Economic analysis of irrigation re-use systems in the Macalister Irrigation District of Eastern Victoria

Irrigation re-use systems are a common way of improving water use efficiency on irrigated dairy farms in the Macalister Irrigation District. A partial budget analysis of installing a range of irrigation re-use systems on an existing dairy farm was conducted using a case study approach. Two re-use dam sizes were tested – 6 ML and 9 ML. The analysis quantified the benefits of installing a re-use system through growing and consuming additional grazed pasture. There are also potentially other benefits of installing a re-use system both on and off farm, including improved irrigation management and reduced nutrient transfer from the capture area. The analysis found that irrigation re-use systems were almost always a good investment, regardless of the volume of water re-used or the amount of additional pasture consumed. The 9 ML dam had some economies of size, and therefore a lower pasture response per megalitre of water re-used was needed to meet the decision criterion (10% nominal internal rate of return). Only in the situation where both the value of pasture and percentage of water re-used were low ($100/t DM and 10% respectively), was the investment not justified on economic grounds. For a 6 ML re-use dam, a pasture price of $150/t DM and a re-use rate of 10% was still able to achieve a nominal internal rate of return of 12%.