Buying an Irrigation (Dairy) Farm in Northern Victoria
Note number: AG0584
Published: June 1997
Reviewed:
The Department of Primary Industries (DPI) staff receive many inquiries on what to look for when buying a farm in the Northern Irrigation Region.
Although we cannot provide a specific assessment on properties for sale, there are a number of common questions we suggest you consider prior to purchasing a farm. Assistance in answering these questions may be obtained through the present landowner, neighbours, local Landcare Groups, real estate agents, DPI and Goulburn-Murray Water. These questions include:
Why buy this farm?
Have you got a plan in the back of your mind of what you want to achieve on the farm? What resources (ie. stock, equipment, buildings and farm infrastructure) will be required to achieve this?
Have you completed a budget on any proposed farm redevelopment work. The total cost for landforming is typically around $2500/ha.
Are the soil types going to support the land use that you have planned?
Pasture
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Figure 1. Produces great hay, but will it produce milk? |
What is the composition of the pasture presently on the property - are there a lot of rushes and nut grass (indicating poor drainage), or strawberry clover and barley grass(indicating salinity), rather than white clover and ryegrass(indicating good pasture management)? Can it grow more permanent pasture? This will affect the number of stock that can be run on the property.
What is the production history of the property? This can directly affect the property's sale price. Has off-farm agistment been used to bolster production figures?
What is the property's history of fertiliser use? Have recent soil samples been taken to identify fertility, organic matter content, pH and salinity levels? Again, this affects the land's productivity and price.
What are the grain tonnages previously used as feed or the property? What type of grain is used? Was hay/silage purchased previously or was it cut on the farm?
Water Right
What is the Water Right for the property? You can check this with Goulburn-Murray Water. Is this sufficient to water pasture that is presently growing or that you intend to sow? Remember that you need 8-10 ML/ha for perennial pasture (pasture irrigated through summer) and 3-4 ML/ha for annual pasture (pasture irrigated in spring and/or autumn).
What percentage of sales water does the present landowner utilise? Is 100% sales normally available in this area? Does water rationing occur on the channel system supplying the farm? Again you can check this information with Goulburn-Murray Water.
Are there other sources of water available on the property, such as through Transferable Water Entitlements, groundwater or diversions from an adjacent drain?
How long does it take to water the farm at the moment?
Condition of animals and dairy
What kind of rearing/husbandry have the property's calves, heifers and milkers received? For how long did they receive it? What is the herd's percentage of replacement?
Does the farm have a history of Johnes disease? Under the Sale of Land Act, Section 32, the presence of Johnes disease (as well as Anthrax) must be declared if it has been detected on that property. It is your solicitor's responsibility to investigate this through the conveyancing process.
What is the size of the shed and how long does it take to complete milking? Milking machines should be tested by a qualified technician.
What size is the vat? It is wise to have a vat that can hold up to three milkings in a peak period. How old is the vat? Any equipment's age can have a big financial impact on a farmer if costly and frequent repairs are required. What type of refrigerant does the vat use? Get an assessment of the dairy's repairs and maintenance work that needs attention. Include with this an assessment of future power needs and availability.
Whole Farm Plan
Does the property have a Whole Farm Plan showing farm works, such as lasergrading, new channels, drains, tracks and tree planting sites? These plans are designed by irrigation consultants with assistance from DPI extension staff. The Whole Farm Plan provides detailed survey information which can be used to redesign farm layouts to suit your own goals or needs.
What is the level of farm development? Does the property have a reuse system? Are the farm channels and drains in good condition?
It is also worth inquiring about whether any, or all, of the irrigation system has been automated to save water and work (particularly at night).
Surface Drainage
Does the farm have access to regional drainage? Within 20 years, it is planned to have all of the irrigated area in the Goulburn Valley drained, but what is the present situation on this farm?
Is the local community developing a Community Surface Drain and if so, what stage is it up to?
DPI, and Goulburn-Murray Water staff, have access to maps which indicate locations of existing and proposed drains.
Watertable level and salinity
What is the watertable level and its salinity under the property, particularly during spring and summer? Watertable levels less than l metre below the surface over spring and summer can reduce farm production, as can soil salinity levels greater than 2 dS/m ECe (approximately 800 ppm TDS). Very general information on watertables is available in the Shepparton Irrigation Region through the regional watertable map produced in August each year. These are available from the Institute of Sustainable Irrigated Agriculture, Tatura (03 5833 5222). However, better information is often available from the local Landcare Group or from the landowner. Most farms in the region now have testwells installed to measure the watertable.
Nutrients and effluent disposal
Nutrient management strategies are being developed for all of the irrigation areas in Victoria. It is important that your property is able to minimise the runoff of nutrients to the regional drainage networks. An important aspect of this is the dairy shed effluent system. Is it big enough to cater for the number of cows you intend to milk? Is it easy to manage? Does it satisfy Environmental Protection Authority (EPA) requirements?
Groundwater
Pumping groundwater provides an extra source of water over the irrigation season as well as lowering the local watertable. You need to know if the farm has its own groundwater pump or if it is located near a Public Pump. If a pump exists, find out how big the pump is and what the salinity level is. It is recommended that the salinity of the groundwater should be less than 3000 EC (1800 ppm) so it can be easily mixed with channel water and applied to pastures at about 800 EC (480 ppm). It is also worthwhile knowing whether this salinity level is changing over time, and if so, at what rate.
How much water will it pump each day? As a general rule, for every megalitre of groundwater pumped each year, you are protecting about 1 hectare of the farm from the impact of a high watertable.
Trees
Trees and shrubs along checkbanks, next to channels and drains, and in the lower parts of the property, will use some of the water before it seeps into the watertable. Trees and shrubs also provide shelter for stock, pastures and crops, and habitat for native wildlife, as well as improving the aesthetic features of the farm.
Healthy remnant Grey Box trees are good indicators that the property is not suffering from watertable and soil salinity problems. Sick or dead trees however, do not necessarily indicate the reverse situation (ie. salty land or a high watertable) as tree decline can be caused by a number of factors.
Finances and budgeting
Prices fluctuate and loans are long-term so use the historical price trend line when developing your farm budget. A farm's running costs should equal 50 per cent of its gross income. A farm's total debt should be less than 1.5 times its gross income. As a percentage of a dairy farm's gross income, the herd should amount to four per cent, shed costs should amount to six per cent, overheads should amount to 10 per cent, and feed should amount to 30 per cent.
Potential buyers are encouraged to contact a farm consultant for specific advice on the property in question, and to discuss associated financial issues which determine the viability of that property. A list of Agricultural consultants are available from your local DPI office. Specific issues relating to water supply and drainage should be referred to Goulburn-Murray Water (03) 5833 5500.
It is also worth checking with your local office of the DPI about any incentives available to implement works on your property associated with regional salinity or nutrient management plans.
Acknowlegements
This Information Note was developed by Chris Norman, Tatura and John Meadows, Murray Valley Rural Industries AssistanceGroup. June 1997.
