Updated: Aug 22, 2021
“Reduce Agriculture’s Carbon Footprint” has been a primary message to farmers, and the subject matter – carbon emissions – has been at the core of most sustainable development initiatives. However, if the agricultural industry is to make a sustainable change to improve its environmental impact, managers should be looking closer at their water footprint.
What is the problem?
Water is a scarce commodity, and its availability is extremely variable, particularly in regions of Australia that is influenced by the heightened frequency of extreme climate conditions like drought that has earnt the country the title “the world’s driest inhabited continent” (National Geographic, 2020). Currently, more than 1 billion people globally live-in water scarce regions and as many as 3.5 billion could experience water scarcity by 2025 (World Resources Institute, 2021). This emphasises the importance of water security and the demand to use water more efficiently. At present, the Australian agricultural sector consumes circa 63% of the total water supply of the country (Hossain, et al., 2021). Moreover, it is estimated that the global food available today will have to increase by 50%-70% to meet the required demand by 2050 (World Resources Institute, 2021; World Bank, 2020). This implies that the inter-sectoral competition for water resources will intensify as demand for food products increase, and the effects of climate change will likely impact the quality and quantity of water available to service that demand.
The primary driver of global food demand – apart from population growth – derives from income per capita growth of developing economies relative to developed counterparts. This suggests possible dietary shifts away from starchy staples and towards animal-based products, fruits, and vegetables as developing countries become wealthier (Fukase & Martin, 2020). The largest use of water is in crop production; however, the largest water footprint is actually found in livestock production relative to an equivalent nutritional value (UNSW, 2007; Hoekstra, 2015; Fukase & Martin, 2020). This is often overlooked because the supply chain of animal production starts with feed from crop cultivation and ends with the consumer, and along each step of the supply chain there is an indirect water footprint, cumulatively known as the virtual water footprint (Hoekstra, 2015). Hence, as income per capita of developing nations increase their consumption of more complex and water intensive foods will increase, adding to the concern of future water availability to meet global demand. So how can the agricultural sector improve their water footprint?
Academics suggest the need for collaboration between government intervention and private development of water governance and sustainable technologies to address agriculture’s water footprint. Pittock, (2019) suggests that water governance of the Murray-Darling Basin – important basin for Australia’s agricultural contribution to the economy and regional economies – will be most efficient using a decentralised system where regional authorities have better access to local knowledge, resources, and ownership that helps identify and contextualise ways of meeting basin-wide objectives. Key points raised by the ACCC’s 2021 Murray-Darling Basin water markets inquiry suggests that there needs to be enhanced transparency, governance, digital and data access to improve the integrity and efficiency of the Basin’s existing systems (ACCC, 2021). A key feature proposed was the development of an online platform to be a central hub to provide consistent and streamlined trading processes for irrigators.
The development of the online platform will improve researchers’ ability to utilise data to understand the impacts of climate change and assess the risks and opportunities of water use going forward. Moreover, the development of water efficient methods such as water reuse, irrigation, and plant genetic technologies will be essential for the industry to curb their water footprint while enhancing the productivity of agricultural foods to sustainably address growing demand.
What is AgFood Opportunities Fund doing?
Select Harvests (ASX: SHV) is Australia’s largest vertically integrated nut and health food company that proactively deploys sustainable farm management practices and technologies to efficiently utilise water resources (Select Harvests, 2021; Phytech, 2020). SHV is a great example of efficient water utilisation and capital preservation as well as one of the AgFood Opportunities Fund’s top stock picks. The company deploys plant-based water stress monitoring sensors that utilise data to deliver the precise amount of water required and when it is needed. This emphasises the company’s efforts to reduce over-delivery of water to their crops while enhancing crop productivity. At one farm alone, SHV saved over 600 megalitres of water per annum, which was estimated to save more than A$250,000 in cost savings.
Additionally, Elders (ELD) and Ridley (RIC) have a broad geographic and product reach coupled with productivity improvements. They seek out efficient users of resources such as water, land, and genetics. They assist innovation with water and change of land use. RIC is focused on future proof proteins such as aquaculture and poultry which use fresh water well, and utilise seawater (for salmon, prawn) with low feed conversion ratios (1.3 vs 8.0 in wild). ELD addresses water use through their research and development of plant genetics that improves crop-types to better endure drought conditions and require less water to generate the same biomass. Additionally, ELD’s partnership with SWAN Systems – a web based, water and nutrition management platform – aims to help farmers manage their resources more efficiently, which addresses issues such as over irrigation.
AgFood Opportunities Fund continues to assess available and innovative technologies in both the listed and unlisted space to enhance partnering opportunities to address the sustainability demands of the ag food industry.
· PAC Partners has raised equity for SHV and RIC
· AgFood Opportunities Fund and Author owns SHV, RIC, and ELD shares.
ACCC, 2021. Murray-Darling Basin water markets inquiry - final report. [Online] Available at: https://www.accc.gov.au/publications/murray-darling-basin-water-markets-inquiry-final-report [Accessed 3 April 2021].
Fukase, E. & Martin, W., 2020. Economic Growth, Convergence, and world food demand and supply. World Development, Volume 132.
Hoekstra, A. Y., 2015. The Water Footprint: The Relation Between Human Consumption and Water Use, s.l.: s.n.
Hossain, I., Imteaz, M. A. & Khastagir, A., 2021. Water footprint: applying the water footprintassessment method to Australian agriculture. J Sci Food Agric, pp. 1-9.
National Geographic, 2020. Failing Rains and Thirsty Cities: Australia’s Growing Water Problem. [Online] Available at: https://www.nationalgeographic.com/environment/article/partner-content-australia-water-problem [Accessed 2 April 2021].
Phytech, 2020. Select Harvests: "At one farm alone, this approach has saved over 600 megalitres of water a year. [Online] Available at: https://www.phytech.com/post/select-harvests-at-one-farm-alone-this-approach-has-saved-over-600-megalitres-of-water-a-year [Accessed 2 April 2021].
Pittock, J., 2019. Are we there yet? the Murray-Darling Basin and sustainable water management, s.l.: ANU.
Select Harvests, 2021. Sustainability: Water Management. [Online] Available at: https://selectharvests.com.au/sustainability/water-management [Accessed 2 April 2021].
UNSW, 2007. Connected Waters Initiative. [Online] Available at: http://www.connectedwaters.unsw.edu.au/articles/2007/09/national-water-footprints#:~:text=Australia%20has%20a%20water%20footprint,the%20internal%20and%20external%20footprints. [Accessed 2 April 2021].
World Bank, 2020. Water In Agriculture. [Online] Available at: https://www.worldbank.org/en/topic/water-in-agriculture [Accessed 1 April 2021].
World Resources Institute, 2021. Food: Supporting agriculture, environment, and sustainable development. [Online] Available at: https://www.wri.org/our-work/topics/food [Accessed 01 April 2021].