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Economic feasibility of implementing regulated deficit irrigation with reclaimed water in a grapefruit orchard
Agricultural Water Management 178 (2016) 119–125
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Economic feasibility of implementing regulated deficit irrigation with reclaimed water in a grapefruit orchard J.F. Maestre-Valero a,∗ , B. Martin-Gorriz a , J.J. Alarcón b , E. Nicolas b , V. Martinez-Alvarez a a b
Escuela Técnica Superior de Ingeniería Agronómica, Universidad Politécnica de Cartagena, Paseo Alfonso XIII 48, 30203, Cartagena, Spain CEBAS-CSIC, Campus Universitario de Espinardo, 30100, PO Box 164, Murcia, Spain
a r t i c l e
i n f o
Article history: Received 15 June 2016 Received in revised form 16 September 2016 Accepted 18 September 2016 Keywords: Treated wastewater Water productivity Net present value Water savings
a b s t r a c t This study, conducted from 2005 to 2014, assessed the long-term economic viability of irrigating a commercial grapefruit orchard with saline reclaimed water (RW) combined or not with a regulated deficit irrigation (RDI) strategy. During the first three years after plantation, trees were full irrigated (100% of the crop evapotranspiration; ETc ) with fresh surface water (TW; electrical conductivity about 1 dS m−1 ) pumped from the “Tagus-Segura” water transfer canal. Then, from the fourth year onwards, two water sources, TW and RW (electrical conductivity of 3.0 dS m−1 ) were used, and two irrigation treatments, a control treatment (TW and RW irrigated 100% of ETc ) and a RDI treatment (TW-RDI and RW-RDI irrigated 50% of ETc during the 2nd stage of fruit growth) were performed. A discounted cash flow analysis (DCFA), which considered an orchard life period of 20 years, was performed to determine the profitability of different irrigation strategies. It evidenced that irrigation with TW was the most economically feasible option up to a TW price of 0.16 D m−3 , whereas from this water value, RW began to be the most profitable treatment. In a context of water scarcity where water availability is limited and RDI strategies must be performed, the use of TW-RDI was advised up to a water price of 0.38 D m−3 , but from this threshold, RDI with RW became the most profitable option due to its lower irrigation water cost. The grapefruit selling price had a clear effect on the profitability of the different treatments and showed full irrigated treatments as the most profitable. A fruit selling price below 0.08 D kg−1 produced negative net present values for all the treatments. © 2016 Elsevier B.V. All rights reserved.
1. Introduction Spain is the largest producer and exporter of grapefruits in Europe, with 73% (58,800 Tm) of the grapefruit production, from which, 93.4% is exported. The main area of production is located in the southeast region, characterized by a semiarid climate and a high evaporative demand. Consequently, although grapefruit is well adapted to dry, warm, semi-tropical humid and tropical climatic conditions, the amount of irrigation necessary for fresh fruit production is very high, forcing citrus growers to find ways to maximize water savings and improve final fruit yield and quality (Pérez-Pérez et al., 2014). Under this unfavorable scenario, an increased pressure on water resources ruled by the competition for water between agriculture, industry and population (Iglesias et al.,
∗ Corresponding author. E-mail addresses: [email protected] (J.F. Maestre-Valero), [email protected] (B. Martin-Gorriz), [email protected] (J.J. Alarcón), [email protected] (E. Nicolas), [email protected] (V. Martinez-Alvarez). http://dx.doi.org/10.1016/j.agwat.2016.09.019 0378-3774/© 2016 Elsevier B.V. All rights reserved.
2007) and also by the climate change (Faurès et al., 2013) is latent, leading to an urgent need to explore new alternative water sources and also strategies to cope with crop water requirements in order to maintain or enhance sustainable agricultural production. In that regard, the use of non-conventional reclaimed water (RW) in agriculture has gained importance during the last decades. In addition, although it has usually been viewed in a negative light as a product commonly requiring disposal, as it may contain high concentrations of salt leading to undesirable effects on soils and plants (Ayers and Westcot, 1985), with appropriate management, RW has great potential to become a valuable irrigation water source. The main reasons are that (i) it is free-of-charge when the “polluter pays” policy is implemented (Mounzer et al., 2013) and (ii) it contains high organic matter and many nutrients such as N, P and K, which are essential for plant growth and might allow reducing fertilizer application rates (Nicolás et al., 2016). Besides using RW, one well-known way to optimize water resources is to employ regulated deficit irrigation (RDI) strategies, which consists of cutting-off or reducing partially the irrigation during low water stress sensitivity periods of the crop cycle, when
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adverse effects on productivity are minimized (Chalmers et al., 1981; Mitchell et al., 1986). Some studies carried out on grapefruits have proved the technical and agronomical advantages of: (i) reusing RW (Maurer and Davies, 1993; Romero-Trigueros et al., 2014; Pedrero et al., 2015), (ii) implementing RDI strategies (Levy et al., 1978; Ballester et al., 2011, 2014; Pérez-Pérez et al., 2014; Gasque et al., 2016) or (iii) implementing RDI combined with RW (Pedrero et al., 2015). However, little research focused on the profitability of RDI or the implementation of RW strategies has been conducted, although all studies point out RDI or the use of RW as a profitable alternative for irrigation in arid and semiarid areas. Most financial and economic studies have been conducted in almond orchards, such as García et al. (2004) and Romero et al. (2006), who evaluated RDI in a fouryear period, and Alcón et al. (2013a), who studied regulated and sustained deficit irrigation during 6 years taking in consideration three different growth phases; i.e. non-productive, transition and fully productive trees. In the case of citrus, others have evaluated the economic performance of RDI in adult orange trees (Pérez-Pérez et al., 2010) or the effect of irrigation with RW on adult mandarin orchard (Alcón et al., 2013b). In spite of these studies, the analysis of the economic feasibility of RDI combined with RW in citrus trees remains unknown. In this context, this study aims to evaluate the long-term economic feasibility of implementing several irrigation regimes, full irrigation and RDI combined or not with RW, in a ‘Star Ruby’ grapefruit orchard, introducing the novelty that this approach overcomes the temporal limitations of previous studies as it considers three different lifecycles of the crop.
2. Material and methods 2.1. Field conditions and irrigation treatments The experiment was conducted from 2005 to 2014 at a 0.5 ha commercial orchard located in Campotéjar-Murcia, south-eastern Spain (38◦ 07 18 N; 1◦ 13 15 W). This area is characterized by a Mediterranean semi-arid climate with warm, dry summers and mild winter conditions. The annual reference evapotranspiration (ET0 ) and rainfall are on average 1,330 and 280 mm, respectively. The soil within the first 90 cm depth had a loamy texture (24% clay, 33% loam and 43% sand) with an average bulk density of 1.41 g cm−3 . It was classified as a Typic Haplocalcid according to Soil Survey Staff (2014). The study was performed on ‘Star Ruby´ı grapefruit trees (Citrus Paradisi Macf) grafted on Macrophylla rootstock [Citrus Macrophylla] which was planted in 2004 with a tree spacing of 6 m × 4 m. Three different lifecycle stages were considered in this study: (i) juvenile (unproductive) stage from 2005 to 2007, (ii) young productive stage from 2008 to 2010 and (iii) adult productive stage from 2011 to 2014. A total of 192 trees were used in this study. The experimental design was a randomized complete design with four blocks and four experimental plots per block. The standard plot was made up of twelve trees, organized in three adjacent rows with four trees per row. The two central trees “inner trees” of the middle row were used for measurements and the other ten trees were guard trees so as to eliminate potential edge effects. The irrigation system consisted of a single lateral drip line laid on the soil surface next to the tree trunk. It provided three selfpressure compensating on-line emitters per tree discharging 4 L h−1 each, placed at 1 m from the trunk and spaced 1 m apart. The irrigation doses were scheduled based on the daily crop evapotranspiration (ETc ) accumulated during the previous week. ETc values were estimated as reference evapotranspiration (ET0 ), calculated
with the Penman–Monteith methodology (Allen et al., 1998), and month-specific crop coefficients (Kc ). From January to December Kc were 0.40, 0.50, 0.50, 0.55, 0.55, 0.60, 0.60, 0.60, 0.55, 0.50, 0.45 and 0.40, respectively (Castel et al., 1987). In order to correct Kc during the juvenile and young productive stages (from 2005 to 2010) a reduction coefficient of 0.50 and 0.75, respectively was considered, which accounted for eventual decrease in evapotranspiration because of the partial soil covering by the crop canopy (young grapefruit trees) (Fereres et al., 1982). Trees were irrigated daily during the ten-year experiment. The total amounts of water applied were measured with inline water flow meters, placed on the four replicates of each treatment. The irrigation was controlled automatically by a head-unit programmer and electro-hydraulic valves. All treatments received the same amounts of fertilizer applied through the drip irrigation system. In 2005, fertilizer amounts were 89–45–64 kg ha−1 year−1 (N–P2 O5 –K2 O) and it increased by about 15% each year until adult productive stage. Pest control practices and pruning were those commonly used by growers in the area, and no weeds were allowed to develop within the orchard. The experiment involved two different water sources. One source (TW), with an average electrical conductivity (ECw ) about 1 dS m−1 , was pumped from the “Tagus-Segura” water transfer canal, which is a canal that supplies a large part of the surface water used in the southeast of Spain for both human consumption and irrigation practices. The other was tertiary saline reclaimed water (RW) pumped from a wastewater treatment plant (WWTP). This source was automatically blended at the irrigation controlhead with water from the canal to reduce its ECw value down to ≈3 dS m−1 in order to obtain a constant ECw during the experiment. The usual blending rate was 63% RW and 37% TW. For each water source (TW and RW), two irrigation treatments were carried out. The control treatments involved irrigation with TW or RW during the whole season at 100% of the soil–water lost by daily ETc . The RDI treatment consisted of irrigation at 100% ETc , except during the second stage of fruit growth, 55–65 days between late-June and mid-September, when it received 50% of the water amount applied to the control. No leaching fraction was added to the irrigation doses. Irrigation with RW and application of RDI strategies began to be performed from 2008 onwards. From 2005 to 2007 the whole orchard was full irrigated with TW. Table 1 shows the irrigation water applied, the rainfall and the ET0 for the experimental period. Table 1 Mean annual values of the water applied (mm) for each irrigation treatment for the juvenile (2005, 2006, 2007 and
Table 1 Mean annual values of the water applied (mm) for each irrigation treatment for the juvenile (2005, 2006, 2007 and 2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages. Annual rainfall (mm) and reference evapotranspiration (ET0 ; mm) at the experimental site during are also presented. Irrigation Water Applied (mm)
2005 2006 2007 2005–2007 2008 2009 2010 2008–2010 2011 2012 2013 2014 2011–2014
Control treatment
RDI treatment
127 142 181 150 224 379 356 320 585 599 570 614 592
– – – – 193 331 309 278 515 521 496 518 513
Rainfall (mm)
ET0 (mm)
168 359 335 287 271 306 330 302 264 260 249 258 258
1,266 1,276 1,299 1,280 1,332 1,384 1,254 1,323 1,258 1,407 1,395 1,431 1,373
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2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages. Annual rainfall (mm) and reference evapotranspiration (ET0 ; mm) at the experimental site are also presented. 2.2. Fruit yield Eight inner trees per treatment were selected to determine yield (Table 2). Further details on the agronomic and physiological variables controlled throughout the long-term experiment are found in Pedrero et al. (2015). The irrigation water productivity (WPi ) was also calculated for each treatment as the ratio between the annual yield (kg ha−1 ) and the applied water (m3 ha−1 ) during the same period (Table 2). Table 2 Annual fruit yield (kg tree−1 ) and water use efficiency (kg m−3 ), determined as the ratio yield/irrigation, for the juvenile (2005, 2006, 2007 and 2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages in the grapefruit orchard. 2.3. Discounted cash flow analysis A discounted cash flow analysis (DCFA) to assess the benefits and costs of the four irrigation strategies assessed in this study was carried out. The DCFA, by comparing the expected benefits and costs and related cash inflows and outflows of a given initiative or investment considering the life span of the investment (IFAC, 2008), may be a suitable tool for farmers to evaluate the feasibility of implementing different irrigation strategies. Following other previous research (Pérez-Pérez et al., 2010; Alcón et al., 2013b), it has been assumed that the investment and the variable costs in this study are provided by farmer own funds and hence there is no financial funding. To assess the feasibility of an investment, both the internal rate of return (IRR, %), the net present value (NPV, D ) and the payback period (PB, years) of the different initiatives were examined. NPV aggregates all inflows (I) and outflows (O) given in a certain period of time usually measured in years (t), applied to a discount rate (r), minus the investment costs (K), NPV = −K +
t It − Ot t=1
(1)
(1 + r)t
Table 2 Annual fruit yield (kg tree−1 ) and water use efficiency (kg m−3 ), determined as the ratio yield/irrigation, for the juvenile (2005, 2006, 2007 and 2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages in the grapefruit orchard. Yield (kg tree−1 )
2005 2006 2007 2005–2007 2008 2009 2010 2008–2010 2011 2012 2013 2014 2011–2014 *
WUE (kg m−3 )
TW
TW-RDI RW
RW-RDI TW
TW-RDI RW
RW-RDI
0 5.1 19.9 12.5 58.7 68.2 78.9 68.6 179.5 140.8 185.4 231.6 184.3
– – – – 59.0 70.4 61.9 62.6 166.7 129.6 186.6 202.1 171.2
– – – – 59.7 52.1 56.1 55.9 158.8 121.9 156.2 192.1 157.2
– – – – 12.7 8.9 7.2 10.4 13.6 10.9 14.9 16.3 13.9
– – – – 12.9 6.5 6.6 8.7 12.8 9.7 13.1 15.4 12.8
– – – – 67.0 61.9 54.9 61.3 192.1 123.5 191.1 211.1 179.4
0 1.5 4.6 3.0 10.9 7.5 9.2 9.2 12.8 9.8 13.5 15.7 13.0
– – – – 12.5 6.8 6.4 8.6 13.6 8.1 15.2 14.3 12.8
Significant differences between treatments each year have not been found following Tukey´ıs range test (P < 0.05) and hence letters to indicate differences have not been shown.
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where It − Ot denotes the expected cash flows in the time period assessed. r is the desired return that could be represented by the specific return an investor expects for an alternative investment with similar risk or the interest rate on debt. In this DCFA, r was set to 4% according to European Commission (2014). The IRR is the interest rate at which discounted cash outflows equals discounted cash inflows of the investment. IRR is commonly used to evaluate the desirability of investments or projects, such that when the IRR of an investment exceeds its cost of capital, it is economically profitable. The PB period refers to the period of time required for the return on an investment to “repay” the amount corresponding to the original investment. It is of note that even though the experimental data have been collected in a 0.5 ha grapefruit orchard, the results will be extrapolated to a typical citrus orchard of 10 ha. The profitability of the initial investment has been estimated for a tree life period of 20 years which is the usual time horizon for citrus orchards in the region. 2.3.1. Benefits Fruit production depended on the irrigation strategy and also on the period of the tree lifecycle (i.e., juvenile, 2005–2007; young productive, 2008–2010; or adult productive, 2011–2014 stages). Total benefits were calculated as the product between the fruit production and the sale prices in origin, which were those officially published by the Government of Region of Murcia (CARM, 2015) and updated to 2014 according to inflation: 0.24 D kg−1 in 2006, 0.26 D kg−1 in 2007, 0.23 D kg−1 in 2008, 0.19 D kg−1 in 2009, 0.21 D kg−1 in 2010, 0.20 D kg−1 in 2011, 0.20 D kg−1 in 2012, 0.20 D kg−1 in 2013 and 0.19 D kg−1 in 2014. 2.3.2. Costs Costs must distinguish between investment and operational costs. Investment costs refer to the value of the initial investment that enables activity start-up, while the operational costs correspond to the cash flow necessary for a proper running and development of the activity. 2.3.3. Investment In this study, the initial investment comprises the cost of both labor and the assets needed to establish the plantation. Considering an average farm area of 10 ha, the total investment costs have been estimated in 109,121 D , of which 33,333 D correspond to the soil preparation and plantation considering a cost of 8 D tree−1 , 10,000 D to the construction of a shed for equipment and irrigation control, 27,000 D to the irrigation equipment and system, and 38,788 D to the agricultural water reservoir with a capacity of 10,000 m3 . Such a capacity has been defined considering a storing of water enough for irrigation during 21 consecutive days during the period of highest water demand by the crop. These values are in accordance with those reported by Pérez-Pérez et al. (2010) and Alcón et al. (2013b) for establishing a 10-ha plot of orange and mandarins trees, respectively. 2.3.4. Operational cost The operational cost (OC) cover all inputs used in the annual productive process and have been considered within four categories which include raw material, labour, machinery and tax and insurance. To compute OC unit prices have been considered constant during the project lifespan taking 2014 as the reference year. 2.4. Raw material Raw material considered the irrigation water, the electric energy, the fertilizers and the plant protection products. In the case of the TW treatments (i.e. water supplied from the “TagusSegura” water transfer canal), the water cost was calculated taking
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into account both (i) the conveyance cost from the sources to the supplying point of the irrigation districts (MAGRAMA, 2014) and (ii) also the off-farm cost, established by the Campotéjar Irrigation Community, which considers the water allocation from the irrigation districts supplying point to each farm hydrant (Martin-Gorriz et al., 2014). During the experiment, water prices ranged between 0.24 D m−3 and 0.35 D m−3 with a mean value of 0.30 D m−3 (SCRATS, 2016). On the other hand, the RW had a price equivalent to the energy costs of carrying it from the waste water treatment plant to the plots, which was estimated at an average of 0.031 D m−3 . In such a way, the mean water price in RW treatments was 0.13 D m−3 (i.e. 0.63*0.031 D m−3 + 0.37*0.3 D m−3 ). Farmers usually receive water from the collective pressurized network of the irrigation community on rotational scheduling, and store it in on-farm reservoirs. Under these conditions farmers need to spend electric energy to re-pressurize the irrigation system with their own pumping systems. Previous studies have established the average energy consumption for drip irrigation in southeast of Spain at 0.17 kWh m−3 (Soto-García et al., 2013). The price of electricity for each year of study was obtained from National Institute of Statistics (INE, 2016). The cost of fertilizers and plant protection products were determined considering their applied amounts each year and their respective prices. 2.4.1. Labour Labour costs included both irrigation maintenance and hand pruning. Irrigation maintenance cost was calculated considering one employee revising the farm quarterly at a speed of 1.75 km h−1 from 2005 to 2007, at 1.50 km h−1 from 2008 to 2010 and at 1.20 km h−1 from 2011 to 2014. Hand pruning is an external labour that requires a great amount of professional manpower. Pruning costs have been defined based on field trial measurements. In this study, 69 h ha−1 at the juvenile stage (10 min tree−1 ), 139 h ha−1 at the young productive stage (20 min tree−1 ) and 208 h ha−1 at the adult productive stage (30 min tree−1 ) were considered. The harvesting cost was not taken in account because in citrus orchards this task is usually paid by the fruit buyers. 2.4.2. Machinery Machinery costs included the pest control and the branches shredding. Pest control was performed with an air-carrier sprayer trailed by tractor at a cost of 27 D h−1 . From 2005 to 2007 it
was calculated considering thrice a year at 1 h ha−1 . From 2008 to 2010, it was performed quarterly considering 1.5 h ha−1 . From 2011 onwards, it was computed by adding to the average cost in 2008–2010 one hour more of machinery. Branch shredding was carried out once a year by mounting the shredder in a tractor at an hourly cost of 30 D h−1 . Branch shredding took 1.5 h ha−1 , 2 h ha−1 and 3 h ha−1 for the juvenile, young productive and adult productive stages, respectively. It should be noted that in this study the tractor was considered as a working cost paid to external contractors since in case it had been acquired by the farmer, it would be under-used, generating a cost per hour very high and hence the experimental plantation alone would render the business unviable. 2.4.3. Tax and insurance Tax and insurance costs were estimated at 50 D ha−1 , 253 D ha−1 and 329 D ha−1 for the juvenile, young productive and adult productive stages, respectively (Table 3). 2.5. Statistical analysis The data derived during the experiment were analyzed separately by lifecycle periods, that is, the young productive and the adult productive stages. A one-way variance analysis (ANOVA) was used to test the hypothesis of equal means of the costs, incomes and water use indicators for the different irrigation treatments and lifecycle periods. Besides, when differences were significant, Tukey’s range test, at 95% confidence level, was carried out. 3. Results and discussion 3.1. Gross margins Table 3 shows the average OCs and revenue for each irrigation treatment during the different orchard stages; juvenile (from 2005 to 2007), young productive (from 2008 to 2010) and adult productive (from 2011 to 2014) stages. Table 3 Mean operational costs, revenues, and gross margins, for juvenile (2005–2007), young productive (2008–2010) and adult productive (2011–2014) stages in the grapefruit orchard under the four irrigation treatments (i.e., TW, TW-RDI, RW and RW-RDI). During the juvenile stage, fruit production was nearly inexistent (12.5 kg tree−1 ; Table 2) but the OC was 2,127 D ha−1 , from which
Table 3 Mean operational costs, revenues, and gross margins, for juvenile (2005–2007), young productive (2008–2010) and adult productive (2011–2014) stages in the grapefruit orchard under the four irrigation treatments (i.e., TW, TW-RDI, RW and RW-RDI). Variable
Juvenile stage
−1
Revenue (D ha ) Yield (kg ha−1 ) Price (D kg−1 ) Operational cost (D ha−1 ) Raw material Irrigation water Electric energy Fertilizers Plant protection Labour Irrigation maintenance Hand pruning Machinery Trailed air-carrier sprayer Shredding machine Tax and insurance Gross margin (D ha−1 ) *
Young productive stage
Adult productive stage
TW
TW
TW-RDI
RW
RW-RDI
TW
TW-RDI
RW
RW-RDI
890 3,475 0.24 2,127 1,379 450 28 307 593 586 31 555 112 82 30 50 −1,237
5,983 28,615 0.21 3,757 2,244 959 58 487 741 1,036 36 1,000 224 163 61 253 2,226
5,553 26,592 0.21 3,624 2,111 833 50 487 741 1,036 36 1,000 224 163 61 253 1,929
5,379 25,544 0.21 3,214 1,701 415 58 487 741 1,036 36 1,000 224 163 61 253 2,165
4,921 23,331 0.21 3,152 1,639 361 50 487 741 1,036 36 1,000 224 163 61 253 1,769
15,131 76,860 0.20 5,850a 3,529a 1,776a 115 748 889 1,710 44 1,667 282 191 91 329 9,281
14,069 71,400 0.20 5,596a 3,275a 1,538a 100 748 889 1,710 44 1,667 282 191 91 329 8,474
14,545 74,826 0.20 4,843b 2,522b 770b 115 748 889 1,710 44 1,667 282 191 91 329 9,902
12,914 65,570 0.20 4,724b 2,403b 666b 100 748 889 1,710 44 1,667 282 191 91 329 8,189
Mean values followed by different letters within the same row and lifecycle period indicate significant differences at 95% confidence level following Tukey’s range test.
J.F. Maestre-Valero et al. / Agricultural Water Management 178 (2016) 119–125
64.8% was attributed to raw material, resulting in a negative gross margin (GM) of −1,237 D ha−1 (Table 3). The GM shows the difference between the selling price of an item and the variable costs incurred to be produced (Caballero et al., 1992). In the case of the young productive stage, significant differences for yield or OC were not either observed among treatments, even though the price of RW was more than twice lower than the TW price or that the RDI treatments reduced the annual amount of applied water to about 13% (Table 1). At this stage, raw material was about 60% of the OC for TW and TW-RDI treatments whereas it was about 52% of the OC for RW and RW-RDI treatments. It can be explained by the lower cost of the RW (0.13 D m−3 ) compared to the TW (0.30 D m−3 ). However, such cost savings associated to a reduction of the water use (i.e. RDI treatments) or to the use RW were not enough to provoke significant differences on the raw material cost. The OC was on average 61.6% higher than that of the juvenile stage with corresponding revenue about 6.1 times higher. This allowed to achieve a positive GM which ranged between 2,226 D ha−1 and 1,769 D ha−1 for TW and RW-RDI treatments, respectively (Table 3). At the adult productive stage, once the trees were fully developed and reached their productive potential, significant differences were only found for the OC and mainly caused by the irrigation water cost. The ratio between the raw material and the OC was similar to that observed at the young productive stage. In this sense, TW and TW-RDI showed higher irrigation water costs but such differences were not observed among treatments for yield. As a result, significant differences were neither observed for GM. On average, the annual OC and revenue were about 2.5 and 15.9 times higher than those of the juvenile stage and about 1.5 and 2.6 times higher than those of the young-trees stage, respectively (Table 3). Our GM results during the adult productive stage were similar to those published by Pérez-Pérez et al. (2010) in orange and by Alcón et al. (2013b) in mandarin trees. These results indicate that, due to the variability of data within each lifecycle stage, studying the average values of revenue, both the OCs and the GM for the different lifecycle stages, could not provide a farmer with valuable criteria to choose the most suitable strategy to be implemented along the grapefruit lifespan in order to recover the investment and achieve the highest profitability from it. Accordingly, assessing the economic feasibility by means of a DCFA might be a tool to provide farmers with more accurate criteria. 3.2. Discounted cash flow According to the DCFA, the time required to recover the cost of the investment (payback period) was similar in the four treatments (8 years) (Table 4). That meant that the cash flow began to be positive once the trees were well entered in the adult productive stage and started to be high-productive. The simulation outputs for the 20-year period indicated that full irrigation with RW would be the most profitable strategy (NPV = 72,263 D ha−1 and IRR = 23.2%), whereas the less profitable would be the RDI treatments (NPV = 56,948 D ha−1 for RW-RDI and 59,669 D ha−1 for TW-RDI treatments and IRR ≈ 20.0%) (Table 4). These results indicate that, bearing in mind the following assumptions: (i) longterm sustainability of the grapefruit orchard during the 20-year lifecycle period, (ii) fixed buying prices for irrigation TW = 0.30 D m−3 and RW = 0.13 D m−3 and (iii) a fixed selling grapefruit price ≈0.21 D kg−1 , in case there is no limitation of water availability for irrigation, the farmer should practice full irrigation with RW to achieve the maximum profitability. On the contrary, in case there is some limitation for the use of water resources for irrigation, the farmer could opt either for TW-RDI or RW-RDI strategies, saving up to 15% of water (Table 1), but then assuming a considerable reduction in the orchard profitability (11.0 and 21.2% for TW-RDI and RW-RDI treatments compared to TW and RW treatments, respectively) (Table 4). It is of note that in all cases, IRR values are much
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Table 4 Net present value (NPV; D ha−1 ), internal rate of return (IRR; %) and payback period (years) derived for each of the water treatments appraised for the simulated period of 20-year.
NPV (D ha−1 ) IRR (%) Payback (years)
TW
TW-RDI
RW
RW-RDI
67,061b 22.2b 8
59,669c 21.0c 8
72,263a 23.2a 8
56,948c 20.6c 8
* Mean values followed by different letters within the same row and lifecycle period indicate significant differences at 95% confidence level following Tukey’s range test. * Data calculated considering a price of surface water (TW) of 0.30 D m−3 , a price for reclaimed water (RW) of 0.13 D m−3 and the fruit prices indicated in epigraph 2.3.1.
higher than other possible financial alternatives making the activity very profitable. Table 4 Net present value (NPV; D ha−1 ), internal rate of return (IRR; %) and payback period (years) derived for each of the water treatments appraised for the simulated period of 20-year. 3.3. Sensitivity analysis Under a water scarcity context, such as the one facing the region of this study, water not only will become increasingly scarce, hence limiting the growing production of foodstuffs but also its cost for irrigation will increase (Martínez-Alvarez et al., 2014). This incoming scenario of higher OCs could reduce the availability of grapefruit in the market, hence increasing the selling prices. Consequently, a sensitivity analysis of the feasibility of an irrigated grapefruit orchard to varying water and grapefruit prices will allow identifying possible impacts on the DCFA and hence in the orchard profitability. To this aim, water and fruit prices were varied within a certain range (TW price from 0.10 to 0.40 D m−3 ; RW price from 0.06 to 0.17 D m−3 ; fruit price from 0.05 to 0.25 D kg−1 ) while holding the remaining variables constant. Fig. 1a and b show the sensitivity analysis of NPV derived for a 20-year time period to water and grapefruit prices, respectively. Regarding the effect of the water price variation on the profitability, the TW treatment was the most profitable up to 0.16 D m−3 (IRR = 24.2%), point of matching of NPV values for TW and RW treatments. From this TW price, irrigation with RW remained always more profitable due to its lower cost and that it reached a similar yield as the TW treatment (Table 2). Note that TW price has ranged between 0.20 and 0.33 D m−3 in the last two decades (SCRATS, 2016) which indicates that the practice of full irrigation with RW had been the recommended irrigation strategy to the farmer. In addition, at about 1.40 D m−3 , NPV for TW treatment became negative indicating that the activity using conventional resources began to be non-profitable (data not shown). In the case of having water availability limitation and hence performing RDI treatments (dotted lines), when the TW price was lower than 0.38 D m−3 (IRR = 20.0%), the farmer should irrigate with TW-RDI, but on the contrary, if the irrigation water price went above that threshold, RDI with RW would be the more profitable option. Regarding the grapefruit price variation (Fig. 1b), little differences were observed between treatments but RW treatment seemed to be the most profitable, followed by the TW and then the RDI treatments. This may be explained by the lower OC of the RW treatment that could withstand a greater drop of the grapefruit price. The RDI treatments presented a similar trend and, as expected, were the less profitable strategies. For all the treatments, the NPV became negative at a fruit price about 0.08 D kg−1 . However, it is noteworthy that in the last decade, the minimum grapefruit selling price has been 0.18 D kg−1 (CARM, 2015). Fig. 1. Sensitivity analysis of net present value (NPV; D ha−1 ) derived for a 20-year time period to (a) water price and (b) grapefruit price. Fig. 1a also shows the internal rates of return (IRR; %)
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Reclaimed water price (RW; € m-3)
0.056 85,000
0.075
0.093
a)
80,000
IRR = 24.2%
0.112
0.130
0.149
0.167
TW
TW-RDI
RW
RW-RDI
NPV (€ha-1)
75,000 70,000 65,000 60,000
IRR = 20.0%
55,000 50,000 0.10
0.15
0.20
0.25
0.30
0.35
0.40
Fresh surface water price (TW; €m ) -3
100,000
b)
NPV (€ha-1)
80,000
Acknowledgments
60,000 40,000 20,000 0 -20,000 0.05
(mainly the cost of the irrigation water) and similar yield as the RW treatment advises the use of RW for irrigation as an economically feasible alternative to irrigation with conventional water resources since higher rates of orchard profitability has been reached. In the case of water limitation for irrigation, the use of conventional water resources (TW-RDI) is advised up to a water price of 0.38 D m−3 , but from this threshold value, regulated deficit irrigation (RDI) with RW becomes the most profitable option due to its lower irrigation water cost and similar yield. The grapefruit selling price also has a clear effect on the economic indicators and makes negative NPV values at a fruit price about 0.08 D kg−1 for all the treatments. In all cases, internal return rate values have been much higher than other possible financial alternatives making the activity very profitable. The results derived in this study may be helpful to stakeholders in making decisions on the best irrigation treatment to be adopted when they decide to invest in a grapefruit plantation.
0.10
0.15
0.20
0.25
Grapefruit price (€kg-1) Fig. 1. Sensitivity analysis of net present value (NPV; D ha−1 ) derived for a 20year time period to (a) water price and (b) grapefruit price. Fig. 1a also shows the internal rates of return (IRR; %) at the intersection of TW and RW at a fresh surface water price of 0.16 D m−3 and the intersection of TW-RDI and RW-RDI treatments at a fresh surface water price of 0.38 D m−3 . RW prices were calculated as RW = 0.63*0.031 + 0.37*TW, where TW refers to the TW prices shown in the lower x-axis.
at the intersection of TW and RW at a fresh surface water price of 0.16 D m−3 and the intersection of TW-RDI and RW-RDI treatments at a fresh surface water price of 0.38 D m−3 . RW prices were calculated as RW = 0.63*0.031 + 0.37*TW, where TW refers to the TW prices shown in the lower x-axis. 4. Conclusions The long-term economic feasibility of a grapefruit orchard under three different lifecycle stages and different irrigation strategies: full irrigation with surface water (TW), full irrigation with reclaimed water (RW), regulated deficit irrigation with TW (TWRDI) and regulated deficit irrigation with RW (RW-RDI) from planting has been analyzed using discount cash flow analysis (DCFA). Mean gross margins (GMs) have showed no significant differences between treatments. These findings are not consistent with results obtained from the DCFA, which shows the highest net present values (NPV) for RW followed by TW, TW-RDI and RWRDI treatments. This suggests that only using GM as an economic indicator may provide biased results and hence the use of DCFA becomes more appropriate for this kind of study. The study demonstrates that full irrigation with conventional water resources only provides the highest economic return generated by the project investment up to a water price of 0.16 D m−3 . From this threshold, the associated high operational costs of TW
This study was supported by IRRIQUAL (EU-FP6-FOODCT-2006-023120) and SIRRIMED (FP7-KBBE-2009-3-245159) projects. We are also grateful to two SENECA projects (05665/PI/07 and 11872/PI/09) and SENECA—Excelencia Científica (19903/GERM/15), CONSOLIDER INGENIO 2010 (MEC CSD2006-0067) and two CICYT projects (AGL2010-17553 and AGL2013-49047-C2-2-R) projects for providing funds to finance this research. References Alcón, F., Egea, G., Nortes, P.A., 2013a. Financial feasibility of implementing regulated and sustained deficit irrigation in almond orchards. Irrig. Sci. 31, 931–941. Alcón, F., Martin-Ortega, J., Pedrero, F., Alarcon, J.J., de Miguel, M., 2013b. Incorporating non-market benefits of reclaimed water into cost-benefit analysis: a case study of irrigated mandarin crops in southern Spain. Water Resour. Manage. 27, 1809–1820. Allen, R.G., Pereira, L.S., Raes, D., Smith, M., 1998. Crop evapotranspiration guidelines for computing crop water requirements. FAO Irrigation and Drainage Paper 56. Rome, Italy, pp 15–27. Ayers R.S., Westcot D.W., 1985. Water quality for agriculture. In: FAO Irrigation and Drainage Paper 29 Rev. 1. Food and Agriculture Organization of the United Nations, Rome, pp. 174. Ballester, C., Castel, J., Intrigliolo, D.S., Castel, J.R., 2011. Response of Clementina de Nules citrus trees to summer deficit irrigation. Yield components and fruit composition. Agric. Water Manage. 98, 1027–1032. Ballester, C., Castel, J., El-Mageed, T.A.A., Castel, J.R., Intrigliolo, D.S., 2014. Long-term response of ‘Clementina de Nules’ citrus trees to summer regulated deficit irrigation. Agric. Water Manage. 138, 78–84. CARM, 2015. Precios agrarios en origen (Accessed 05.02.16) https://www.carm.es/ web/pagina?IDCONTENIDO=1210&IDTIPO=100&RASTRO=c212$m1230. Caballero, P., De Miguel, M.D., Julia, J.F., 1992. Costes y Precios en Horticultura. Ed Mundi-Prensa, Madrid. Castel, J.R., Bautista, I., Ramos, C., Cruz, G., 1987. Evapotranspiration and irrigation efficiency of mature orange orchards in Valencia (Spain). Irrig. Drain. Syst. 3, 205–217. Chalmers, D.J., Mitchell, P.D., Van Heek, L., 1981. Control of peach tree growth and productivity by regulated water supply, tree density and summer pruning. J. Am. Soc. Hortic. Sci. 106, 307–312. European Commission, 2014. Guide to cost-benefit analysis of investment projects. Economic appraisal tool for Cohesion Policy 2014–2020. Directorate-General for Regional and Urban policy. pp. 364. Faurès, J.M., Bartley, D., Bazza, M., Burke, J., Hoogeveen, J., Soto, D., Steduto, P., 2013. Climate Smart Agriculture Sourcebook. FAO, Rome, pp. 557. Fereres, E., Martinich, D.A., Aldrich, T.M., Castel, J.R., Schulbach, E.H., 1982. Drip irrigation saves money in young almond orchards. Calif. Agric. 36, 12–13. García, J., Romero, P., Botía, P., García, F., 2004. Cost-benefit analysis of almond orchard under regulated deficit (RDI) in SE Spain. Span. J. Agric. Res. 2, 157–166. Gasque, M., Martí, P., Granero, B., González-Altozano, P., 2016. Effects of long-term summer deficit irrigation on ‘Navelina’ citrus trees. Agric. Water Manage. 169, 140–147. IFAC, 2008. International good practice guidance Project appraisal using discounted cash flow. International federation of accountants. Available in http://www.ifac.org.
J.F. Maestre-Valero et al. / Agricultural Water Management 178 (2016) 119–125 Instituto Nacional de Estadística, INE. Available at: http://www.ine.es/. (Accessed 05.02.16). Iglesias, A., Garrote, L., Flores, F., Moneo, M., 2007. Challenges to manage the risk of water scarcity and climate change in the Mediterranean. Water Resour. Manage. 21 (5), 775–788. Levy, Y., Bielorai, H., Shalhevet, J., 1978. Long-term effects of different irrigation regimes on grapefruit tree development and yield. J. Am. Soc. Hortic. Sci. 103, 680–683. Ministerio de Agricultura, Alimentación y Medio Ambiente (MAGRAMA), 2014. Resolución de 11 de noviembre de 2014, de la Dirección General del Agua, por la que se publica el Acuerdo de Consejo de Ministros de 7 de noviembre de 2014, por el que se aprueban las nuevas tarifas para el aprovechamiento del acueducto Tajo-Segura. Martínez-Alvarez, V., García-Bastida, P.A., Martin-Gorriz, B., Soto-García, M., 2014. Adaptive strategies of on-farm water management under water supply constraints in South-Eastern Spain. Agric. Water Manage. 136, 59–67. Martin-Gorriz, B., Soto-García, M., Martínez-Alvarez, V., 2014. Energy and greenhouse-gas emissions in irrigated agriculture of SE (southeast) Spain: effects of alternative water supply scenarios. Energy 77, 478–488. Maurer, M., Davies, F., 1993. Use of reclaimed water for irrigation and fertigation of young Redblush grapefruit trees. Proc. Florida State Hortic. Soc. 106, 22–30. Mitchell, P.D., Chalmers, D.J., Jerie, P.H., Burge, G., 1986. The use of initial with holding of irrigation and tree spacing to enhance the effect of regulated deficit irrigation on pear trees. J. Am. Soc. Hortic. Sci. 111, 858–861. Mounzer, O., Pedrero-Salcedo, F., Nortes, P.A., Bayona, J.M., Nicolás-Nicolás, E., Alarcón, J.J., 2013. Transient soil salinity under the combined effect of reclaimed water and regulated deficit drip irrigation of Mandarin trees. Agric. Water Manage. 120, 23–29. Nicolás, E., Alarcón, J.J., Mounzer, O., Pedrero, F., Nortes, P.A., Alcobendas, R., Romero-Trigueros, C., Bayona, J.M., Maestre-Valero, J.F., 2016. Long-term
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Economic feasibility of implementing regulated deficit irrigation with reclaimed water in a grapefruit orchard J.F. Maestre-Valero a,∗ , B. Martin-Gorriz a , J.J. Alarcón b , E. Nicolas b , V. Martinez-Alvarez a a b
Escuela Técnica Superior de Ingeniería Agronómica, Universidad Politécnica de Cartagena, Paseo Alfonso XIII 48, 30203, Cartagena, Spain CEBAS-CSIC, Campus Universitario de Espinardo, 30100, PO Box 164, Murcia, Spain
a r t i c l e
i n f o
Article history: Received 15 June 2016 Received in revised form 16 September 2016 Accepted 18 September 2016 Keywords: Treated wastewater Water productivity Net present value Water savings
a b s t r a c t This study, conducted from 2005 to 2014, assessed the long-term economic viability of irrigating a commercial grapefruit orchard with saline reclaimed water (RW) combined or not with a regulated deficit irrigation (RDI) strategy. During the first three years after plantation, trees were full irrigated (100% of the crop evapotranspiration; ETc ) with fresh surface water (TW; electrical conductivity about 1 dS m−1 ) pumped from the “Tagus-Segura” water transfer canal. Then, from the fourth year onwards, two water sources, TW and RW (electrical conductivity of 3.0 dS m−1 ) were used, and two irrigation treatments, a control treatment (TW and RW irrigated 100% of ETc ) and a RDI treatment (TW-RDI and RW-RDI irrigated 50% of ETc during the 2nd stage of fruit growth) were performed. A discounted cash flow analysis (DCFA), which considered an orchard life period of 20 years, was performed to determine the profitability of different irrigation strategies. It evidenced that irrigation with TW was the most economically feasible option up to a TW price of 0.16 D m−3 , whereas from this water value, RW began to be the most profitable treatment. In a context of water scarcity where water availability is limited and RDI strategies must be performed, the use of TW-RDI was advised up to a water price of 0.38 D m−3 , but from this threshold, RDI with RW became the most profitable option due to its lower irrigation water cost. The grapefruit selling price had a clear effect on the profitability of the different treatments and showed full irrigated treatments as the most profitable. A fruit selling price below 0.08 D kg−1 produced negative net present values for all the treatments. © 2016 Elsevier B.V. All rights reserved.
1. Introduction Spain is the largest producer and exporter of grapefruits in Europe, with 73% (58,800 Tm) of the grapefruit production, from which, 93.4% is exported. The main area of production is located in the southeast region, characterized by a semiarid climate and a high evaporative demand. Consequently, although grapefruit is well adapted to dry, warm, semi-tropical humid and tropical climatic conditions, the amount of irrigation necessary for fresh fruit production is very high, forcing citrus growers to find ways to maximize water savings and improve final fruit yield and quality (Pérez-Pérez et al., 2014). Under this unfavorable scenario, an increased pressure on water resources ruled by the competition for water between agriculture, industry and population (Iglesias et al.,
∗ Corresponding author. E-mail addresses: [email protected] (J.F. Maestre-Valero), [email protected] (B. Martin-Gorriz), [email protected] (J.J. Alarcón), [email protected] (E. Nicolas), [email protected] (V. Martinez-Alvarez). http://dx.doi.org/10.1016/j.agwat.2016.09.019 0378-3774/© 2016 Elsevier B.V. All rights reserved.
2007) and also by the climate change (Faurès et al., 2013) is latent, leading to an urgent need to explore new alternative water sources and also strategies to cope with crop water requirements in order to maintain or enhance sustainable agricultural production. In that regard, the use of non-conventional reclaimed water (RW) in agriculture has gained importance during the last decades. In addition, although it has usually been viewed in a negative light as a product commonly requiring disposal, as it may contain high concentrations of salt leading to undesirable effects on soils and plants (Ayers and Westcot, 1985), with appropriate management, RW has great potential to become a valuable irrigation water source. The main reasons are that (i) it is free-of-charge when the “polluter pays” policy is implemented (Mounzer et al., 2013) and (ii) it contains high organic matter and many nutrients such as N, P and K, which are essential for plant growth and might allow reducing fertilizer application rates (Nicolás et al., 2016). Besides using RW, one well-known way to optimize water resources is to employ regulated deficit irrigation (RDI) strategies, which consists of cutting-off or reducing partially the irrigation during low water stress sensitivity periods of the crop cycle, when
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adverse effects on productivity are minimized (Chalmers et al., 1981; Mitchell et al., 1986). Some studies carried out on grapefruits have proved the technical and agronomical advantages of: (i) reusing RW (Maurer and Davies, 1993; Romero-Trigueros et al., 2014; Pedrero et al., 2015), (ii) implementing RDI strategies (Levy et al., 1978; Ballester et al., 2011, 2014; Pérez-Pérez et al., 2014; Gasque et al., 2016) or (iii) implementing RDI combined with RW (Pedrero et al., 2015). However, little research focused on the profitability of RDI or the implementation of RW strategies has been conducted, although all studies point out RDI or the use of RW as a profitable alternative for irrigation in arid and semiarid areas. Most financial and economic studies have been conducted in almond orchards, such as García et al. (2004) and Romero et al. (2006), who evaluated RDI in a fouryear period, and Alcón et al. (2013a), who studied regulated and sustained deficit irrigation during 6 years taking in consideration three different growth phases; i.e. non-productive, transition and fully productive trees. In the case of citrus, others have evaluated the economic performance of RDI in adult orange trees (Pérez-Pérez et al., 2010) or the effect of irrigation with RW on adult mandarin orchard (Alcón et al., 2013b). In spite of these studies, the analysis of the economic feasibility of RDI combined with RW in citrus trees remains unknown. In this context, this study aims to evaluate the long-term economic feasibility of implementing several irrigation regimes, full irrigation and RDI combined or not with RW, in a ‘Star Ruby’ grapefruit orchard, introducing the novelty that this approach overcomes the temporal limitations of previous studies as it considers three different lifecycles of the crop.
2. Material and methods 2.1. Field conditions and irrigation treatments The experiment was conducted from 2005 to 2014 at a 0.5 ha commercial orchard located in Campotéjar-Murcia, south-eastern Spain (38◦ 07 18 N; 1◦ 13 15 W). This area is characterized by a Mediterranean semi-arid climate with warm, dry summers and mild winter conditions. The annual reference evapotranspiration (ET0 ) and rainfall are on average 1,330 and 280 mm, respectively. The soil within the first 90 cm depth had a loamy texture (24% clay, 33% loam and 43% sand) with an average bulk density of 1.41 g cm−3 . It was classified as a Typic Haplocalcid according to Soil Survey Staff (2014). The study was performed on ‘Star Ruby´ı grapefruit trees (Citrus Paradisi Macf) grafted on Macrophylla rootstock [Citrus Macrophylla] which was planted in 2004 with a tree spacing of 6 m × 4 m. Three different lifecycle stages were considered in this study: (i) juvenile (unproductive) stage from 2005 to 2007, (ii) young productive stage from 2008 to 2010 and (iii) adult productive stage from 2011 to 2014. A total of 192 trees were used in this study. The experimental design was a randomized complete design with four blocks and four experimental plots per block. The standard plot was made up of twelve trees, organized in three adjacent rows with four trees per row. The two central trees “inner trees” of the middle row were used for measurements and the other ten trees were guard trees so as to eliminate potential edge effects. The irrigation system consisted of a single lateral drip line laid on the soil surface next to the tree trunk. It provided three selfpressure compensating on-line emitters per tree discharging 4 L h−1 each, placed at 1 m from the trunk and spaced 1 m apart. The irrigation doses were scheduled based on the daily crop evapotranspiration (ETc ) accumulated during the previous week. ETc values were estimated as reference evapotranspiration (ET0 ), calculated
with the Penman–Monteith methodology (Allen et al., 1998), and month-specific crop coefficients (Kc ). From January to December Kc were 0.40, 0.50, 0.50, 0.55, 0.55, 0.60, 0.60, 0.60, 0.55, 0.50, 0.45 and 0.40, respectively (Castel et al., 1987). In order to correct Kc during the juvenile and young productive stages (from 2005 to 2010) a reduction coefficient of 0.50 and 0.75, respectively was considered, which accounted for eventual decrease in evapotranspiration because of the partial soil covering by the crop canopy (young grapefruit trees) (Fereres et al., 1982). Trees were irrigated daily during the ten-year experiment. The total amounts of water applied were measured with inline water flow meters, placed on the four replicates of each treatment. The irrigation was controlled automatically by a head-unit programmer and electro-hydraulic valves. All treatments received the same amounts of fertilizer applied through the drip irrigation system. In 2005, fertilizer amounts were 89–45–64 kg ha−1 year−1 (N–P2 O5 –K2 O) and it increased by about 15% each year until adult productive stage. Pest control practices and pruning were those commonly used by growers in the area, and no weeds were allowed to develop within the orchard. The experiment involved two different water sources. One source (TW), with an average electrical conductivity (ECw ) about 1 dS m−1 , was pumped from the “Tagus-Segura” water transfer canal, which is a canal that supplies a large part of the surface water used in the southeast of Spain for both human consumption and irrigation practices. The other was tertiary saline reclaimed water (RW) pumped from a wastewater treatment plant (WWTP). This source was automatically blended at the irrigation controlhead with water from the canal to reduce its ECw value down to ≈3 dS m−1 in order to obtain a constant ECw during the experiment. The usual blending rate was 63% RW and 37% TW. For each water source (TW and RW), two irrigation treatments were carried out. The control treatments involved irrigation with TW or RW during the whole season at 100% of the soil–water lost by daily ETc . The RDI treatment consisted of irrigation at 100% ETc , except during the second stage of fruit growth, 55–65 days between late-June and mid-September, when it received 50% of the water amount applied to the control. No leaching fraction was added to the irrigation doses. Irrigation with RW and application of RDI strategies began to be performed from 2008 onwards. From 2005 to 2007 the whole orchard was full irrigated with TW. Table 1 shows the irrigation water applied, the rainfall and the ET0 for the experimental period. Table 1 Mean annual values of the water applied (mm) for each irrigation treatment for the juvenile (2005, 2006, 2007 and
Table 1 Mean annual values of the water applied (mm) for each irrigation treatment for the juvenile (2005, 2006, 2007 and 2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages. Annual rainfall (mm) and reference evapotranspiration (ET0 ; mm) at the experimental site during are also presented. Irrigation Water Applied (mm)
2005 2006 2007 2005–2007 2008 2009 2010 2008–2010 2011 2012 2013 2014 2011–2014
Control treatment
RDI treatment
127 142 181 150 224 379 356 320 585 599 570 614 592
– – – – 193 331 309 278 515 521 496 518 513
Rainfall (mm)
ET0 (mm)
168 359 335 287 271 306 330 302 264 260 249 258 258
1,266 1,276 1,299 1,280 1,332 1,384 1,254 1,323 1,258 1,407 1,395 1,431 1,373
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2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages. Annual rainfall (mm) and reference evapotranspiration (ET0 ; mm) at the experimental site are also presented. 2.2. Fruit yield Eight inner trees per treatment were selected to determine yield (Table 2). Further details on the agronomic and physiological variables controlled throughout the long-term experiment are found in Pedrero et al. (2015). The irrigation water productivity (WPi ) was also calculated for each treatment as the ratio between the annual yield (kg ha−1 ) and the applied water (m3 ha−1 ) during the same period (Table 2). Table 2 Annual fruit yield (kg tree−1 ) and water use efficiency (kg m−3 ), determined as the ratio yield/irrigation, for the juvenile (2005, 2006, 2007 and 2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages in the grapefruit orchard. 2.3. Discounted cash flow analysis A discounted cash flow analysis (DCFA) to assess the benefits and costs of the four irrigation strategies assessed in this study was carried out. The DCFA, by comparing the expected benefits and costs and related cash inflows and outflows of a given initiative or investment considering the life span of the investment (IFAC, 2008), may be a suitable tool for farmers to evaluate the feasibility of implementing different irrigation strategies. Following other previous research (Pérez-Pérez et al., 2010; Alcón et al., 2013b), it has been assumed that the investment and the variable costs in this study are provided by farmer own funds and hence there is no financial funding. To assess the feasibility of an investment, both the internal rate of return (IRR, %), the net present value (NPV, D ) and the payback period (PB, years) of the different initiatives were examined. NPV aggregates all inflows (I) and outflows (O) given in a certain period of time usually measured in years (t), applied to a discount rate (r), minus the investment costs (K), NPV = −K +
t It − Ot t=1
(1)
(1 + r)t
Table 2 Annual fruit yield (kg tree−1 ) and water use efficiency (kg m−3 ), determined as the ratio yield/irrigation, for the juvenile (2005, 2006, 2007 and 2005–2007), young productive (2008, 2009, 2010 and 2008–2010) and adult productive (2011, 2012, 2013, 2014 and 2011–2014) stages in the grapefruit orchard. Yield (kg tree−1 )
2005 2006 2007 2005–2007 2008 2009 2010 2008–2010 2011 2012 2013 2014 2011–2014 *
WUE (kg m−3 )
TW
TW-RDI RW
RW-RDI TW
TW-RDI RW
RW-RDI
0 5.1 19.9 12.5 58.7 68.2 78.9 68.6 179.5 140.8 185.4 231.6 184.3
– – – – 59.0 70.4 61.9 62.6 166.7 129.6 186.6 202.1 171.2
– – – – 59.7 52.1 56.1 55.9 158.8 121.9 156.2 192.1 157.2
– – – – 12.7 8.9 7.2 10.4 13.6 10.9 14.9 16.3 13.9
– – – – 12.9 6.5 6.6 8.7 12.8 9.7 13.1 15.4 12.8
– – – – 67.0 61.9 54.9 61.3 192.1 123.5 191.1 211.1 179.4
0 1.5 4.6 3.0 10.9 7.5 9.2 9.2 12.8 9.8 13.5 15.7 13.0
– – – – 12.5 6.8 6.4 8.6 13.6 8.1 15.2 14.3 12.8
Significant differences between treatments each year have not been found following Tukey´ıs range test (P < 0.05) and hence letters to indicate differences have not been shown.
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where It − Ot denotes the expected cash flows in the time period assessed. r is the desired return that could be represented by the specific return an investor expects for an alternative investment with similar risk or the interest rate on debt. In this DCFA, r was set to 4% according to European Commission (2014). The IRR is the interest rate at which discounted cash outflows equals discounted cash inflows of the investment. IRR is commonly used to evaluate the desirability of investments or projects, such that when the IRR of an investment exceeds its cost of capital, it is economically profitable. The PB period refers to the period of time required for the return on an investment to “repay” the amount corresponding to the original investment. It is of note that even though the experimental data have been collected in a 0.5 ha grapefruit orchard, the results will be extrapolated to a typical citrus orchard of 10 ha. The profitability of the initial investment has been estimated for a tree life period of 20 years which is the usual time horizon for citrus orchards in the region. 2.3.1. Benefits Fruit production depended on the irrigation strategy and also on the period of the tree lifecycle (i.e., juvenile, 2005–2007; young productive, 2008–2010; or adult productive, 2011–2014 stages). Total benefits were calculated as the product between the fruit production and the sale prices in origin, which were those officially published by the Government of Region of Murcia (CARM, 2015) and updated to 2014 according to inflation: 0.24 D kg−1 in 2006, 0.26 D kg−1 in 2007, 0.23 D kg−1 in 2008, 0.19 D kg−1 in 2009, 0.21 D kg−1 in 2010, 0.20 D kg−1 in 2011, 0.20 D kg−1 in 2012, 0.20 D kg−1 in 2013 and 0.19 D kg−1 in 2014. 2.3.2. Costs Costs must distinguish between investment and operational costs. Investment costs refer to the value of the initial investment that enables activity start-up, while the operational costs correspond to the cash flow necessary for a proper running and development of the activity. 2.3.3. Investment In this study, the initial investment comprises the cost of both labor and the assets needed to establish the plantation. Considering an average farm area of 10 ha, the total investment costs have been estimated in 109,121 D , of which 33,333 D correspond to the soil preparation and plantation considering a cost of 8 D tree−1 , 10,000 D to the construction of a shed for equipment and irrigation control, 27,000 D to the irrigation equipment and system, and 38,788 D to the agricultural water reservoir with a capacity of 10,000 m3 . Such a capacity has been defined considering a storing of water enough for irrigation during 21 consecutive days during the period of highest water demand by the crop. These values are in accordance with those reported by Pérez-Pérez et al. (2010) and Alcón et al. (2013b) for establishing a 10-ha plot of orange and mandarins trees, respectively. 2.3.4. Operational cost The operational cost (OC) cover all inputs used in the annual productive process and have been considered within four categories which include raw material, labour, machinery and tax and insurance. To compute OC unit prices have been considered constant during the project lifespan taking 2014 as the reference year. 2.4. Raw material Raw material considered the irrigation water, the electric energy, the fertilizers and the plant protection products. In the case of the TW treatments (i.e. water supplied from the “TagusSegura” water transfer canal), the water cost was calculated taking
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into account both (i) the conveyance cost from the sources to the supplying point of the irrigation districts (MAGRAMA, 2014) and (ii) also the off-farm cost, established by the Campotéjar Irrigation Community, which considers the water allocation from the irrigation districts supplying point to each farm hydrant (Martin-Gorriz et al., 2014). During the experiment, water prices ranged between 0.24 D m−3 and 0.35 D m−3 with a mean value of 0.30 D m−3 (SCRATS, 2016). On the other hand, the RW had a price equivalent to the energy costs of carrying it from the waste water treatment plant to the plots, which was estimated at an average of 0.031 D m−3 . In such a way, the mean water price in RW treatments was 0.13 D m−3 (i.e. 0.63*0.031 D m−3 + 0.37*0.3 D m−3 ). Farmers usually receive water from the collective pressurized network of the irrigation community on rotational scheduling, and store it in on-farm reservoirs. Under these conditions farmers need to spend electric energy to re-pressurize the irrigation system with their own pumping systems. Previous studies have established the average energy consumption for drip irrigation in southeast of Spain at 0.17 kWh m−3 (Soto-García et al., 2013). The price of electricity for each year of study was obtained from National Institute of Statistics (INE, 2016). The cost of fertilizers and plant protection products were determined considering their applied amounts each year and their respective prices. 2.4.1. Labour Labour costs included both irrigation maintenance and hand pruning. Irrigation maintenance cost was calculated considering one employee revising the farm quarterly at a speed of 1.75 km h−1 from 2005 to 2007, at 1.50 km h−1 from 2008 to 2010 and at 1.20 km h−1 from 2011 to 2014. Hand pruning is an external labour that requires a great amount of professional manpower. Pruning costs have been defined based on field trial measurements. In this study, 69 h ha−1 at the juvenile stage (10 min tree−1 ), 139 h ha−1 at the young productive stage (20 min tree−1 ) and 208 h ha−1 at the adult productive stage (30 min tree−1 ) were considered. The harvesting cost was not taken in account because in citrus orchards this task is usually paid by the fruit buyers. 2.4.2. Machinery Machinery costs included the pest control and the branches shredding. Pest control was performed with an air-carrier sprayer trailed by tractor at a cost of 27 D h−1 . From 2005 to 2007 it
was calculated considering thrice a year at 1 h ha−1 . From 2008 to 2010, it was performed quarterly considering 1.5 h ha−1 . From 2011 onwards, it was computed by adding to the average cost in 2008–2010 one hour more of machinery. Branch shredding was carried out once a year by mounting the shredder in a tractor at an hourly cost of 30 D h−1 . Branch shredding took 1.5 h ha−1 , 2 h ha−1 and 3 h ha−1 for the juvenile, young productive and adult productive stages, respectively. It should be noted that in this study the tractor was considered as a working cost paid to external contractors since in case it had been acquired by the farmer, it would be under-used, generating a cost per hour very high and hence the experimental plantation alone would render the business unviable. 2.4.3. Tax and insurance Tax and insurance costs were estimated at 50 D ha−1 , 253 D ha−1 and 329 D ha−1 for the juvenile, young productive and adult productive stages, respectively (Table 3). 2.5. Statistical analysis The data derived during the experiment were analyzed separately by lifecycle periods, that is, the young productive and the adult productive stages. A one-way variance analysis (ANOVA) was used to test the hypothesis of equal means of the costs, incomes and water use indicators for the different irrigation treatments and lifecycle periods. Besides, when differences were significant, Tukey’s range test, at 95% confidence level, was carried out. 3. Results and discussion 3.1. Gross margins Table 3 shows the average OCs and revenue for each irrigation treatment during the different orchard stages; juvenile (from 2005 to 2007), young productive (from 2008 to 2010) and adult productive (from 2011 to 2014) stages. Table 3 Mean operational costs, revenues, and gross margins, for juvenile (2005–2007), young productive (2008–2010) and adult productive (2011–2014) stages in the grapefruit orchard under the four irrigation treatments (i.e., TW, TW-RDI, RW and RW-RDI). During the juvenile stage, fruit production was nearly inexistent (12.5 kg tree−1 ; Table 2) but the OC was 2,127 D ha−1 , from which
Table 3 Mean operational costs, revenues, and gross margins, for juvenile (2005–2007), young productive (2008–2010) and adult productive (2011–2014) stages in the grapefruit orchard under the four irrigation treatments (i.e., TW, TW-RDI, RW and RW-RDI). Variable
Juvenile stage
−1
Revenue (D ha ) Yield (kg ha−1 ) Price (D kg−1 ) Operational cost (D ha−1 ) Raw material Irrigation water Electric energy Fertilizers Plant protection Labour Irrigation maintenance Hand pruning Machinery Trailed air-carrier sprayer Shredding machine Tax and insurance Gross margin (D ha−1 ) *
Young productive stage
Adult productive stage
TW
TW
TW-RDI
RW
RW-RDI
TW
TW-RDI
RW
RW-RDI
890 3,475 0.24 2,127 1,379 450 28 307 593 586 31 555 112 82 30 50 −1,237
5,983 28,615 0.21 3,757 2,244 959 58 487 741 1,036 36 1,000 224 163 61 253 2,226
5,553 26,592 0.21 3,624 2,111 833 50 487 741 1,036 36 1,000 224 163 61 253 1,929
5,379 25,544 0.21 3,214 1,701 415 58 487 741 1,036 36 1,000 224 163 61 253 2,165
4,921 23,331 0.21 3,152 1,639 361 50 487 741 1,036 36 1,000 224 163 61 253 1,769
15,131 76,860 0.20 5,850a 3,529a 1,776a 115 748 889 1,710 44 1,667 282 191 91 329 9,281
14,069 71,400 0.20 5,596a 3,275a 1,538a 100 748 889 1,710 44 1,667 282 191 91 329 8,474
14,545 74,826 0.20 4,843b 2,522b 770b 115 748 889 1,710 44 1,667 282 191 91 329 9,902
12,914 65,570 0.20 4,724b 2,403b 666b 100 748 889 1,710 44 1,667 282 191 91 329 8,189
Mean values followed by different letters within the same row and lifecycle period indicate significant differences at 95% confidence level following Tukey’s range test.
J.F. Maestre-Valero et al. / Agricultural Water Management 178 (2016) 119–125
64.8% was attributed to raw material, resulting in a negative gross margin (GM) of −1,237 D ha−1 (Table 3). The GM shows the difference between the selling price of an item and the variable costs incurred to be produced (Caballero et al., 1992). In the case of the young productive stage, significant differences for yield or OC were not either observed among treatments, even though the price of RW was more than twice lower than the TW price or that the RDI treatments reduced the annual amount of applied water to about 13% (Table 1). At this stage, raw material was about 60% of the OC for TW and TW-RDI treatments whereas it was about 52% of the OC for RW and RW-RDI treatments. It can be explained by the lower cost of the RW (0.13 D m−3 ) compared to the TW (0.30 D m−3 ). However, such cost savings associated to a reduction of the water use (i.e. RDI treatments) or to the use RW were not enough to provoke significant differences on the raw material cost. The OC was on average 61.6% higher than that of the juvenile stage with corresponding revenue about 6.1 times higher. This allowed to achieve a positive GM which ranged between 2,226 D ha−1 and 1,769 D ha−1 for TW and RW-RDI treatments, respectively (Table 3). At the adult productive stage, once the trees were fully developed and reached their productive potential, significant differences were only found for the OC and mainly caused by the irrigation water cost. The ratio between the raw material and the OC was similar to that observed at the young productive stage. In this sense, TW and TW-RDI showed higher irrigation water costs but such differences were not observed among treatments for yield. As a result, significant differences were neither observed for GM. On average, the annual OC and revenue were about 2.5 and 15.9 times higher than those of the juvenile stage and about 1.5 and 2.6 times higher than those of the young-trees stage, respectively (Table 3). Our GM results during the adult productive stage were similar to those published by Pérez-Pérez et al. (2010) in orange and by Alcón et al. (2013b) in mandarin trees. These results indicate that, due to the variability of data within each lifecycle stage, studying the average values of revenue, both the OCs and the GM for the different lifecycle stages, could not provide a farmer with valuable criteria to choose the most suitable strategy to be implemented along the grapefruit lifespan in order to recover the investment and achieve the highest profitability from it. Accordingly, assessing the economic feasibility by means of a DCFA might be a tool to provide farmers with more accurate criteria. 3.2. Discounted cash flow According to the DCFA, the time required to recover the cost of the investment (payback period) was similar in the four treatments (8 years) (Table 4). That meant that the cash flow began to be positive once the trees were well entered in the adult productive stage and started to be high-productive. The simulation outputs for the 20-year period indicated that full irrigation with RW would be the most profitable strategy (NPV = 72,263 D ha−1 and IRR = 23.2%), whereas the less profitable would be the RDI treatments (NPV = 56,948 D ha−1 for RW-RDI and 59,669 D ha−1 for TW-RDI treatments and IRR ≈ 20.0%) (Table 4). These results indicate that, bearing in mind the following assumptions: (i) longterm sustainability of the grapefruit orchard during the 20-year lifecycle period, (ii) fixed buying prices for irrigation TW = 0.30 D m−3 and RW = 0.13 D m−3 and (iii) a fixed selling grapefruit price ≈0.21 D kg−1 , in case there is no limitation of water availability for irrigation, the farmer should practice full irrigation with RW to achieve the maximum profitability. On the contrary, in case there is some limitation for the use of water resources for irrigation, the farmer could opt either for TW-RDI or RW-RDI strategies, saving up to 15% of water (Table 1), but then assuming a considerable reduction in the orchard profitability (11.0 and 21.2% for TW-RDI and RW-RDI treatments compared to TW and RW treatments, respectively) (Table 4). It is of note that in all cases, IRR values are much
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Table 4 Net present value (NPV; D ha−1 ), internal rate of return (IRR; %) and payback period (years) derived for each of the water treatments appraised for the simulated period of 20-year.
NPV (D ha−1 ) IRR (%) Payback (years)
TW
TW-RDI
RW
RW-RDI
67,061b 22.2b 8
59,669c 21.0c 8
72,263a 23.2a 8
56,948c 20.6c 8
* Mean values followed by different letters within the same row and lifecycle period indicate significant differences at 95% confidence level following Tukey’s range test. * Data calculated considering a price of surface water (TW) of 0.30 D m−3 , a price for reclaimed water (RW) of 0.13 D m−3 and the fruit prices indicated in epigraph 2.3.1.
higher than other possible financial alternatives making the activity very profitable. Table 4 Net present value (NPV; D ha−1 ), internal rate of return (IRR; %) and payback period (years) derived for each of the water treatments appraised for the simulated period of 20-year. 3.3. Sensitivity analysis Under a water scarcity context, such as the one facing the region of this study, water not only will become increasingly scarce, hence limiting the growing production of foodstuffs but also its cost for irrigation will increase (Martínez-Alvarez et al., 2014). This incoming scenario of higher OCs could reduce the availability of grapefruit in the market, hence increasing the selling prices. Consequently, a sensitivity analysis of the feasibility of an irrigated grapefruit orchard to varying water and grapefruit prices will allow identifying possible impacts on the DCFA and hence in the orchard profitability. To this aim, water and fruit prices were varied within a certain range (TW price from 0.10 to 0.40 D m−3 ; RW price from 0.06 to 0.17 D m−3 ; fruit price from 0.05 to 0.25 D kg−1 ) while holding the remaining variables constant. Fig. 1a and b show the sensitivity analysis of NPV derived for a 20-year time period to water and grapefruit prices, respectively. Regarding the effect of the water price variation on the profitability, the TW treatment was the most profitable up to 0.16 D m−3 (IRR = 24.2%), point of matching of NPV values for TW and RW treatments. From this TW price, irrigation with RW remained always more profitable due to its lower cost and that it reached a similar yield as the TW treatment (Table 2). Note that TW price has ranged between 0.20 and 0.33 D m−3 in the last two decades (SCRATS, 2016) which indicates that the practice of full irrigation with RW had been the recommended irrigation strategy to the farmer. In addition, at about 1.40 D m−3 , NPV for TW treatment became negative indicating that the activity using conventional resources began to be non-profitable (data not shown). In the case of having water availability limitation and hence performing RDI treatments (dotted lines), when the TW price was lower than 0.38 D m−3 (IRR = 20.0%), the farmer should irrigate with TW-RDI, but on the contrary, if the irrigation water price went above that threshold, RDI with RW would be the more profitable option. Regarding the grapefruit price variation (Fig. 1b), little differences were observed between treatments but RW treatment seemed to be the most profitable, followed by the TW and then the RDI treatments. This may be explained by the lower OC of the RW treatment that could withstand a greater drop of the grapefruit price. The RDI treatments presented a similar trend and, as expected, were the less profitable strategies. For all the treatments, the NPV became negative at a fruit price about 0.08 D kg−1 . However, it is noteworthy that in the last decade, the minimum grapefruit selling price has been 0.18 D kg−1 (CARM, 2015). Fig. 1. Sensitivity analysis of net present value (NPV; D ha−1 ) derived for a 20-year time period to (a) water price and (b) grapefruit price. Fig. 1a also shows the internal rates of return (IRR; %)
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Reclaimed water price (RW; € m-3)
0.056 85,000
0.075
0.093
a)
80,000
IRR = 24.2%
0.112
0.130
0.149
0.167
TW
TW-RDI
RW
RW-RDI
NPV (€ha-1)
75,000 70,000 65,000 60,000
IRR = 20.0%
55,000 50,000 0.10
0.15
0.20
0.25
0.30
0.35
0.40
Fresh surface water price (TW; €m ) -3
100,000
b)
NPV (€ha-1)
80,000
Acknowledgments
60,000 40,000 20,000 0 -20,000 0.05
(mainly the cost of the irrigation water) and similar yield as the RW treatment advises the use of RW for irrigation as an economically feasible alternative to irrigation with conventional water resources since higher rates of orchard profitability has been reached. In the case of water limitation for irrigation, the use of conventional water resources (TW-RDI) is advised up to a water price of 0.38 D m−3 , but from this threshold value, regulated deficit irrigation (RDI) with RW becomes the most profitable option due to its lower irrigation water cost and similar yield. The grapefruit selling price also has a clear effect on the economic indicators and makes negative NPV values at a fruit price about 0.08 D kg−1 for all the treatments. In all cases, internal return rate values have been much higher than other possible financial alternatives making the activity very profitable. The results derived in this study may be helpful to stakeholders in making decisions on the best irrigation treatment to be adopted when they decide to invest in a grapefruit plantation.
0.10
0.15
0.20
0.25
Grapefruit price (€kg-1) Fig. 1. Sensitivity analysis of net present value (NPV; D ha−1 ) derived for a 20year time period to (a) water price and (b) grapefruit price. Fig. 1a also shows the internal rates of return (IRR; %) at the intersection of TW and RW at a fresh surface water price of 0.16 D m−3 and the intersection of TW-RDI and RW-RDI treatments at a fresh surface water price of 0.38 D m−3 . RW prices were calculated as RW = 0.63*0.031 + 0.37*TW, where TW refers to the TW prices shown in the lower x-axis.
at the intersection of TW and RW at a fresh surface water price of 0.16 D m−3 and the intersection of TW-RDI and RW-RDI treatments at a fresh surface water price of 0.38 D m−3 . RW prices were calculated as RW = 0.63*0.031 + 0.37*TW, where TW refers to the TW prices shown in the lower x-axis. 4. Conclusions The long-term economic feasibility of a grapefruit orchard under three different lifecycle stages and different irrigation strategies: full irrigation with surface water (TW), full irrigation with reclaimed water (RW), regulated deficit irrigation with TW (TWRDI) and regulated deficit irrigation with RW (RW-RDI) from planting has been analyzed using discount cash flow analysis (DCFA). Mean gross margins (GMs) have showed no significant differences between treatments. These findings are not consistent with results obtained from the DCFA, which shows the highest net present values (NPV) for RW followed by TW, TW-RDI and RWRDI treatments. This suggests that only using GM as an economic indicator may provide biased results and hence the use of DCFA becomes more appropriate for this kind of study. The study demonstrates that full irrigation with conventional water resources only provides the highest economic return generated by the project investment up to a water price of 0.16 D m−3 . From this threshold, the associated high operational costs of TW
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