Relocation of Intensive Agriculture to Northern Australia: The Case of the Rice Industry

Abstract

Development of new agricultural industries in northern Australia is seen as a way to provide food
security in the face of reduced water availability in existing regions in the south. This report aims to
identify some of the possible economic consequences of developing a rice industry in the Burdekin
region, while there is a reduction of output in the Riverina.
Annual rice production in the Riverina peaked at 1.7 M tonnes, but the long-term outlook, given
climate change impacts on that region and government water buy-backs, is more likely to be less
than 800,000 tonnes. Growers are highly efficient water users by international standards, but the
ability to offset an anticipated reduction in water availability through further efficiency gains is
limited. In recent years growers in the Riverina have diversified their farms to a greater extent and
secondary production systems include beef, sheep and wheat.
Production in north Queensland is in its infancy, but a potentially suitable farming system has been
developed by including rice within the sugarcane system without competition and in fact contributing
to the production of sugar by increasing yields and controlling weeds.
The economic outcomes are estimated a large scale, dynamic, computable general
equilibrium (CGE) model of the world economy (Tasman Global), scaled down to regional
level. CGE models mimic the workings of the economy through a system of interdependent
behavioural and accounting equations which are linked to an input-output database. When
an economic shock or change is applied to a model, each of the markets adjusts according
to the set of behavioural parameters which are underpinned by economic theory.
In this study the model is driven by reducing production in the Riverina in accordance with
relationships found between water availability and the production of rice and replacement by other
crops and by increasing ride production in the Burdekin. Three scenarios were considered:
• Scenario 1: Rice is grown using the fallow period between the last ratoon crop of sugarcane
and the new planting. In this scenario there is no competition between rice and sugarcane
• Scenario 2: Rice displaces sugarcane production
• Scenario 3: Rice is grown on additional land and does not compete with sugarcane.
Two time periods were used, 2030 and 2070, which are the conventional time points to consider
climate change impacts. Under scenario 1, real economic output declines in the Riverina by $45
million in 2030 and by $139 million in 2070. This is only partially offset by the increased real
economic output in the Burdekin of $35 million and $131 million respectively.