Where's the economics? The core discipline of farm management has gone missing!

Economic illiteracy is abundant in farm management analysis. Failure to understand that economics is the core discipline of farm-management analysis and failure to apply the whole-farm approach leads to wrong questions being asked and wrong answers being given. The power of economic thinking is in making sense of resource allocation questions in farm systems characterised by much complexity and powerful dynamics. The challenge for those who continue to work in farm management economics is to re-establish theoretically sound farm-management analysis based on economics as the core discipline.Farm Management, Teaching/Communication/Extension/Profession,

Financing Matters

Farms systems are open to financial systems. Financing matters. Analysis of questions about management of farms is a multi-dimensional task; focusing on economic efficiency only partly does the job. A financial system channeling funds efficiently from the non-farm sector to the farm sector, doing so in many and varied ways that meet the specific and different requirements of farm businesses is the key to a farm sector that is liquid and, as a consequence, makes it possible for farmers to use resources efficiently and to grow their wealth.Agribusiness, Farm Management, Financial Economics, Risk and Uncertainty,

A Whole- Farm Investment Analysis of Some Precision Agriculture Technologies

This study uses a farm in the Victorian Mallee over the period 1998 2005 to analyse whole-farm profitability and risks of investing in Precision Agriculture and Site-Specific Crop Management systems. To answer the research questions, a model to predict yield under PA management is developed to simulate paddock and activity gross margins. Analysis is conducted that enables judgements to be formed about merit of investing in some PA technologies. The case study farm comprised 1400 hectares, with 900 hectares of cereals cropped each year. In this case, investment in Zone Management technologies did not meet the required return on capital. Using the relationship of paddock variability to profitability derived from the simulation data, in a year with median growing season rainfall, a variation of at least 2.5t/ha in yield across the paddock was required to meet the required rate of return on the Zone Management investment. A comparison using certain and uncertain seasonal knowledge assumptions indicated that seasonal variation has a much bigger impact on gross margins than spatial variation on this case study farm. Two equipment guidance systems were evaluated. Both systems earned more than 8 per cent on capital invested. Real-Time Kinetic (RTK) guidance with a precision of 2cm and a capital cost of $50,000 was outperformed in economic terms by a$20,000, 10cm accuracy Sub-Metre guidance system. The analysis of RTK guidance profitability showed that it would be important that producers who invest in this technology also adopt supporting management practices that enhance crop gross margins or provide other benefits. Investment in GPS guidance technology can be a worthwhile investment, provided the benefits per hectare are adequate and the capital cost is spread over sufficient hectares. This conclusion is endorsed by many Australian farmers who have moved towards GPS guidance.Farm Management,

A benefit cost analysis on management strategies for Queensland Fruit Fly: methods and observations

The Queensland Fruit Fly (QFF) — Bactrocera tryoni — poses a significant threat to horticultural production in Victoria causing losses of fruit and jeopardising access to interstate and international markets. The Victorian Government implements and largely funds an area freedom program to manage QFF. Concern about the record number of outbreaks in 2007-08 and the escalating costs of maintaining the current management regime, led the Victorian Department of Primary Industries to review the program to identify improved strategies for managing QFF. As part of this work, a benefit cost analysis (BCA) of alternative strategies has been conducted. While the BCA method is well established, in general few studies are publicly available for area freedom programs. In this paper a number of the practical issues encountered in analysing area freedom are detailed, such as estimating welfare effects, how to consider social and environmental costs and benefits and incorporating risk for managing pests. Implications for policy and the design of future programs are discussed. The approach and issues identified in this paper provide insights for other agencies undertaking similar BCAs to inform biosecurity policy.International Relations/Trade,

Open to Ideas: Information flows from Dairy Directions to Dairy Farmers

The ‘openness’ of farming systems that is the focus of this paper is ‘open to information’, in particular the way that new information from the farming systems research project, Dairy Directions, flows from research outputs to dairy farmers. Dairy Directions is a multidisciplinary research activity centred on a steering group of interested parties, mostly farmers, scientists and economists, but also drawing on extension agents, natural resource managers, water service providers, community service providers and public policy participants. The core general research question of Dairy Directions is ‘What options do farmers running different dairy farming systems have to achieve their goals in an uncertain future?’ The goals analysed by the project are predominantly economic and financial – maintaining or increasing profit and cash flow, growing wealth, managing risk, preparing for succession and balancing the dairy work-life balance. Their uncertain future encompasses variability in prices, as well as the natural environment and the policy setting.Farm Management,

Improving performance of bay irrigation through higher flow rates

Bay (border check) irrigation systems are utilised extensively throughout the Goulburn Murray Irrigation District (GMID). However, the performance of these systems have rarely been assessed, in part due to the difficulty in determining the soil intake function. The CRC for Irrigation Futures has recently completed a project to demonstrate the Irrimate™ performance evaluation process in bay irrigation through on-farm trials. The Irrimate™ approach originally developed for furrow irrigation has already provided real benefits to farmers and has been accepted across the cotton industry. Bay irrigation has a number of unique characteristics which presented a number of challenges for the tools used to evaluate furrow irrigation. Informed by field trials, new monitoring strategies were tested and new modelling approaches developed in order to provide the same robust evaluation procedure for bay systems. Evaluations provide objective information to irrigators both quantifying efficiencies of current practices and providing strategies to improve performance. Trials were conducted across 11 sites in order to benchmark current performance and to examine the potential advantages of higher flow rates. Performance varied widely between sites with application efficiencies ranging from 45.9% to 89.5%. Initial modelling indicated that higher flow rates offer potential to increase efficiency. Trials in the second season confirmed the modelling work demonstrating water savings in excess of 20% through flow rates approximately double the conventional rates. The results also show that higher flow rates do not automatically lead to higher efficiency. When adopting higher flow rates irrigators must have greater control over cut-off times. System evaluation is an essential step to reap the benefits of higher flows. The results of this study provide objective information for the modernisation of irrigation systems in the GMID

Obituary: Alan Grahame Lloyd (1926-1999)

Teaching/Communication/Extension/Profession,

The benefits to the Australian Pig meat industry from an increase in demand for a hypothetical low cholesterol pork product

This is the third of a series of papers examining the potential economic effects from the introduction of a hypothetical low cholesterol pork product into the Australian market. Here, a newly updated pig meat model reported by Griffith et al. (2010) is used to model the industry wide impacts of the Bellhouse et al. (2010) survey results on consumer willingness to pay for this new pork product. Six different scenarios are examined that are combinations of a 10, 20 or 30 per cent increase in consumer demand, with and without a 10 per cent increase in the costs of producing the more valuable pork. The simulation results for the various scenarios indicate total annual industry benefits of some $450m for an increase in aggregate willingness to pay of 30 per cent and no cost increase, down to$88m for an increase in aggregate willingness to pay of 10 per cent and a 10 per cent cost increase. Australian consumers receive about 80 per cent of total benefits, pork producers receive about 7-8 per cent and all other market participants together receive about 12-13 per cent. These values provide a guide to the size of the annual investment that could be justified by pork producers to produce a pig that is low in cholesterol.cholesterol, pork, Australia, consumer willingness to pay, demand, Agribusiness, Demand and Price Analysis, Environmental Economics and Policy, Farm Management, Food Consumption/Nutrition/Food Safety, Livestock Production/Industries, Production Economics,

Australian consumers' willingness to pay and willingness to purchase a hypothetical lower cholesterol pork product

This study investigated whether there would be an increase in consumer willingness to pay and purchase if reduced cholesterol pork was introduced to the Australian market. A stated choice analysis was used, with the following questions addressed. How are current purchases of fresh pork affected by concerns about cholesterol content? What financial premium, if any, would consumers place on reduced cholesterol pork? Would consumers buy more pork if a low cholesterol option were available? Is there a group of consumers, such as those with high cholesterol, who have an increased willingness to pay for or purchase reduced cholesterol pork when compared to consumers without this health problem? Results from this study indicated that at present the majority of consumers are relatively unconcerned about the cholesterol content of fresh pork and that there is a minimal effect of such concerns on fresh pork purchases. The results also predicted a significant financial premium for the reduced cholesterol product at the retail level, with increased willingness to pay for and consume reduced cholesterol pork by the average pork consuming family. However, as these results are the product of a stated choice analysis and not a revealed preference study, and therefore simply reasonable expectations, it is likely that the reported increase in demand in both quantity and price by potential consumers is overstated to some extent.pork, cholesterol, choice analysis, Australian pork, Agribusiness, Agricultural and Food Policy, Consumer/Household Economics, Farm Management, Food Consumption/Nutrition/Food Safety, Livestock Production/Industries, Risk and Uncertainty,

Old model, new problem: when should you update a model and what happens when you do?

This paper is a summary of some of the considerations involved in applying an existing model to a new problem, in particular in deciding whether to update or not, and some of the issues involved in interpreting the output from the new application. Thus where you start from does influence where you end up. Both change in total surplus and to a lesser extent the distribution of this change in total surplus across sectors, depends on the price and quantity data which is used to define the initial equilibrium, even if elasticity values are the same. So careful consideration should be given to whether an existing model should be updated because updating a model does matter. The final point to restate is that consumers of pig meat end up being the winners from either cost saving technology at the farm level or new product development or advertising campaigns at the retail level. Even for new technology implemented at the farm level, producers only receive about 20 per cent of the total benefits. These issues are discussed in detail in Mounter et al. (2005a, 2005b). Therefore in relation to the new problem outlined above, we now have a modelling framework available for the task that has been tested in a number of different ways and that now reflects current industry structure and size. It should be a more appropriate framework than the original that was described in the papers by Mounter et al. (2004, 2005a, 2005b).new model, old model, decision making, change in total surplus, updating a model, new technologies, pork, industry structure, industry size, Agribusiness, Agricultural Finance, Environmental Economics and Policy, Farm Management, Industrial Organization, Institutional and Behavioral Economics, Livestock Production/Industries, Marketing,