Economic analysis of the impacts and management of subsoil constraints report

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This report was prepared by the Departments economist, Dr Elizabeth (Liz) Petersen for the Grains Research and Development Corporation funded project: DAW00242 Subsoil constraints – understanding and management.

For a copy of the full report please contact David Hall (details below).

Report executive summary

The aim of this report is to conduct an economic analysis of the effects of subsoil constraints on yields, cost structures and profits, and to analyse the cost-effectiveness of interventions for their management. The analysis is concentrated on the nine agro-ecological zones (AgZones) that make up the dominant grain-producing regions of Western Australia.

A brief summary of the area of south-western Australia susceptible to each subsoil constraint considered in this analysis, and associated yield penalties is provided below (note that boron toxicity is not included in this version of the report due to significant uncertainties regarding yield penalties it imposes and yield impacts of management strategies):

  • Subsoil acidity: Approximately 70% of south-western Australia is moderate to strongly-affected by acidity (11 million hectares). Yield penalties caused by acidity occur in approximately 94% of seasons and are approximately 46% for barley and canola and 13% for wheat. Lupins are not susceptible to acidity.
  • Subsoil compaction: While most of the croppable land in Western Australia is affected by compaction, approximately 75% is estimated to be moderately to highly-affected by compaction (12 million hectares). Crop penalties are between 10-30%, occurring in approximately 67% of years,
  • Subsoil sodicity: Approximately 62% of croppable land in south-western Australia is susceptible to subsoil sodicity (10 million hectares). Yield penalties are in the order of 10-30% in most years.
  • Transient salinity: Approximately 11% of croppable land in south-western Australia is affected by transient salinity (two million hectares). Yield penalties range from negligible up to 65% depending on the severity of susceptibility and crop type, with an average of approximately 15%.

Table 1 and Table 2 provide estimates of the average and total indicative value of lost production due to each subsoil constraint, respectively. Subsoil acidity has the highest cost of lost production, both in average terms ($141/ha/year) and in total ($1.6 billion/year - average cost multiplied by area affected). Subsoil compaction and sodicity have similar average costs of lost production at approximately $50/ha/year. Compaction has a higher total cost of lost production compared with sodicity ($880million/year compared with and $580 million/year, respectively). Transient salinity has the smallest average and total cost of lost production at $19/ha/year and $92 million/year.

Table 3a and b provides a summary of the economic returns of various management strategies. It is estimated that liming increases the indicative equivalent annual profit by $63/ha/year with $11 returned for every dollar invested. The most profitable of the strategies investigated for subsoil compaction is deep ripping and deep working with controlled traffic farming with an indicative equivalent annual profit of $35/ha/year and a $9 return for every dollar invested. Applying gypsum for the amelioration of sodic soils provides more modest returns with an indicative equivalent annual profit of $9/ha/year and a return to investment of $1.4 for every dollar invested.

Table 1 Estimated average indicative value of lost production due to subsoil constraints ($/ha/year)
AgZone Acidity Compaction Sodicity Transient salinity
Mid West 127 77 31 13
Mullewa to Morawa 141 64 48 49
West Midlands 149 70 12 24
Central-Northern Wheatbelt 114 52 44 18
East Moora to Kojonup 129 48 37 14
Southern Wheatbelt 133 36 68 22
Stirlings to Ravensthorpe 212 45 88 13
South Coast 195 87 56 15
Salmon Gums Mallee 251 48 128 10
Weighted average 141 54 52 19
Table 2 Estimated total indicative value of lost production due to subsoil constraints ($million/year)
AgZone Acidity Compaction Sodicity Transient salinity
Mid West 122 87 15 3
Mullewa to Morawa 82 51 27 7
West Midlands 147 72 2 1
Central-Northern Wheatbelt 381 264 141 29
East Moora to Kojonup 263 113 46 6
Southern Wheatbelt 258 117 160 33
Stirlings to Ravensthorpe 76 27 38 3
South Coast 218 114 49 3
Salmon Gums Mallee 27 39 97 7
Weighted average 1574 883 577 92
Table 3a Indicative equivalent annual profit of management strategies for each subsoil constraint
AgZone Acidity
Liming (deep-banded with surface applications)		 Compaction
DR and DW alone		 Compaction
DR and DW with gypsum		 Compaction
DR and DW with controlled traffic farming		 Sodicity
Gypsum (surface application)
Mid West 57 8 -10 55 4
Mullewa to Morawa 174 -3 -22 27 1
West Midlands 89 2 -17 47 7
Central-Northern Wheatbelt 69 -4 -23 20 4
East Moora to Kojonup 13 9 -9 46 7
Southern Wheatbelt 41 -3 -21 27 12
Stirlings to Ravensthorpe 30 8 -9 48 19
South Coast 122 27 12 78 11
Salmon Gums Mallee 37 7 -11 41 22
Weighted average 63 3 -16 35 9

Note: DR = Deep ripping, DW = Deep working

Table 3b Indicative benefit cost ratio (over 20 years) of management strategies for each subsoil constraint
AgZone Acidity
Liming (deep-banded with surface applications)		 Compaction
DR and DW alone		 Compaction
DR and DW with gypsum		 Compaction
DR and DW with controlled traffic farming		 Sodicity
Mid West 16 1.6 0.7 12.6 1.2
Mullewa to Morawa 10 0.7 0.3 10.7 1.1
West Midlands 25 1.1 0.5 23.1 1.3
Central-Northern Wheatbelt 9 0.6 0.2 4.8 1.2
East Moora to Kojonup 7 1.7 0.7 10.2 1.3
Southern Wheatbelt 8 0.8 0.3 7.2 1.6
Stirlings to Ravensthorpe 9 1.7 0.7 14.2 1.9
South Coast 13 3.1 1.4 15.8 1.5
Salmon Gums Mallee 10 1.5 0.7 9.2 2.0
Weighted average 11 1.2 0.5 8.8 1.4

Note: DR = Deep ripping, DW = Deep working

The results of this analysis should be considered as indicative estimates of economic impacts of lost production caused by the focus subsoil constraints, and strategies for their management in south-western Australia. There are a number of limitations to this analysis:

  • This methodology assumes that each subsoil constraint is the only constraint present. In reality, a number of constraints can be present in each soil
  • The analysis is a snapshot in time and does not consider future risk of the change in impacts of each subsoil constraint over time
  • The estimated indicative average and total cost of each subsoil constraint only includes agricultural costs, and no other on-site or off-site costs
  • Costs in terms of time and financial investment in learning, investigation and understanding each subsoil constraint have not been included
  • The analysis assumes an average year and average response times for management strategies. The situation for each farmer is different, so advice from professionals with appropriate skills should be sought before beginning a program of action is developed for individual properties.

Given these limitations, the main use for these numbers is to compare across regions and across subsoil constraints. Caution should be used when quoting these numbers in isolation.

Economic analysis is only as good as the underpinning assumptions, available data and evidence-base. There are a number of assumptions used in this analysis, which decrease the accuracy and reliability of the results. Further research to provide more accurate information on the following factors will lead to more reliable economic results:

  • area of susceptibility to each subsoil constraint in each AgZone
  • the probability of impact of each subsoil constraint
  • yield penalties caused in different years by each subsoil constraint
  • the probability that various management strategies will lead to yield boosts
  • the extent of these boosts through time.

These assumptions will be updated as new information is generated from the GRDC project. It is anticipated that a second version of this report will be published at the conclusion of the GRDC project in early 2019 with updated assumptions.

Further research could also include application of this methodology to boron toxicity. Lastly, further research into economically feasible strategies to manage multiple constraints in the soils within each AgZone will provide richer and more practical information for landholders in south-western Australia. Research into the seasonal impacts of each subsoil constraints (rather than assuming an average year) would also provide more depth to this analysis.

Acknowledgements

Thanks go to:

  • GRDC and the Department of Primary Industries and Regional Development (DPIRD) for funding the project
  • Dennis van Gool (DPIRD) for providing timely advice and mapping on area and susceptibility of the various subsoil constraints across the Western Australian grain-growing regions
  • Chris Gazey (the Department) for his advice regarding the impact of subsoil acidity on yields, the appropriate use of liming for ameliorating acidic soils and for guidance through runs with Optlime,
  • James Hagan and Paul Blackwell (DPIRD) for their advice regarding the impact of subsoil compaction on yields and appropriate yield responses to various management strategies
  • David Hall (DPIRD) for his advice regarding the impact of subsoil sodicity on yields and appropriate yield responses to gypsum
  • Ed Barrett-Lennard (DPIRD) for providing information on the causes, presentation and yield penalties associated with transient salinity.

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