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An economic assessment of a proposed dry land Leucaena development within the Brigalow Belt of Central Queensland: An operational case study perspective

Mark Best and Lindy Symes

No 58884, 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia from Australian Agricultural and Resource Economics Society

Abstract: This following case study focuses on beef production using dry land leucaena to increase production on a property of alluvial scrub flats south of Biloela, Queensland. The investment proposal is for development of the property through the growing of the fodder legume tree crop leucaena. The benefit of finishing cattle on leucaena is estimated using partial budgeting techniques. The case study reports on aspects of agronomic, managerial, production and economic considerations for 174 hectares of dry land leucaena development, staged over four years. A discounted cash flow approach was applied in order to model expected returns over time. Net cash flows between the existing grass based operation and the proposed leucaena supplemented operation are estimated. Comparison between grass only and leucaena supplemented gross margins provide the marginal benefit from developing leucaena. These future cash flows were discounted to assign their present values. Productive capacity estimates were used in the analysis. Expected yields and weight gain from grass fed operations were available from detailed management records. However, given the lack of scientifically verified data on expected leucaena production across land types, production estimates were based on localised production results and sourced from technical extension experts. The use of adult equivalents and accounting for the opportunity cost of maintaining particular herd structures allows for direct comparison of gross margins across different land types and herd structures. By choosing to plant leucaena, the owner is $144,939 better off, achieves a 22% internal rate of return, a benefit-cost ratio of 3.2:1, and breaks even on the investment in seven years.

Keywords: Production; Economics (search for similar items in EconPapers)
Pages: 9
Date: 2010
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DOI: 10.22004/ag.econ.58884

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