Managing Complexity in Modern Farming

Modern farming in Australia is no longer simple. Farms are large, multi-enterprise businesses underpinned by expensive capital investments, changing production technologies, volatile markets and pervasive regulation. The complexity of modern broadacre farming leads to the question: what is the nature of the relationship between farm business complexity and farm profitability? This study uses bioeconomic farm modelling and employs eight measures of complexity to examine the profitability and complexity of a wide range of broadacre farming systems in Australia. Rank order correlations between farm profitability and each measure of complexity show inconsistent relationships, although the most profitable farming systems are found to be reasonably complex on several criteria. Among the set of highly profitable systems are found some characterised by less complexity. Using the farmer’s annual hours worked as a measure of complexity that affects current farm management, the trade-off between profit and this measure of complexity is found not to be large. A case is outlined where the farmer’s annual hours worked could be reduced by 9 percent for a 3 percent reduction in farm profit. If farmers’ workloads are proving problematic now and in the future, then agricultural R&D, service delivery and policy development will need to focus much more on being highly attractive to time-poor farm managers.complexity, farm modelling, management, profitability, Farm Management,

Revenue volatility faced by Australian wheat farmers

This paper uses variance decomposition modelling to explore how wheat revenue volatility in Australia has changed spatially and temporally. The components of revenue variance are the variances and covariances of wheat prices, the area of wheat harvested and the yield of wheat. The key finding is that the volatility of wheat revenue (detrended) has more than doubled in every main wheat-growing State in Australia over the last 15 years or so Changes in wheat areas are mostly a minor source of revenue variance. The principal cause of volatility is yield changes with price changes increasing slightly in absolute importance when compared to their adjacent previous period. Greater downside yield risk is often the principal cause of the increased yield variance. The implications are that revenue variance, and especially downside revenue risk, has posed major problems for wheat-dominant farm businesses over the last 15 years or so. How Australia’s wheat producers have managed this greater volatility of wheat revenue is likely to have greatly affected the viability of their farm businesses.risk, wheat production, variance decomposition, wheat farming, Agribusiness,

The Carbon Challenge for Mixed Enterprise Farms

As part of its climate change policy the Australian government has introduced a Mandatory Renewable Energy Target (MRET) scheme and is also attempting to introduce a Carbon Pollution Reduction Scheme (CPRS). Using as a case study a main agricultural region of Australia, this paper examines how farming systems in this region may be affected by the medium term policy settings of these two schemes. A bio-economic model of the region’s farming systems is developed and used to assess the schemes’ impacts on the nature and profitability of the farming systems. Results show a range of profit and enterprise impacts across the range of farming systems. Farms as providers of biomass for electricity generation and small users of electricity are liable to benefit from the MRET scheme, with the extent of benefit depending on the price offered for biomass. By contrast, the CPRS is liable to more profoundly affect farming systems, especially if agriculture is included in the scheme. The impacts of the CPRS on agriculture are mostly conditional on: the amount of free permits allocated to agriculture, the value of trees as carbon sinks, the extent of pass-through of CPRS-related costs onto agriculture and emission permit prices. Dependent on these factors, farm profits can increase by up to 20 percent or decrease by over 30 percent, relative to the ‘no CPRS’ or ‘business-as-usual’ case. If agriculture is covered by the CPRS, and emission permits and tree growth rates are sufficiently high then optimal farm plans typically involve a combination of reduced livestock numbers, the planting of permanent stands of trees on marginal farmland and other changes to the enterprise mix on farms that reduce emissions.agriculture, greenhouse gases, economic modelling, sequestration, Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Institutional and Behavioral Economics, International Relations/Trade, Land Economics/Use,

Dryland Salinity: Spatial Impacts and Farmers' Options

The salinisation of farmland in Australia is a major natural resource management problem. Over the next 20 years a further 1.1 million hectares of broadacre farmland is predicted to become salt-affected. This paper firstly explores the spatial ramifications of the spread of salinity in Australia's agricultural regions. Some of the nation's most profitable grain growing regions will become seriously affected by salinity over the next 20 years. Secondly this paper outlines the nature, uptake and profitability of various salinity management options available to Australian farmers. These options include preventative and containment measures, such as engineering solutions and adoption of deep-rooted perennials, and other options involving adaptation to more saline environments such as commercial use of saline water and salt tolerant fodder plants. Deep-rooted perennial fodder species appear to offer the best short to medium term prospect for managing salinity in most agricultural zones. However, in many situations perennials may not be profitable at the scale required to have a significant impact on the rate of spread of salinity on farmland, or the rate of increase of saltload in rivers and streams.Farm Management,

Institutional change and plant variety provision in Australia

Crop Production/Industries,

Seasonal labour is the most profitable use of labour in broadacre crop dominant farms

Labour scarcity and affordability have encouraged many farmers in Western Australia to focus more on cropping than sheep production. Many farmers are opting to run low input livestock systems. This paper examines labour demand for sheep and cropping during the production year, combined with various scenarios of labour availability and cost. The implications for farm profitability and enterprise selection are examined using the bio-economic farming systems model MIDAS (Model of an Integrated Dryland Agricultural System). Labour requirements for sheep are far greater than those for cropping. Additionally the labour requirements for sheep are high in all production periods whilst the seasonal nature of cropping means more time is required only at certain times of the year, particularly at seeding and harvest. This means that the most profitable labour option is employing casual labour during periods of peak demand for cropping. The lesser relative profitability of the sheep enterprise makes employing a permanent worker the least profitable labour option. By contrast, employing casual labour during busy periods for cropping is more profitable but it is also associated with only small areas of perennial pastures being sown which has environmental implications. The logistics of employing labour at only certain times of the year compared to employing a full time worker means that farmers need to pay more per week to employ these workers or do the extra work themselves.agriculture, labour, farm modelling, cropping, sheep,

Low Emission Farming Systems: A whole-farm analysis of the potential impacts of greenhouse policy

The Australian government is introducing a Carbon Pollution Reduction Scheme in 2010, as part of its climate change policy. After 2015 agriculture may be covered by this scheme. This paper examines how different broadacre farming systems may be affected by the policy settings of this scheme. Using the bio-economic farming systems model MIDAS (Model of an Integrated Dryland Agricultural System) the impacts of the Carbon Pollution Reduction Scheme on the profitability of different broadacre farming systems in the southwest of Australia are investigated. Results show a range of profit and enterprise impacts across the various farm types. In a scenario where agriculture is not covered by the scheme, reductions in profit range from 7 to 12 percent, attributable to more expensive ‘covered’ inputs such as fuel and fertiliser; and farmers reduce their use of expensive energy inputs such as chemicals and fertilisers. In a covered scenario profits decline by 15 to 25 percent of ‘business-as-usual’ profit and optimal farm plans involve a combination of reduced livestock numbers, the introduction of permanent woody perennial plantations on marginal lands and other changes to the farm enterprise mix to reduce emissions.agriculture, greenhouse gases, economic modelling, abatement,

Climate Change Impacts on Investment in Crop Sowing Machinery

Down-scaled global circulation modelling is combined with wheat growth simulation modelling to generate yield responses to times of sowing under current and projected climatic conditions for several locations in the grainbelt of Western Australia. A model for investment in crop sowing machinery draws on these simulated yield relationships at each location and is used to determine a farmer’s optimal investment in crop sowing work rate capacity under current and projected climate regimes. The key finding is that at most locations the projected change in climate has marked impacts on profit distributions from grain production, yet mostly modest changes in the farmer’s investment in machinery work rate form part of the profit-maximising response to climate change at each location. There is also a divergence in machinery investment response between high versus low rainfall locations, with increases and decreases in work rates respectively being forecast. However, as illustrated for a few locations, the changes in investment in work rate within a broadly similar rainfall region are not uniform; principally due to climate change differently affecting the pattern of yield response to time of sowing at each location.climate change, farm machinery, farm management, machinery investment, Environmental Economics and Policy, Farm Management,

BROADACRE FARM PRODUCTIVITY AND PROFITABILITY IN SOUTH WESTERN AUSTRALIA

This paper examines broadacre farm performance in south-western Australia. This region has experienced pronounced climate variability and volatile commodity prices over the last decade or so. Relationships between productivity and profitability are explored using panel data from 50 farms in the study region. The data are analysed using non-parametric methods. Components of farm productivity and profitability are measured over the period 1998 to 2008. Economies of scale and scope are shown often to be positive contributors to productivity and profitability. However, the main finding is that technical change, much more so than technical efficiency, has supplied over 68 percent of the improvement in total factor productivity for farms in the different climatic zones of the region from 1998 to 2008. In addition, growth in total factor productivity is the main contributor to farm profitability. By implication, technical change, often accompanied by scale and mix efficiencies, is the main driver of farm profitability. These findings indicate a vital role for innovation and R,D&E to deliver technologies and practices that bolster farm profitability, as well as a continuing role for scale and scope economies. The products and knowledge that come from innovation and R,D&E are the springboard for technical change. Through technical change and scale and scope efficiencies farmers in this study have achieved higher profits.Productivity, Profitability, Technical change, Farm businesses, Farm Management, Productivity Analysis, Research and Development/Tech Change/Emerging Technologies,

Dynamic trade-offs in water use between irrigation and reservoir aquaculture in Vietnam

Conflicts of interest between irrigation and aquaculture in water use from reservoirs in Vietnam can be resolved when trade-offs in the economic value of water can be quantified over time. Determining these trade-offs can be used as a benchmark for making decisions about managing reservoirs tending to develop rural areas in Vietnam. To solve this problem, a stochastic dynamic programming model was constructed. This model maximizes the expected net present values generated by both agriculture and aquaculture by finding the optimal release paths throughout a year, under conditions of uncertain rainfall. The model was constructed using two main components. First, a dated water production function is used to evaluate responses of crop yields for different levels of applied irrigation. Second, a bio-economic model for reservoir fisheries is employed to estimate fish yields at different levels of water during a harvest season. Using this model, we present a case study of reservoir water management in Vietnam.irrigation, reservoir aquaculture, stochastic dynamic programming, and dynamic trade-offs, Community/Rural/Urban Development,