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Profitability and risk evaluation of novel perennial pasture systems for livestock producers in the high rainfall zone: Context, Approach and Preliminary Results

Claire Lewis, Bill Malcolm, Robert J. Farquharson, Brian Leury, Ralph Behrendt and Steve Clark

No 59097, 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia from Australian Agricultural and Resource Economics Society

Abstract: The decision to invest in pasture improvement raises various questions for the livestock grazier, with the most pertinent being about the potential returns and risks. In the high rainfall zone of south-west Victoria, researchers have trialled novel perennial pasture systems with the aim of substantially increasing on-farm profits whilst simultaneously improving environmental outcomes. Results from the Hamilton EverGraze® proof site have shown potential to greatly improve livestock production. Promotion of the pasture technology is the next step. Key to this process is developing information about profitability and risk regarding the decision to invest in the new pasture. To help meet this need a model of a representative mixed livestock farm system for the region has been developed to generate information about profit, cash wealth and risk to aid extension and help inform decisions. The farm is comprised of a wool and meat producing sheep system and a beef enterprise. Using the model, the performance of two of the novel pasture systems can be evaluated against current practice, and compared to determine which of the two is the most beneficial EverGraze® option for the future. The risk associated with the pasture decision is assessed by considering different price structures and seasonal outcomes, and evaluating these effects on net benefits. Discounted cash flows, net present values and internal rates of return are estimated for the alternative systems, which include the effects of this price and seasonal variability. Preliminary results have been calculated, however further work is needed to confirm these. The method and results of the analysis provide information that is valuable for farm decisions about investing in a new pasture system and provide a basis for future economic analyses at the case study site and elsewhere.

Keywords: Farm; Management (search for similar items in EconPapers)
Pages: 23
Date: 2010
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DOI: 10.22004/ag.econ.59097

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