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Assessing the profitability of native pasture grazing systems: a stochastic whole-farm modelling approach

Amidy, M.R., Behrendt, K. and Badgery, W.B. (2017) Assessing the profitability of native pasture grazing systems: a stochastic whole-farm modelling approach. Animal Production Science, 57 (9). pp. 1859-1868.

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Official URL: https://doi.org/10.1071/AN16678

Abstract

Grazing enterprises on the Central Tablelands of New South Wales employ a range of different strategies to manage temperate native grassland pastures common in the high rainfall zone of southern Australia. This paper uses a stochastic whole-farm simulation modelling approach to assess the impact of grazing system and stocking rate (SR) on the long-term profitability of a representative case-study enterprise. In particular, the impact of infrastructure costs, debt and downside risk, on whole-farm performance are examined over a 10-year planning horizon. In total, 12 different strategies were modelled under both price and climate risk, with a matrix of three paddock systems (1-paddock, 4-paddock and 20-paddock rotations) and four stocking rates (SR of 3, 4.2, 5.3 and 7 ewes/ha). Profitability was primarily driven by SR. In general, higher SR increased total farm output and annual profits under favourable conditions, although they were also associated with higher costs and greater downside risk in poor seasons, which in turn was magnified by the compounding effect of accumulating debt over time. When SR increased above 4.2 ewes/ha, it had a negative impact on lamb sale weights, resulting in lower prices due to lambs not meeting the ≥40-kg liveweight specification. Although this was offset by increased whole-farm production volumes at 5.3 ewes/ha, declines in profitability occurred at 7 ewes/ha as a result of significant increases in supplement feeding costs, and lambs not meeting sale weight specifications. The analytical scale of the analysis also had an impact on the relative profitability between alternative treatments. When assessed using a partial measure of economic analysis (gross margin per ha), there was little difference between paddock system treatments at the same SR. When the cost of additional fencing and water infrastructure were accounted for at the whole-farm analytical scale, the 20 paddock system was markedly less profitable than the 1- and 4-paddock rotations. This highlights the need for assessing production systems at an appropriate analytical and temporal scale to better understand the relationship between the key drivers of long-term profitability and risk. Overall there were relatively small differences in whole-farm performance between the four best performing strategies in this study. Given the trade-offs between profitability, downside risk, ground cover and feedbase sustainability, the lower risk 1- and 4-paddock systems with a SR of 4.2 ewes/ha are proposed as being optimal.

Item Type: Article
Keywords: financial analysis, price risk, stocking rate
Divisions: Land, Farm and Agribusiness Management
Depositing User: Ms Kath Osborn
Date Deposited: 19 Feb 2018 12:35
Last Modified: 19 Feb 2018 12:35
URI: http://hau.collections.crest.ac.uk/id/eprint/17252

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