OT_212: AgFirst/B+LNZ (2016) Economic Evaluation of Stock Water Reticulation on Hill Country

OT_212: AgFirst/B+LNZ (2016) Economic Evaluation of Stock Water Reticulation on Hill Country

Source

https://beeflambnz.com/knowledge-hub/PDF/economic-evaluation-stock-water-reticulation-hill-country-report.pdf — original source (opens in a new tab; the file is not redistributed)

Summary

AgFirst Ltd’s Economic Evaluation of Stock Water Reticulation on Hill Country (Journeaux & van Reenen, 2 December 2016), commissioned by the Ministry for Primary Industries and Beef + Lamb New Zealand. It analyses eleven hill-country case-study farms (2 Northland, 1 East Coast, 5 Horizons, 1 Wairarapa, 2 North Canterbury) that shifted from natural stock water (creeks/dams of variable quality) to a reticulated good-quality supply, and calculates the 20-year NPV and IRR (8% real discount) of that investment including the subdivisional fencing and stock-number changes it enables. For the Neobiome food system its value is the per-hectare establishment capital it publishes, and specifically its clean separation of the water-only reticulation capital from the total on-farm capital, which is the exact cost leg the NI grazing producer’s establishment-CapEx cell needs (the water leg). All the figures the model needs sit in Table 3.

Key claims

- claim: "WATER-ONLY RETICULATION CAPITAL COST PER HECTARE (the model-relevant leg; 'Water Only Capital = just the capital involved in the reticulation scheme'). Weighted Average $154/ha, Raw Average $166/ha, Median $132/ha. Per-farm range $98/ha (Horizons 1, lowest) to $280/ha (Horizons 3, highest): Horizons 1 $98, Horizons 2 $245, Horizons 3 $280, Horizons 4 $132, Horizons 5 $125, Northland 1 $130, Northland 2 $246, East Coast 1 $200, Wairarapa 1 $108, Canterbury 1 $134, Canterbury 2 $126. All 2016 NZD. [verified verbatim against Table 3, 'Water Only Capital Cost/ha' column]"
  source_location: "Table 3 'Capital costs per hectare and per stock unit', §5.1 Results (Financial), p.19-20; the Water Only Capital definition is the sentence immediately preceding Table 3 (p.19)."
- claim: "TOTAL CAPITAL COST PER HECTARE ('Total Capital = capital involved in the water reticulation scheme + subdivisional fencing + increased/changed stock numbers'). Weighted Average $311/ha, Raw Average $362/ha, Median $303/ha. Per-farm range $132/ha (Horizons 4, lowest) to $811/ha (Northland 2, highest): Horizons 1 $342, Horizons 2 $507, Horizons 3 $601, Horizons 4 $132, Horizons 5 $509, Northland 1 $134, Northland 2 $811, East Coast 1 $293, Wairarapa 1 $206, Canterbury 1 $303, Canterbury 2 $142. All 2016 NZD. (Canterbury 1 is based on the 1,500 ha area serviced by the scheme, not the whole farm's effective area.)"
  source_location: "Table 3 'Capital costs per hectare and per stock unit', §5.1 Results (Financial), p.19-20 (Total Capital Cost/ha column + footnote on Canterbury 1)."
- claim: "OPERATING COST PER HECTARE of the reticulation scheme. Weighted Average $4.77/ha ($0.59 per total stock unit). Per-farm range $3.13/ha (Horizons 4) to $12.56/ha (Northland 2). 2016 NZD, per year."
  source_location: "Table 6 'Operating costs per hectare and per total stock unit', §5.1 Results (Financial)."
- claim: "STUDY SCOPE + METHOD. Eleven hill-country case-study farms that changed from a natural water source (creeks/streams + mostly dams, variable quality/reliability) to a reticulated good-quality reliable supply. Analysis = 20-year NPV and IRR at an 8% real discount rate, covering capital costs (reticulation + subdivisional fencing + capital stock change), changes in operating costs, and benefits from increased stock numbers/productivity. Result: significant returns (weighted-average IRR 53%, raw average 45%, median 40%) with short payback (mostly ~1.5-4.5 years). The subdivisional fencing that the water enables was a key driver of the productivity gains."
  source_location: "§1.0 Executive Summary, p.4-5 (farm list, NPV/IRR table, payback table); §3.0 Methodology (two farmer interviews); §4.0 Financial Investment Approach."
- claim: "CAPITAL-COSTING CONVENTIONS (what is / is not included). Farmers' own labour on installation was costed as an opportunity cost at $50/hour and own machinery (tractor/digger/bulldozer) at the equivalent contract rate. Only the INCREASED subdivision fencing was counted as a capital cost; repair/rejuvenation of existing fences was excluded (would have occurred anyway). Capital-stock increases were valued using a 5-year average (2012-2016) of IRD Herd Scheme values. Reticulation cost items covered: pumps, electricity supply, storage/pressure tanks, pipe, troughs & fittings, earthworks, contract labour, tank fencing, weirs/dams and machinery."
  source_location: "§4.1 Capital Costs, p.14."

Neobiome Intelligence relevance

Resolves the water-reticulation-cost leg of the grazing producer’s establishment-CapEx cell in the D02 food model. The still-open CapEx side explicitly named “water-reticulation quotes” as one of the missing pieces; this source supplies it from an authoritative NZ hill-country dataset:

• Water leg (the direct model input): water-only reticulation capital 154/ha weighted average** (2016 NZD; median 132, range 98-280/ha). Escalated for CPI to ~2026 (~+30%), this is **~200/ha — a DERIVED figure, not a number printed in the source.
• Whole-establishment cross-check: the survey’s Total Capital (water + subdivisional fencing + stock change) is **311/ha weighted average** (2016 NZD, range 132-811), ~$400/ha escalated to 2026.
• Operating leg: ~$4.77/ha/yr (2016 NZD) for the water scheme, if an OpEx line is wanted for the reticulation asset.

⚠ Discrepancy to reconcile. The NI grazing establishment cell currently carries an interim 3,000/ha** assumption. The water-reticulation component of that, per this evidence, is only **~200/ha (2026), and even the survey’s total on-farm establishment capital is **~400/ha (2026)** — roughly an order of magnitude below 3,000/ha. The gap is most likely a scope difference (the 3,000/ha probably bundles stockyards/handling infrastructure and land development this hill-country reticulation survey does not cost), so this source should replace the *water leg* of that cell rather than the whole figure. The other legs (stockyards, a per-ha fencing rate, stock-purchase /head) remain open; the sibling MPI stock-exclusion source addresses the fencing leg.

Research targets

Research gaps

• Water-reticulation leg resolved by this source. It supplies the NZ hill-country water-reticulation establishment cost (154/ha weighted avg, 2016 NZD; ~200/ha escalated 2026) for the pasture_grazing CapEx cell. Still unsourced: the stockyards and stock-purchase ($/head) legs. The per-ha fencing rate is addressed separately by the MPI stock-exclusion source.

Notes

Directly-downloaded first-party AgFirst/MPI/B+LNZ report (native digital PDF, 56 pp; SHA-256 recorded), not AI-prepared. All model-relevant figures verified verbatim against Table 3 (and Table 6, §4.1, and the Executive Summary) via pdftotext -layout. Vintage is 2016 NZD (5-year-average gross margins/prices 2012/13-2016/17; IRD Herd Scheme 2012-2016) — escalate for CPI before any 2026 application; the ~$200/ha 2026 water-only figure is a derivation, not a source figure. Scope caveat: hill-country case studies only, and the model input is the water-only leg, deliberately separated by the authors from the fencing- and stock-inclusive Total Capital.

Connections

Referenced by

EDT domains (1): D02: Smart Food Systems & Agriculture