ECONOMIC IMPACT OF WATER STRESS ON SUGAR PRODUCTION IN AUSTRALIA

THE ASSESSMENT of drought on crop production is complicated by the difficulty in defining the conditions that constitute both 'normal' and 'drought' situations. In the sugar industry, the matter is further complicated by drought mitigation with irrigation which can vary substantially from year to year. Taking current levels of irrigation into account, this paper assesses the economic impact of water stress on sugar production in the major cane growing regions of Australia, in order to evaluate the merits of breeding for drought resistance and improved water use efficiency. The approach taken in this study was to use the crop simulation model APSIM-Sugarcane to account for historical yields for a number of regions. Having explained up to 60% of the variation in past yields, achievable yields without water limitation could then be estimated. After considering the contribution of each region to the annual Australian cane crop, a mean water stress factor of 0.867 was obtained, indicating that with adequate water and all other factors non-limiting, the maximum that yields could be improved is about 15%. Total annual sugar production in 2002 to 2004 was 5.0 to 5.5 m tonnes. Assuming a 5 m tonne annual production and a pool sugar price of $300, this theoretical yield improvement is worth $230 million per annum. The estimated revenue loss due to water stress varied considerably from year to year and from region to region. For instance, revenue losses since 1992 were greatest in Mackay during the peak drought years of 2002 to 2004, exceeding $90 million per annum at the current pool sugar price. This study provides an objective assessment of the cost of water stress to the industry in order to judge the value of breeding for drought tolerance and improved water use efficiency. The feasibility of doing this will need to be assessed thoroughly.