Australian Farm Business Management Journal:

AFBM Journal offers a publication venue for scientists working in the area of farm business management and the related areas of agricultural technology and farming systems.The content focuses on areas of interest to farm business, farming systems and agricultural technology management professionals.

Volume 10 - 2013

Page 1 -15: CI Ludemann, BR Cullen, B Malcolm and KF Smith

Economic values of changes in energy concentration of pasture in contrasting temperate dairy regions in Australia

Pasture intake from two contrasting dairy farm experiments in temperate Australia over multiple years was used to estimate the potential economic benefit of changes in the metabolisable energy (ME) concentration of pasture consumed by lactating dairy cows. Barley prices were used to calculate the worth or ‘replacement cost’ of the ME within perennial ryegrass (Lolium perenne L.). The economic values for changes in ME concentration of pasture in each year of the experiments were estimated using a deterministic model. Then Monte Carlo (stochastic) simulation was conducted, incorporating distributions of changes in pasture intake, ME concentration and replacement cost of ME to derive a distribution of the economic benefits of an increase in ME concentration of pasture. The mean stochastic results of a one unit increase in ME concentration across the year for perennial ryegrass were AU$191/ha (Terang-‘medium rainfall’ in Victoria) and AU$459/ha (Elliott-‘high rainfall’ in Tasmania). In both farm experiments the largest seasonal contribution to the annual economic value was in the spring. In comparison, when economic values were estimated using changes in ME concentration achieved in experiments (1.74 MJ/kg DM higher in spring and 1.44 MJ/kg DM higher in summer), the economic values were AU$141/ha in spring and AU$74/ha in summer for Terang and AU$266/ha in spring and AU$187/ha in summer for Elliott. The economic values for changes in ME concentration of pasture provide an indication of potential feed cost savings for these farms. The savings estimated using Monte Carlo simulation for Terang was 9% of total variable costs for a one unit increase in ME concentration and 20% of total variable costs for Elliott.

Page 16-29: Joanna Heard, B Malcolm, T Jackson, J Tocker, P Graham and A White

Whole farm analysis versus activity gross margin analysis: a sheep farm example

Gross margins are a traditional method used to assess farm activities.  However, they have a limited ability to inform farm management decisions.  This study uses a whole farm approach and risk assessments to compare two alternative sheep activities for a farm business. The performance of a ‘first cross ewe’ (1 x ewe) activity is compared to the performance of a ‘Merino ewe joined to terminal sire’ (M x T) activity. 
The ‘M x T’ activity generated a higher average gross margin than the ‘1 x ewe’ activity ($423 vs. $353/ha). Using the whole farm systems approach, the ‘M x T’ activity generated higher annual average Net Farm Income, Net Cash Flow, Change in Equity, Return on Capital and Return on Equity with greater variance around the means.  Results indicate that for assumed degrees of aversion to risk, the values of profit generated by the ‘M x T’ enterprise outweigh the extra risk associated with this activity.  The conclusion is that the whole farm approach enables decision makers to better weigh up the choice of livestock activities by considering the implications for economic efficiency of the business, cash flow, growth in wealth and risk.

Page 30 - 45: CD Lewis, B Malcolm, JL Jacobs, G Spangenberg and KF Smith

A method to estimate the potential net benefits of trait improvements in pasture species: Transgenic white clover for livestock grazing systems

 
The potential net benefits of pasture species with enhanced genetic potential can be estimated using the acquisition value technique. The analysis presented here indicates there are potential net benefits from the genetic innovations, and these net benefits would be shared between suppliers and users. Economic models applied to molecular breeding programs can produce information to help inform decisions on prioritisation of research and investment in new traits, and assists in determining the magnitude of improvements in trait efficiencies that is required to justify such investment.

The approach presented here, based on the acquisition value technique to value extra annual DM from a hectare of pasture, represents an initial look at the question; such partial estimates are not the potential net benefits from trait improvements in pasture species that would occur at whole farm level, within years and over time. For this information, analysis at the whole farm scale is required to capture the impact on the complexity of the farm system from changes to the pasture base, as the next phase of this research will explore.

Page 46 - 60: CD Lewis, JL Jacobs, KF Smith, R Behrendt and B Malcolm

Potential returns and risk of growing aluminium-tolerant lucerne in a grazing system with acidic soils located in the high rainfall zone

The benefits, costs and risk from introducing aluminium-tolerant lucerne (alfalfa) into a sheep grazing enterprise, consisting of a perennial ryegrass-based pasture, located in the high rainfall zone of Victoria, Australia, were estimated using a discounted cash flow analysis.

Growing aluminium-tolerant lucerne on 10% of the farm area was consistently more profitable than continuing to graze the perennial ryegrass pasture, returning an extra $7-28/ha/year of profit for the 9 year analysis period. However, if the use of conventional lucerne with liming was a viable option for incorporating lucerne into the grazing system, the advantage of the aluminium tolerance ( ‘Al Tol’) technology was minimal. The results of this analysis suggest that aluminium-tolerant lucerne could be a profitable option for livestock graziers in the high rainfall zone, and is likely to be more beneficial when aluminium toxicity occurs in the sub-soil compared to the top-soil.

Page 61 - 87: Jonathon Tocker, B Malcolm, J Heard, A Sinnett, C Ho and R Behrendt

Profit, cash, wealth and risk implications of changes to a prime lamb business in south-west Victoria

A case study of a prime lamb operation in south-west Victoria was analysed to inform the farm owner, and others in similar situations, about the relative merit of common choices for the challenges they face. The focus was on changes to the farm business that would increase profits from producing prime lamb, evaluating both the profit and the risk of making these changes. The biophysical, economic, financial and risk dimensions of the farm business were simulated to examine how changed farm systems were likely to perform under volatile seasonal, price and cost conditions over a seven year planning period. Each change was also analysed to estimate additions to wealth, debt servicing and the attractiveness of these options based on the degree of aversion to risk.
These results suggest the expansion in size of prime lamb businesses will be limited by the degree to which capital gain can be made on purchased land and the significant additional financial risk associated with the servicing of debt. Furthermore, analysis of factors contributing to variability of returns on capital indicated price of lamb was a substantial contributor to risk of the enterprise, suggesting sheep farmers and industry should seek solutions to mitigate this risk to their businesses.