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A financial analysis of the impact of sheep on the risks and returns associated with mixed enterprise dryland farming in south-eastern Australia: Part II

Timothy R. Hutchings

AFBM Journal, 2009, vol. 06, issue 2

Abstract: This paper extends the long-term cash-flow simulations reported in Part I (Hutchings 2009) to include a range of seasonal scenarios at four representative dryland sites in south-eastern Australia. The effect of varying the proportion of sheep and cropping in the enterprise mix at each site on cash surpluses is discussed. The analysis shows that, for most sites, the cropping enterprises require better than average seasons, prices and water-use efficiencies to generate a positive cash flow and are subject to substantial variability and risk of loss. In contrast, the sheep enterprises show small but stable cash flows in all but extreme drought conditions. This paper emphasises the need to include site-specific, long-term variability and whole-farm costs in analyses of farming returns. Attempts to define optimum or best-bet management systems which exclude these factors are likely to provide misleading information to farmers.

Keywords: Whole-farm planning; cash flow; sheep; crops; risk; Farm Management (search for similar items in EconPapers)
Date: 2009
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