Growing vegetables for the right reasons

Even in drought circumstances, when it is obviously very important to make best use of your irrigation and water resources, the underlying reasons for deciding to grow vegetables do not change. You should choose to grow specific vegetable crops because you have:

• identified niche domestic markets or highly profitable export opportunities
• managerial, resource and financial capacities to grow high-quality products, with access to good market intelligence and effective marketing strategies
• a limate suitable for producing high-quality products.

Do not decide to grow vegetables just because you feel they will give a higher return on your irrigation investment. Recognise that the Australian domestic vegetable market is oversupplied, with consistently low prices and rare peaks.

During drought, there may be opportunities to access markets that usual suppliers are unable to satisfy. You may need to clearly identify those markets and organise to supply them specifically, rather than rely on the chance that there will be a demand when your product is being harvested. Remember that most major vegetable producers will be doing everything they can to maintain their supply volumes to retain market share and meet obligations.

If you are considering becoming a new vegetable producer, you may find opportunities to develop a growing/marketing arrangement with larger producers, taking advantage of their established expertise and contacts.

Remember that, even in drought circumstances, price variation dramatically affects returns per ML of irrigation (see Table 1). Prices more than 30 per cent below the average price are not uncommon, and sometimes do not even cover the cost of harvesting and marketing. Note that unlike many field crops, your individual volume of production could adversely affect the market price, particularly if you sell through the general market system. Also note that for vegetables (unlike field crops), improving yields does not compensate for a reduction in prices.

Economic returns from irrigation

Irrigation is only a small component of horticultural production costs. For example, irrigation makes up about 3-10 per cent of variable production costs for potatoes, onions, broccoli or lettuce, compared with about 20-25 per cent in irrigated cotton and around 50 per cent in irrigated grain sorghum or lucerne.

Total variable costs in horticulture are much higher than in field crops. You will have to invest $5000-15,000 per ha in variable costs to grow potatoes, onions, broccoli or lettuce. This compares with variable costs of $700-3000 for irrigated sorghum, lucerne or cotton. Look carefully into the likelihood of low prices and their consequences, as well as your return on investment, before growing vegetables.

During drought, returns from fodder and grain crops are almost certain to be much better than average. One advantage with these crops is that they can also be grown using supplementary irrigation at critical times, rather than full irrigation through the life of the crop. Scarce water resources can be used to irrigate extensive areas, accepting lower per hectare yields for higher total production. With most vegetables there are fewer opportunities for less than full irrigation and such strategies need to be very carefully managed; dramatic reductions in quality and yield must be avoided, or the produce may be unsaleable.

The following table shows returns per ML of irrigation for some vegetable crops. They use department Gross Margins that have not been updated for at least three years,; however, the principles of price sensitivity still apply. Whilst returns for vegetables appear very attractive under the current high prices, note how influenced they are by price fluctuations. A change in seasonal outlook and supply could see the drought prices used here drop substantially, much more than the indicative 20 per cent used in the table. These days, growers try to lock in a contract price with a major buyer before planting. These returns also take no account of the capital infrastructure (such as coolrooms and harvest aids) required to grow the crop.

Anyone contemplating switching to a vegetable crop to increase their returns per ML should review all the costs associated with the change (using a whole farm analysis for example), rather then just relying on comparing crop gross margins.

Sensible irrigation of vegetables

Even in drought situations, the three basic management requirements for irrigating vegetable crops must be met in the following order of priority:

1. Use an irrigation system able to deliver the correct amount of water when the crop needs it and at an economical rate. There is no profitable market for poor-quality produce harvested from vegetable crops that were under- or over-watered because of an inappropriate irrigation system.
2. Ensure that the application of water is as uniform as possible across the paddock. Margins are too tight to not sell a substantial proportion of the crop because it was watered differently from the rest.
3. Where possible, schedule irrigation using objective, cost-effective monitoring systems. Optimal water application results in marketable produce and the most efficient use of a scarce resource. Initially, tensiometers are a suitable monitoring system for most vegetable cropping situations.