An Economic Analysis of GRDC Investment in Minor Use Chemicals

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Chlorothalonil has been used on a range of crops in many countries since the late 1960’s. APVMA consulted on registration in 2006. Further data was sought to address the risk to trade in animal commodities including edible offal, resulting from feeding of pulse forages and fodders. Lengthy and expensive animal transfer studies were necessary to determine Export Slaughter Intervals before registration was achieved in 2009. The above can be summarised as follows for the Without Scenario: • disease losses would have increased for the first few years of the decade as growers reduced use of unregistered fungicides and relied more on agronomic measures, • some growers used to cereal production using registered pesticides would have been less inclined to adopt some more risky pulse crops in rotations, • by mid-decade the trend could have reversed as more resistant pulse varieties became available and alternative means of registration or permits were being achieved for some chemicals, and • during the period of increasing disease losses, there would have been some reduction in areas of pulses as other crops became more profitable and less risky. There is little data to inform judgements on the increase in disease losses from growers reducing use of unregistered fungicides. If average losses and the risk of extreme losses are large enough growers will switch to alternative crops. Table 11 shows that losses with current VOC are $12/ha and potential losses are $116/ha. The reduction in gross margin chosen for the maximum level is set at a further $12/ha. The increased disease loss per ha is assume to increase from zero in 2000 to the maximum in 2004 and then decline to zero by 2010. Reduced area of pulse crops (the Without MUP scenario) – the increased disease loss would contribute to a reduced area of pulses and increased areas of alternative crops depending on their profitability compared with areas of less profitable pulses. A peak reduction of 15 percent in 2004 is assumed and then a decline to zero by 2013. Reduced profitability from reduced area of pulse crops (the Without MUP scenario) – Because of increased disease losses, some growers would switch from pulse crops to alternative crops. Depending on the crop chosen, there would be a loss from both the current year gross margin and from the break crop benefit to the following crop. The break crop benefit can be from disease control, a weed break or from additional soil moisture. Some judgements are necessary to arrive at an estimate of possible benefits over the last decade. The most important trends for Northern NSW using area data from NSW Industry and Investment (2011) were: • increased adoption of options for disease control in chickpeas based on fungicides, new varieties and cultural measures, • price trends particularly the doubling of chickpea prices around 2006 and 2007 and the increased wheat prices in 2007 and 2008, • recognition of the value of chickpeas in the cereal-based rotation, now accounting for over half of other winter crops apart from wheat and barley, and • recognition of the value of canola, the area increasing to average close to half the chickpea area over the last two seasons. _________________________________________________________________ Agtrans Research Page 28
There is a limit to the area of chickpeas given that more than one crop in four years in a rotation with wheat increases disease risk. In Northern NSW the proportion has increased to one sixth in recent years. In the GRDC Northern Region, there are a range of crops that could have increased in area if chickpeas were less profitable because of increased disease losses. Preference would have been for a crop that had value in the rotation given the increasing disease problems of continuous cereals (GRDC 2011). Gross margins for alternative crops are listed in Table 13 for two years to provide some coverage across the decade. Gross margins are prior to planting so they are more relevant to planting intentions than to profitability outcomes. Table 13: Gross Margins Estimates for Northern New South Wales Cropping Options in 2003 and 2010. Alternative Crops Northern NSW Gross Margins* ($/ha) 2003 2010 Wheat 190 116 Malting Barley 248 163 Wheat (after Chickpeas) 274 226 Wheat (after Canola) 258 193 Chickpeas 265 109 Canola 259 173 Safflower 197 (east) 293 (east) Sorghum 236 297 *The gross margins are an average of North eastern and North western NSW provided by Fiona Scott, NSW Industry and Investment, Tamworth. A fact sheet on rotations in the Northern region demonstrated the value of chickpeas in a cereal rotation in terms of control of crown rot, nitrogen and subsequent wheat yields. Canola and sorghum were also shown to be useful alternatives (GRDC 2011). Wylie (2008) showed that for Queensland, sorghum was superior to wheat in cooler areas and would expand in area with increasing demand. The Without Scenario has to be defined in relation to those trends and also taking into account the consequences if the prospects for chickpeas were less attractive because of limited disease control options. Research priorities would have changed and farmers would have adapted. For example canola is now seen as a promising prospect in more favoured northern areas as is safflower. From Table 13, the value of Wheat (after Chickpeas) compared with Continuous Wheat is $63/ha.; little different to Wheat (after Canola) compared with Continuous Wheat. So for the Without Scenario given that chickpeas would have been a less attractive option, the reduced gross margin could range from around zero for an alternative break crop like canola to over $60 if continuous wheat was the alternative. There are of course many other feasible alternatives that could be considered as a typical one. But a good starting point is recognising that the chickpea area has grown rapidly over the last decade and is therefore clearly more profitable than alternatives. The analysis will therefore assume an initial benefit of $60/ha, decreasing by 2014 to $30/ha, about average of the comparisons with a canola rotation and with continuous wheat. _________________________________________________________________ Agtrans Research Page 29
Page 1 and 2: GRDC Impact Assessment Report Serie
Page 3 and 4: Impact Assessment: An Economic Anal
Page 5 and 6: losses that had been incurred, for
Page 7 and 8: There are changes in the operating
Page 9 and 10: Table 2: Project Codes, Titles and
Page 11 and 12: Details of current and expired perm
Page 13 and 14: 4. Outcomes The previous section de
Page 15 and 16: grouped by examples of the range of
Page 17 and 18: VOC data for diseases are only avai
Page 19 and 20: Environmental Social increased avai
Page 21 and 22: 2. Would the investments still have
Page 23 and 24: chickpeas has grown at a rapid rate
Page 25 and 26: “The following structural shortco
Page 27: 1. the increasing availability of v
Page 31 and 32: Summary of Assumptions A summary of
Page 33 and 34: Table 17: Contribution of the Sourc
Page 35 and 36: The benefits assessed in this evalu
Page 37 and 38: Ted Knights, Senior Research Scient
Page 39: ___________________________________

An Economic Analysis of GRDC Investment in Minor Use Chemicals

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