Landuse Change, Productivity & Development - Historical and Geographical Context

Final Report of Theme 5.1 to the National Land & Water Resources Audit
August 2001

Historical and Geographical Context

Summary

Agricultural land use in Australia is circumscribed in large part by climatic factors, particularly rainfall, including its timing, amount and reliability. The characteristics of soils become important limiting factors for plant growth at the finer scales of the local landscape.

Agriculture, which has reached its present land use after much trial and error, experimentation and testing, needs to be considered in the context of historical changes. Land use changes in Australia appear as intensifications in a major response to the challenges of international markets and profitability.

The successes of Australian agriculture have really depended on the degree to which a large overseas market existed for a product, that could be produced using little labour, but required large areas of land and could be transported cheaply. The historical phases of agricultural development in Australia began with wool, then beef cattle followed by grains as enabling technologies became available, and now possibly milk products.

Gains in productivity come in response to added inputs and improved efficiencies as a result of innovations. Increases in productivity might be expected to use the resource base more intensively and therefore any degradation of the resource would show up in static or declining productivity, although this may be masked by increased inputs.

Generally a change in land use is a major decision for an individual producer with wide-ranging ramifications. While world population growth and demands for food and fibre provide some of the ultimate causes, other immediate causes include: production factors such as land condition, innovations, and input costs; marketing factors such as quality, timeliness, and prices; personal factors such as motivations, knowledge, and skills; and external factors such as regulations, social changes, infrastructure, and government policies.

One method in this study was to update the considerable work presented on land utilization by Wadham et al (1964). This posed challenges: to condense the changes considerably and to tailor the products for managers and policy use. Since Wadham et al. wrote their last edition in 1964, a major groundswell of concern for the environmental impacts of activities has emerged, manifest in the ESD process, the Decade of Landcare, and the consideration of the ecological units of landscapes and catchments in planning and management.

2.1 Geography and climate

Land use, particularly by agriculture, is circumscribed in large part by climatic factors - exceptions include the highly intensive, or protected, uses such as urban, glasshouses, and housed poultry and piggeries. The land uses have to accommodate to the major climatic types across the continent of wet and dry tropical, humid sub-tropical, dry subtropical, temperate marine, and semi-arid mid-latitude.

The dominating climatic factor in Australia is rainfall, including its timing, amount and reliability. It is commonly stated that Australia is the driest inhabited continent with the largest variability in rainfall. However, there is a large range in total rainfall across the continent, and it falls at different times. More detailed information can be obtained from the Bureau of Meteorology (www.bom.gov.au).

From a plant's viewpoint the reliability of rainfall is important to potential productivity. As an example, Figure 2-1 shows one estimate of reliability for the period July to September.

Figure 2.1 Map showing areas of different reliability of receiving more than 20 mm of rainfall for each of June, July, August and September, based on rainfall records in Bureau of Meteorology 1900 to 2000.

This simple example, which ignores the differences in evaporation in different places, assumes that for reliable production of a cereal crop, or for an annual grass to grow and reseed, requires a minimum of 20 mm per month for four months (as distinct from the chances of receiving 80 mm of total rain in 4 months). As it is based on 100 years of rainfall data interpolated by the Bureau of Meteorology, the range of 0-10% equates to about a 1 year in10 chance. The map in Figure 2-1 shows that there is a sharp reduction in this chance as one moves from the south to the north of the continent and from the coast to the inland. It becomes correspondingly riskier to try to grow improved pastures or crops in this season moving out along this gradient.

A similar map for the summer season (Figure 2-2) shows trends of declining reliability from the north to the south of the continent, and from the coast to the inland.

Figure 2.2 Map showing areas of different reliability of receiving more than 25 mm of rainfall for each of December, January and February, based on rainfall records in Bureau of Meteorology 1900 to 2000.

Other climatic factors that limit production include temperature range (eg frosts and heat waves), evaporation and solar radiation also provide further constraints to where plants may potentially grow without protection.

The Australian continent is extremely old and the actions of wind and water have, over time, worn away its surface until it is now the lowest and flattest continent. This long-term erosion together with a lack of recent volcanic activity to create new rocks mean that soils in Australia have been leached and are relatively low in plant available nutrients. In many areas where they are derived from sands they are low in water holding capacity. The characteristics of soils become important limiting factors for plant growth at fine scales of the local land surface and drainage.

Figure 2-3 shows the major topographic features with regional names for the areas of intensive agriculture referred to in this report. The Great Dividing Range that runs the length of eastern Australia from Cape York in north Queensland to the south of Tasmania, has an important impact on climate. Temperatures decrease with altitude and restrict the growing season of plants. It also acts as a barrier to winds causing orographic rainfall (some similarities show in Figure 2-1).

In the west the Western Plateau is an upland that includes underlying rocks up to 3.6 billion years old. To the west are coastal plains whilst to the south is the Nullarbor plain. In between the Western Plateau and the Great Dividing Range are the lowlands of the Murray-Darling Basin plains and the Flinders and Gawler Ranges in South Australia.

Figure 2.3 Topographical map of Australia listing major regions referred to in this report. (grey is lowest and red is highest elevation)

2.2 Historical development

Agriculture, which has reached its present land use after much trial and error, experimentation and testing, needs to be considered in the context of historical changes. Interested readers are asked to consult one or more of the many histories of Australian agricultural land use that are available (see references). Here only a cursory overview is given to provide a context for the most recent changes.

The first land use change in Australia likely happened about 40,000 years ago when the first humans introduced fire stick farming, dingoes and some tools such as digging sticks to disturb the surface of the soil (Diamond 1998).

Intensification of land use came relatively late to Australia. European settlers, beginning in the late 18th century, introduced a range of exotic plants, such as wheat, barley and vines, and animals such as cattle, horses and sheep. Later pests such as rabbits and foxes, weeds such as willow, cactus and ornamental plants were introduced. Indeed Davidson (1975a) claims that agricultural policy in Australia has been directed at founding a European type of farming here, with its history a record of the difficulties encountered in achieving this objective and how these were overcome.

Land use changes in Australia appear as intensifications in a major response to the challenges of international markets and profitability. Since Wadham et al (1964) observed nearly 40 years ago that "the agricultural scene is changing all over the world" it is well recognised that the context within which farming operates has changed dramatically. This change has not only transformed the nature of farm-based production, but it has also altered the whole agro-food chain and the social composition of rural areas. Changes in agricultural land use are partly about how new technologies allow adaptation to these external factors, and partly about modifiying the impact of them eg by irrigation, frost avoidance and fertiliser application.

Clearing of tree and shrub vegetation on State land was an important factor contributing to increased area of agriculture in Queensland and Western Australia during the 1960s and 1970s. However, total area used for agricultural purposes (Table 2-1) has declined in each State since 1980 and in the case of New South Wales, Victoria, South Australia and Tasmania since 1960. It is likely that these reductions have been due to transfers to alternative uses such as urban, roads, national parks and native title, although some may be due to environmental degradation.

Table 2.1 Total area of farms (agicultural holdings) in each State since 1960 (million hectares). Source ABS.

State	1960	1980	1997
New South Wales	69.95	65.01	60.90
Queensland	150.58	157.72	151.07
Victoria	15.28	14.74	12.74
South Australia	62.95	62.79	56.22
Western Australia	99.07	114.92	112.48
Tasmania	2.64	2.23	1.92

2.3 Trends for major industries over 140 years

This section presents a brief overview of the historical development of the wool, grains and cattle industries. Detailed descriptions can be found for most industries in six editions from 1987 to 1997 of the National Farmers series of publications of Australian Agriculture published by Morescope, Hawthorne East, Victoria.

A trend expresses a persistent condition over time or space. Trends are often assessed against a point in time or period that is used as a baseline. By contrast a change is a more general alteration or modification to something different. Short-term variability or change may mask long-term trends.

Wool industry changes
A relatively small population is insufficient to provide a market for all the agricultural activities possible in Australia so that export markets were essential for the viability of Australian farms. The successes of Australian agriculture have really depended on the degree to which a large overseas market existed for a product, which could be produced using little labour, but required large areas of land and which could be transported cheaply (Davidson 1975a). Wool was the first product which easily fitted these requirements.

The history of the wool industry is one of facing challenges, seeking opportunities and responding to them. The wool industry began with herded flocks of sheep spread over the countryside, grazing native grasses, with the wool clipped by hand shears, loosely packed in open bullock-drawn drays and sent to uncertain markets in the UK. In 1997 the industry had 130 million sheep, rotated as flocks within paddocks confined by electric fences and fed on introduced pastures fertilised for optimum production, shorn with electric machines, sorted into uniform qualities, pressed into bales, despatched by road sometimes to specified customers, some to be tested and sold in electronic markets.

Figure 2-4 below identifies some of the challenges and the responding innovations in the wool industry over the past 140 years. There were several notable declines in the number of sheep within this time. During the 1890s the decline was most likely due to a succession of droughts, a world-wide economic recession, and resource degradation that followed overgrazing of native pastures. Another during 1970s followed declines in the price of wool as production increased and increasing competition from beef and wheat.

Sheep numbers over the last 50 years (Figure 2-5) show that NSW has had the largest number of sheep but also appear to be the most variable. In contrast to most states where the maximum number of sheep occurred during the 1960s, Western Australia continued to increase, becoming the second most populous State from 1970, and peaked in 1990. Part of this increase would be a consequence of land clearing in the Great Southern region during the 1960s and 1970s. The year 1990 marked another peak in numbers in all States, whereafter the drop in wool prices from 1989 induced a change to other, more profitable, land uses.

The grazing industries generally influence the natural resources mostly through grazing the surface vegetation, which may alter species composition and ground cover and thus have impacts on erosion and biodiversity. Other influences are nutrient redistribution through excretion of dung and urine, fouling of waters, and compaction effects from treading especially on tracks. Residues of chemicals used to control parasites and diseases may show up in the food chain or are concentrated close to site of application.

Figure 2.4 Total sheep and lambs in Australia each year since 1860 with significant historical events. (source ABS)

Figure 2.5 Numbers of sheep in the different States of Australia from 1950. (source ABS)

Cattle industry changes
The second major industry to expand was the cattle industry especially when refrigeration technology allowed the export of frozen and later chilled meat to overseas markets. Similar to the sheep industry, the cattle industry (including dairy) has faced challenges and responded to them in different ways. Figure 2-6 below summarises some of the major ones during the last 140 years. As noted for sheep there was a significant decline in numbers during the 1890s when droughts, economic recessions caused large losses. In the early 1970s there was a huge increase in beef cattle numbers as export markets in Europe, North America and Japan developed at the same time as wool prices fell and wheat quotas were introduced in Australia. Then followed a major challenge as the EC and Japan restricted access to their markets in the mid 1970s causing a collapse in prices.

Figure 2.6. Trends in numbers of beef and dairy cattle in Australia since 1860

Beef cattle are most numerous in Queensland, and reached their peak in the late 1970s, a little later than the other states (Figure 2-7). The restrictions of major export markets in the EU and USA caused numbers to decline after 1975, although live exports to parts of Asia and the Middle East have helped the growth of recent years.

Dairy numbers have generally been in decline (Figure 2-8) since the UK dropped preferential imports for butter in the late 1960s. Victoria has become the dominant milk producer with record numbers of dairy cows at present, in large part because of developing markets for milk products rather than fresh milk. Most other states produce milk primarily for the domestic fresh milk market. The heavy declines in numbers of dairy cows in New South Wales and Queensland reflect both increasing production per cow and diminishing proportions delivered to manufactured milk.

Figure 2.7 Numbers of beef cattle in the different States of Australia from 1950. (source ABS)

Figure 2.8 Numbers of dairy cows in the different States of Australia from 1950. (source ABS)

Where the grazing industries are produced on sown pastures there will be large impacts on biodiversity, most obviously on the type and number of pasture plants but also on soil biodiversity such as rhizobia and vesicular arbuscular mycorrhiza. The more intensively grazed and fertilised the higher the likelihood of nutrient transfers and losses to ground and surface waters.

Grains industry
The third industry wave was the grains industry, facilitated by the introduction of bulk grain handling and large machinery capable of seeding and harvesting large areas at a time. The grains industry initially depended upon having clean open fields and used animal drawn ploughs, harvesting by sickles, threshing with the grain put in bags to be loaded into animal-drawn drays to the nearest city. In 1997 over 20 million hectares were sown with large mechanical seeders to disease resistant varieties into chemically prepared seedbeds, fertilised with nutrients based on soil tests and paddock history, harvested with large headers, loaded into trucks to be delivered into bulk stores segregated according quality standards.

Wheat area expanded slowly in the late 19th century (Figure 2-9). Innovations, some noted in the figure, provided the means to answer challenges posed by the environment, the landscape and distance. The new farming systems naturally led to radical changes in the landscape and these varied from farming zone to farming zone Davidson (1975a). Large declines in area sown occurred during the two World Wars because of labour restrictions.

After the Second World War, research became better organised and more scientific and a much greater investment in technology ensured that innovations continually appeared. Consequently further parts of Australia were brought under agricultural production or productivity increased to maximise climatic inputs. A rapid expansion in the area cropped, particularly winter crops still dominated by wheat, occurred during the 1960s to the early 1980s. Following a weakening in the price of grain due to a world surplus, with an increase in the price of wool during the 1980s the area sown to wheat in particular declined. At this time new crops, mostly lupins, were introduced into the rotation for diversification and to control weeds and diseases. With the collapse of wool prices in 1989 areas sown to grains, particularly canola which had attractive prices, increased again.

Figure 2.9 Area of wheat and total winter grains in Australia since 1860 with selected events. (source ABS)

Broadacre cropping industries influence natural resources by controlling weeds and non-crop plants; disturbing soil with cultivation and at sowing; applications of fertilisers, herbicides and insecticides; management of crop residues; and alterations to the local area water cycle. A wide range of impacts may eventually occur through an extended series of events on biodiversity, erosion, soil compaction, chemical composition, water quality, salinity and product quality. The scale of such impacts is also dependent upon location and management practices.

Semi-intensive crops (cotton, rice, sugar cane and potatoes)
Development of high value crops required significant advances in technology to overcome limiting resources chiefly water and labour. In part, it required the development of extensive infrastructure, which did not commence until the 1890s. Many of the irrigation schemes were originally for pasture for "drought proofing" but is now moving inexorably to higher value outputs. In some cases individual industries have tended to concentrate in regions because of processing capacity (for rice, cotton, and processed fruit), other climatic constraints (eg cotton to north of 30 degrees S), or biotic constraints such as pests and diseases (eg rice and cotton not viable in the Ord Scheme).

Cotton, although introduced with the First Fleet in 1788 and experiencing a short boom during the American Civil War in the 1860s, did not take off until the 1960s with the completion of the Keepit Dam on the Namoi River in New South Wales. Later in the 1970s this spread from the Moree Plains to the Macquarie Valley in NSW, the Darling Downs, and Central Highlands in Queensland. Insecticide usage is major environmental concern for this industry.

Rice is largely produced in the Riverina of New South Wales, despite attempts to establish production in the Burdekin of Queensland and the Ord River in Western Australia. Rice production commenced in 1924 with the construction of the Murrumbidgee Irrigation Area and increased as more irrigation was made available from Snowy Mountains Scheme and other diversions. Just over half the rice is exported, mostly as a premium packaged product. Because the industry extensively uses flood irrigation, control of salinity is a major concern for the industry.

Sugar cane is grown almost entirely along the eastern coast of Australia from the North Coast of NSW to the Atherton Tablelands area in north Queensland. The crop was first grown about 1823, but the industry did not become strongly established until the 1870s when sugar mills were built. Recent innovations include mechanisation of green cane harvesting to reduce erosion risks. Approximately 80% of sugar is exported, which exposes the industry to wide fluctuations in price. Chemical and fertiliser losses to the marine environment is a particular concern of the industry.

Potatoes were introduced with the First Fleet in 1788 and increased to a peak during World War 2 and declined until 1976 but has slowly increased since then as population and new products increased. Very little is exported. Potatoes are largely grown under irrigation in the Murray Mallee of South Australia, the Riverina and Northern Tablelands of New South Wales, the Atherton Tablelands and the Lockyer Valley in Queensland, in southern and North-West Tasmania, the Swan coastal plain in Western Australia, and in Victoria along the Murray River, Gippsland, the Western Districts and in the Central Highlands. Efficient and safe use of chemicals and soil structure decline are major environmental concerns.

Semi-intensive cropping industries generally operate at a smaller scale than broadacre crops but use more inputs, such as irrigation, to obtain higher value outputs from a unit of land. Irrigation in particular will influence natural resources through changes to the local area water cycle. Eventually, such changes may have impacts such as increased salinity, higher nutrient levels in effluent water and rising ground water tables. They share many of the influences of broadacre crops by controlling weeds and non-crop plants, disturbing soil with cultivation and at sowing, application for fertilisers, herbicides and insecticides, and management of crop residues.

Horticulture
Horticulture encompasses a very wide range of crops from short-season leafy vegetables to long-lived woody perennial fruit trees. Because labour, particularly for harvest, is often required in large numbers the area used by horticultural industries is relatively small and concentrates on the domestic market with only small proportions trying to compete on export markets.

Winegrapes are one of the success stories for Australian agriculture during the 1990s. The industry set an ambitious target in 1993 of one billion dollars worth of wine exports by the year 2000' - which it achieved. Central to its success has been improved methods of growing the grapes, mechanical harvesting and technological innovations in wine making. Another crop that was introduced very early in European settlement, the major production areas were in South Australia and the Hunter Valley of New South Wales. Recent increases in plantings have occurred in the Sunraysia of Victoria, the MIA of New South Wales, Margaret River in Western Australia and to cooler localities in Tasmania, southern Victoria and the Highlands of New South Wales.

Fruit crops include apple and pears, which are concentrated in the Huon Valley, around metropolitan Melbourne, Gippsland and Goulburn Valley in Victoria, central west of New South Wales, Margaret River in Western Australia and south Queensland. Although a major exporter in the early 1970s, the major UK market declined when it entered the EC. Integrated pest management and codes of practice for use of chemicals have been introduced as have a suite of new varieties at denser plantings to revitalise the industry. The citrus industry is concentrated along the Murray River of South Australia, Victoria and New South Wales, the Riverina and Burnett regions with some production along the Murray River, near Perth and Brisbane. Stonefruits (peach, apricot and nectarine) are largely produced in the Murray, Goulburn Valleys, with some in the MIA and Riverland. Plantation fruits such as bananas and pineapples are largely produced in the coastal regions of New South Wales and Queensland. Vegetables (here excluding potatoes), compose a large number of different crop plants such as tomatoes, onions, carrots, lettuce, beans, peas, pumpkins etc. Production occurs largely in the Riverland of South Australia, the MIA of New South Wales, the Murray Valley of Victoria, and Tasmania. Little is exported at present, and has been used mostly for disposing of surplus domestic production although initiatives under the Supermarket to Asia program hope to change this.

Horticultural industries have many of the same influences as the semi-intensive industries. However, some features such as fertilisers applied to vegetables are so much in excess of need that this becomes a major effluent problem.

2.4 Productivity

Gains in productivity come in response to added inputs and improved efficiencies as a result of innovations and technologies. The motivation for increasing productivity in Australia has commonly been the challenge of the declining terms of trade where costs increase relatively more than the price of the product. Increases in productivity might be expected to use the resource base more intensively and therefore any degradation of the resource would show up in static or declining productivity. However, increased inputs and technological innovations often mask environmental deterioration of natural resources (Scott and Christoff 1992). The best available example of productivity changes is that for wheat. The national yield of wheat calculated since 1860 (Figure 2-10) indicates that yields declined, on average, until 1900. This has been ascribed to declining soil fertility and soil degradation (Donald 1967) although a series of droughts around the turn of the century would have also contributed. It represents one of the few cases where soil degradation appears to have significantly impacted on productivity. Since 1900, many innovations have been implemented to increase the average yield almost continuously until the present day. Even under drought conditions, the same trend is evident.

Figure 2.10 Average grain yields of wheat in Australia since 1860 categorised according to incidence of drought. (source ABS and BoM)

In the animal industries productivity is sometimes harder to track because of changes in market demand, eg desired carcass size, over the years. Dairy cow milk yields have noticeably increased, but the trend with wool cuts/head is minimal by comparison (Figure 2-11). The reasons for this difference are not simple. In part it could reflect an emphasis in dairying on the performance of the individual animal because there are efficiencies in milking and care. Breeders have selected heavily for milk production per head, rather than butterfat or solids, and supplementary feeding and improved pastures have extended the effective period of milk production per year. By contrast sheep are shorn once per year with minimal supplementary feeding, there has been a selection emphasis on finer wools categories which generally cut lighter, and production gains have focussed more on sheep per hectare. Nevertheless, the low gains for wool cut may also be explained by the sensitivity of the industry prices (see Figure 2-12).

Figure 2.11 Trends in average yield of milk and wool per animal for Australia since 1910. (source ABS)

2.5 Major factors in land use change

Changes in land use that show up at the Statistical Local Area (SLA - which often define Shires) level are the net result of decisions by hundreds of individual producers. Generally a change in land use is a major decision for an individual producer. It has wide-ranging ramifications that include expending capital on new infrastructure, learning new skills and markets, and new risks, such as income uncertainty in transition, for the decision maker. Accordingly we might expect that these would most likely be spurred by an existing industry crisis or a change of ownership or management. Of course, in some cases where there is existing diversification of land use, such as between sheep and wheat in the sheep-wheat belt or between wool and fat lambs, the changes may reflect more a change of emphasis in managing the farm enterprise.

However, uncertainty about the precise nature of trends persist even in major sectors. Without adequate information on trends it is difficult to identify the causes, or drivers, of change. Unfortunately the precision of identifying and categorising such causes even after the event is constrained by adequate data and understanding of the particular system. Furthermore there are many secondary factors that can also be important in particular situations such as family demands, exceptional climatic events, or credibility of advice.

The major influencing factors are production and marketing costs; the dynamics of the domestic and international markets for agricultural products; the uptake of technological change; the quality of human capital (including management capability); and social factors (SCARM 1998). Using a hierarchical aggregation other factors can be accommodated. At the most aggregated level it could consist of:

Production factors: the suitability of climate and soils, land condition, innovations, irrigation, technologies, input costs;

Marketing factors: quality, timeliness, prices, transport, population trends and consumer wants;

Personal factors: motivations, cultural, knowledge, preferences, attitudes to risk and change, and skills;

External factors: regulations, social changes, infrastructure, land tenure, financial/capital availability, government policies and plans.

World population growth and demands for food and fibre provide some of the ultimate causes, and Australia's population growth and education system has provided some of the human capital to respond to those challenges.

Production factors
Climate provides the largest constraint for many industries, for instance it is not feasible to grow sugar cane in Tasmania outside a greenhouse. More local factors, such as topography, soils and land condition will influence the suitability, production potential, costs and profitability. Changes in agricultural land use are partly about how new technologies allow adaptation to these external factors, and partly about modifiying the impact of them eg by irrigation, frost avoidance and fertilisation.

In the past many technologies and innovations, such as herbicides, pest controls, seeders, helped improve productivity and overcome constraints to some land uses. Current innovations, such as genetic engineering, new farming systems, and electronic information should contribute to future productivity ((Gorrie 2000, White and Walcott 2000). Other factors could include: climatic variation (Wadham et al 1964); costs, complexity, and observability (Cary 2000). Productivity is the subject of a major section later in this report.

Personal factors
These factors are intrinsic to the individual land manager or decision-maker. Contributing factors here include: amenities in the country (Wadham et al 1964); relative cost of living; adequate technical knowledge (Wadham et al 1964); individual factors as beliefs and opinions, level of motivation and attitude to risk (Guerin and Guerin 1994); tradition, stewardship (O'Brien 1987); orientation to change (Phillips 1987) and personal preferences. For instance, land managers may use land for grazing instead of cropping even when economic signals indicate cropping to be more profitable and feasible, because of concerns about risk of erosion, because they prefer working with animals, because they fear change, or because they feel they lack skills to succeed at the new enterprise. These are strong, sometimes dominant, influences on land use decisions. By their nature they vary considerably between individual operators and show at very local scales. Furthermore, there is little data as to their impact on land use decisions. Consequently, they are not considered further here although some will be captured in the Audit Theme 6 on Capacity to Change.

External factors
External factors are generally outside the industry or farm and could include: the influence of the system of land tenure on use; political attitude of the community towards rural industries; development of secondary and tertiary industries; previous development and historical attitude of capital to development; decisions of developers or transportation entrepreneurs (Wadham et al 1964). In some cases these will be widespread influences while in others they will be more localised.

Other external influences include: regulations eg to control tree clearing and natural vegetation (NSW and Qld ); globalisation with its concentration of trade and financial influence and global trading under rules drawn up by bodies such as the World Trade Organisation (WTO) (Gorrie 2000); community expectations for responsible management (Cocks 2000); and peer pressure (O'Brien 1987). Many of these factors, eg taxation and regulation, are in the direct purview of government policies. The benefits and unintended consequences are contentious (eg Dumsday et al 1990, Industry Commission 1998). While these are often wide-spread in intent, the effect may well be modified by local conditions eg regulations on vegetation clearing mostly affects areas that still have considerable native vegetation with little effect on those already cleared and cultivated.

Market factors
If world population and its demands provide an ultimate cause this should reflect in the price for the commodity. Local factors will also impact on the price received by producers including transport costs, marketing/selling costs, storage costs, buyer competition, and price hedging. Nevertheless a longer term story can be told using average prices. The prices can be compared using a base year of 1981 as 1, chosen because it immediately precedes the beginning of 1982-83 timeframe for the Audit. Comparing the relative prices received for animal based commodities in Figure 2-11, it is noticeable how much they vary from year to year. For instance in 1988 wool was more than double its value relative to wheat that it was in 1981. All other things being equal this should indicate that where feasible wool production would substitute for wheat production during the period 1987 to 1991. To a significant extent this did occur (Figures 2-3) when sheep numbers soared during this period and the area of crops sown plunged (Figure 2-4). What is less obvious is why broadacre crops have been sown in increasing areas again.

Wheat is only one substitute for wool and, depending upon biophysical limitations, beef cattle and fat lamb production are other possibilities. Figure 2-12 indicates that the price of yearling beef has often been relatively better than for wheat during the last 20 years. Again, this is likely to lead to increases in cattle numbers, which has indeed been occurring during this time-frame (Figure 2-9).

The price of milk for manufacturing appears to be increasing in relative value over the last 30 years and is likely fuelling the increase in dairy production in Victoria. While the fat lamb production is often a reasonably direct complement to wool production, the relative prices have not been particularly encouraging for this land use. Other grain crops such as canola and lupins have also been recent substitutes for cropping wheat in the rainfed cropping areas.

Relative prices for some of the semi-intensive crops usually grown under irrigation are given in Figure 2-13. Sugar appears particularly volatile, but has been lower than it was in 1981 for all of the last 20 years, although greater than in the late 1960s. Rice, as might be expected of another widely traded cereal used for human food, appears reasonably close to wheat over the long term. Likewise cotton prices, although more volatile, do not show any particular trend relative to the price of wheat over this time-frame.

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