David Landini: The Value of Employment Created by Water
It is commonly understood that irrigation water is important for local jobs and employment. The following article explains and approximately calculates this importance. The article uses the example of rice, but similar figures will apply to all types of productive water use.
Rice has a farm gate value of approximately $400 per tonne. Growing one tonne of rice requires the use of approximately one megalitre of water. Therefore, each megalitre of water used in rice production creates wealth valued at the farm gate at $400.
The price of any article is the total accumulation of expenses (including profits or losses) paid to the business community for producing, packaging, delivering, displaying, and selling that article.
When the buyer pays $400 for a tonne of rice, he is paying the total of the long list of production expenses accumulated up until that time. These expenses include land purchase, loan interest, surveying, land forming, machinery purchase operation and maintenance, water delivery, agronomy, seed, fertilizer, sowing, insurance, harvesting, freight, and profit for the rice grower.
This list is employment of the local business community.
Of the $400 of wealth produced per megalitre, the rice grower keeps approximately 10-20%, and the businesses employed in production are paid the other 80-90%.
The current Murray Darling Basin Authority Basin Plan removes 1500 gigalitres of water from productive use annually. This equates to removing the equivalent of $600,000,000 worth of production of rice, of which between $540,000,000 and $480,000,000 would be spent employing the mainly local business community.
These figures numerate the Basin Plan’s decimation of the local business community.
Yet, the rice production trail from inception to consumption continues past the farm gate. It continues all the way to the supermarket shelf. The supermarket shelf is the final point of sale before consumption.
At the low price end of the Coles supermarket selection, one kilogram of Sunrice Long Grain Premium (Australian rice is marketed as Sunrice) is priced at $2.00. Due to husk removal during milling, there is approximately 1.5 kg of raw farm gate rice used in producing the 1 kg of rice on the supermarket shelf. The $2.00 for the supermarket rice equates to $2.00 for the 1.5 kg of raw farm gate rice it is milled from. This calculates back to $1.33 for one kilogram of raw farm gate rice. As one megalitre of water produces one thousand kilograms of farm gate rice, one megalitre of water therefore produces Long Grain Premium rice valued at $1330 on the supermarket shelf.
At the high price end of the Coles supermarket selection, one kilogram of Sunrice Brown Rice Single Serve is priced at $12 per kilogram (in 125 gram packs). The $12 for the Brown Rice Single Serve calculates back to $7.89 per kilogram for the raw farm gate rice. Therefore, one megalitre of water produces Brown Rice Single Serve valued at $7890 on the supermarket shelf.
One megalitre of water creates total employment valued at $1330 in the form of Long Grain Premium, and $7890 in the form of Brown Rice Single Serve. The 1500 gigalitres removed from productive use therefore equates to removing employment valued at approximately $1,995,000,000 in producing Long Grain Premium, and $11,835,000,000 in producing Brown Rice Single Serve, each year.
As not all water is used in production of rice, and not all rice is Long Grain Premium or Brown Rice Single Serve, and some of these articles are sold overseas, the total employment value in Australia being negated by removing water requires additional research to calculate accurately. It is known though that the total Australian employment value is the farm gate value of $600,000,000 plus the value of all milling and packaging (which practically all takes place in Australia), plus the value of retail sales (nett of previously included values) that take place in Australia.
There is no genuine environmental reason for removing any water from productive use. The current Basin Plan is maintaining the 850 square kilometre Lakes Alexandrina and Albert in South Australia as artificial fresh water lakes, and losing 1000 gigalitres of fresh water every year in evaporation in the process.
The Basin Plan also uses 2000 gigalitres of fresh water every year scouring the mouth of the Murray open, while the sea dykes (barrages) in Lake Alexandrina block the salt water tidal interchange between the lake and the Southern Ocean that previously did this naturally. Saving these 3,000 gigalitres alone exceeds the 2,750 gigalitres the MDBA originally demanded be removed from productive use.
There is a lot of room for improvement!