ha is anticipated, partly by debt funding, partly by shareholders. Total annual water charges, based on 70% debt funding and 6% interest, are estimated at $930 to $1185/ha.
Waimate District Council and Timaru District Council are shareholders in the scheme, with plans to use HDI water to improve reliability of town and rural water supply schemes. Both have paid the second instalment, says Foster, but there have been comments in local media questioning further council support.
Some farmers are also questioning how HDI will achieve the environmental outcomes written into a variation of Waimate District’s plan now out for consultation.
Irrigation New Zealand chief executive Andrew Curtiss says farmers and those in the wider community not supporting HDI need “a reality check”.
“Without it the whole Waimate District Variation 3 Plan Change is completely unviable,” he says. “If you don’t augment the lakes and rivers it means you’re then into an environment like the Hinds or Selwyn catchments and talking about how far you’ve got to cut back and it becomes very fractious.”
Those who say they’re not supporting the scheme because they can’t make it stack up financially are probably failing to account for the environmental mitigation measures they’ll be forced to take if the scheme doesn’t go ahead, he maintains. “You can’t compare it to the status quo.”
Those who argue they’re not farming intensively so shouldn’t bear the cost of mitigation measures should consider “how much they want to be curtailed in their land use in future,” adds Curtiss. “Essentially you’ll be locked into what you have been doing.”
The economic benefit of irrigation across the region – not just on the farms that buy in – is well documented in districts such as Timaru or Ashburton, he points out.
Marginal returns
Hunter Downs Irrigation chairman Andrew Fraser says it’s mainly cropping farmers who haven’t provided the further funding (see main story), typically those with 100-200ha operations.
Farm budgets provided by Macfarlane Rural Business posted on HDI’s website possibly explain. Based on all types of farming requiring an additional $16,611/ha capital investment to irrigate through HDI, plus 6% interest rates, mixed cropping makes the lowest margin on investment in irrigation at 2.6%. Mixed livestock is only slightly better at 3.5%, dairy grazers 4.2%, and intensive arable 6.8%.
Meanwhile dairy’s marginal return on irrigation investment comes out at 3.7%, 8.6% or 13.5% at payouts of $5.50/kgMS, $6.50/kgMS or $7.50/kgMS respectively.
See www.hunterdownsirrigation.co.nz for more.
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