Tactical responses to seasonal conditions in whole-farm planning in Western Australia

Ross Kingwell

90 citations0/0 files storedAgricultural Economics

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Agricultural economics and policies Livestock Farming and Management Pasture and Agricultural Systems

Abstract

In dryland agricultural systems, efficient farm management requires a degree of flexibility according to variations in climate from year to year. Tactical adjustments to the mix of farm enterprises can capitalize on good growing conditions and minimise losses under poor growing conditions. In this paper, a discrete stochastic programming model of dryland wheat-sheep farms in Western Australia is used to identify optimal tactical adjustments to climate and to calculate the value of these tactical adjustments. The model, MUDAS, includes nine discrete season types with a wide range of options for tactical adjustments in each. In the standard model, optimal tactical responses increase expected net cash surplus by approximately 22% relative to a fixed or inflexible strategy. In most season types, changes to the long term farm strategy are made on less than 10% of the farm area, although in some seasons over 25% of the farm can require adjustments to the enterprise selected. The benefits of flexibility are not evenly distributed across different season types but occur predominantly in the best and worst seasons. The magnitude of benefits is affected differently by different commodity prices. Benefits of flexibility are due to capitalizing on knowledge about the greater volatility of profits from cropping than from livestock production. Deterministic models and even stochastic models which don't include activities for tactical adjustments miss this key feature of the system.

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References

1980Attitudes Toward Risk: Experimental Measurement in Rural India 1987Econometric Estimation of Producers' Risk Attitudes 1980RISK ATTITUDES AMONGST AUSTRALIAN FARMERS 1971An Empirical Application and Evaluation of Discrete Stochastic Programming in Farm Management 1983Sequential Decision Making in Production Models 1971Stochastic Programming, Utility, and Sequential Decision Problems in Farm Management 1987MIDAS, a bioeconomic model of a dryland farm system.1987AN APPROACH TO THE ECONOMETRIC ESTIMATION OF ATTITUDES TO RISK IN AGRICULTURE*

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