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Farm businesses often use debt to finance the purchase inputs and meet operational costs. Selected studies have investigated the impact of debt use on farm performance as measured using technical efficiency. However, no prior studies in agriculture have considered treating the debt repayment obligation created as a by‐product of production when benchmarking farm performance. This study employs nonparametric directional distance function models to quantify the impact of debt repayment as a by‐product of input use purchased on credit on farm‐level partial inefficiency using a panel data of 54 mixed enterprise broadacre farms in Western Australia from 2002 to 2011. The study finds that omitting repayment obligations created in the production process in analysis results in underestimating partial inefficiency scores. Farm size, production diversification and rainfall zone are significant drivers of partial inefficiency. The implication of the study's findings is that failure to account for repayment obligations created in the production process may result in erroneous policy suggestions that undermine the efforts of farm businesses to minimise or avoid financial stress. [ABSTRACT FROM AUTHOR]

Context: Australia is renowned for its climate variation, featuring years with drought and years with floods, which result in significant production and profit variability. Accordingly, to maximise profitability, dryland farming systems need to be dynamically managed in response to unfolding weather conditions. Aims: The aim of this study is to identify and quantify optimal tactical livestock management for different weather-years. Methods: This study employed a whole-farm optimisation model to analyse a representative mixed enterprise farm located in the Great Southern region of Western Australia. Using this model, we investigated the economic significance of five key livestock management tactics. These included timing of sheep sales, pasture-area adjustments, rotational grazing, crop grazing and sheep nutrition adjustments. Key results: The results showed that, on the modelled dryland mixed-enterprise farm in the Great Southern region of Western Australia, short-term adjustments to the overall farm strategy in response to unfolding weather conditions increased expected profit by approximately 16%. Each tactic boosted profit by between A$7704 and A$53,171. However, we outline several complexities that farmers must consider when implementing tactics. Conclusions: The financial gains from short-term tactical management highlighted their importance and farmers' need to develop and apply those skills. The tactical skills promote business resilience and adaptability in the face of climate uncertainties. Implications: The study highlighted the economic value of dynamic livestock management in response to climate variations, offering farmers in the Great Southern region the means to underpin profitable and sustainable farm practices. Under Australia's renowned climate variation, it is profitable for farmer to implement short-term tactical management adjustments in response to the unfolding weather conditions. This paper has identified and quantified optimal tactical livestock management for different weather-years for a mixed-farming system in the Great Southern region of Western Australia. [ABSTRACT FROM AUTHOR]

The trade‐off between accuracy and complexity is a common issue faced in farm systems analysis. To provide insights into the importance of representing weather‐year sequence in farm modelling, two whole‐farm optimisation models are constructed and applied to a mixed enterprise farming system in a subregion of Western Australia. The frameworks are (i) four‐stage single‐sequence stochastic programming with recourse (4‐SPR) to capture weather‐year variation and management tactics tailored to each weather‐year and (ii) eight‐stage multi‐sequence stochastic programming with recourse (8‐SPR) to outline weather‐year sequences and management tactics tailored to particular weather‐year sequences. Results show that single‐year stochastic programming generates similar expected profit and strategic management as multi‐year stochastic programming. However, optimal tactical farm management is affected by the outcome of the previous year. Tactical decision‐making in response to the outcome of the preceding weather‐year increases profitability by 14%. Technology changes over the last decade, particularly the increase in computer speed and computational power, increase the ease of construction and application of the 4‐SPR and 8‐SPR frameworks. Nonetheless, choosing which framework is best to apply to a particular issue or opportunity remains a challenge. [ABSTRACT FROM AUTHOR]

Farm management occurs against a backdrop of weather-year variation. In Australian mixed enterprise farming systems, how important is it for farm optimisation models to capture this variation and the management tactics matched to that variation? This study compares two whole farm optimisation models of an Australian mixed enterprise farming system. One model represents weather-year variation and the short-term tactical management responses tailored to the unfolding weather-year conditions. The other model is a traditional deterministic steady state model that employs the key assumption that every year is an expected weather-year. Both models require the farm manager to select a profit-maximising suite of enterprises and activities relevant to either the expected weather-year or the suite of weather-years that typify weather-year variation where the farm is located. Comparison of the models' results reveals key differences in farm strategy, farm tactics and farm profit. The model that includes tactics aligned to the weather-year variation reveals that tactical decision-making increases expected farm profit by about 18 per cent. [ABSTRACT FROM AUTHOR]

Sheep stocking rate influences farm profit significantly; however determining the optimal stocking rate is a difficult task. In this paper, we address this challenge through three main steps. First, we review the definition of stocking rate; second, we examine prior research relevant to the review topic and highlight the factors that need to be considered when determining the optimal stocking rate; and third, we make recommendations for improvements in research on establishing the optimal sheep stocking rate. Inconsistency in the definition of stocking rate can lead to miscommunication among researchers, advisers and farmers. If 10 dry sheep equivalents (DSE)/ha is optimal for one flock, it may not be optimal for another flock because the DSE measure does not fully capture the nuances of different patterns of nutritional requirements among sheep classes and feed availabilities and their respective prices and costs. The optimal stocking rate occurs when the marginal economic benefit of an additional animal equals its marginal cost. Determining this point requires an understanding of the quantity and quality of feed available throughout the year, the optimal liveweight profile throughout the year, the impact of seasonal variation, the impact of labour availability, the cost of alternative feeds, prices of livestock and livestock products, the risk preferences of the farmer, and any emission policies relating to greenhouse gases. Farmers tend to use their own judgement to set their stocking rates, with the aim of maximising utility. However, the complexities listed make it a challenging task. Thus, researchers have used various simulation and programming models to aid decision-making over optimal stocking rates, but most farmers continue to rely on their own personal judgement. Moreover, often a focus of this modelling is for sheep systems in eastern Australia. Generalising this research across Australia is difficult due to differences in climatic conditions and markets across Australia. Often farmers are unaware of the profits they are foregoing when choosing either an overly conservative or excessive stocking rate. Our research has shown that foregone income of up to AUD50 per hectare can occur when a stocking rate 30% below or above the optimum is selected. Thus, despite the complexities that underpin the stocking rate decision, we believe that there are potential rewards from further research on the optimisation of stocking rates. [ABSTRACT FROM AUTHOR]

The viability and profitability of a farm business can be influenced by how it chooses to fund its operations and capital investments either using debt or internal funds. This study examines the determinants and speed of adjustment of the capital structure of broadacre farm businesses in Western Australia's Wheatbelt. Results show that prior period cash flow and equity, farm size and farm location are significant determinants of observed capital structures. Farm businesses are found to quickly adjust their capital structure to desired target levels, suggesting that adjustment costs are not high. The findings support the view that there is a pecking order in the choice of how farm businesses fund working capital and capital investments. [ABSTRACT FROM AUTHOR]

Agricultural research on climate change generally follows two themes: (i) impact and adaptation or (ii) mitigation and emissions. Despite both being simultaneously relevant to future agricultural systems, the two are usually studied separately. By contrast, this study jointly compares the potential impacts of climate change and the effects of mitigation policy on farming systems in the central region of Western Australia's grainbelt, using the results of several biophysical models integrated into a whole‐farm bioeconomic model. In particular, we focus on the potential for interactions between climate impacts and mitigation activities. Results suggest that, in the study area, farm profitability is much more sensitive to changes in climate than to a mitigation policy involving a carbon price on agricultural emissions. Climate change reduces the profitability of agricultural production and, as a result, reduces the opportunity cost of reforesting land for carbon sequestration. Nonetheless, the financial attractiveness of reforestation does not necessarily improve because climate change also reduces tree growth and, therefore, the income from sequestration. Consequently, at least for the study area, climate change has the potential to reduce the amount of abatement obtainable from sequestration – a result potentially relevant to the debate about the desirability of sequestration as a mitigation option. [ABSTRACT FROM AUTHOR]

The financial performance of 240 farms in a drought-affected agricultural region of Australia is analysed. The decadal study period included some years of widespread drought, as well as years with only subregional droughts or no drought. Some droughts created larger adverse financial impacts than others. Mostly, the more droughts farms experienced, the worse was their financial performance relative to farms within the same quantile of farm performance. Despite the incidence of drought, by the end of the decade, almost all the farm businesses were wealthier from increasing their farm size and becoming more crop dominant. Unexpectedly, consecutive years of drought had a significant positive effect on the operating profit per hectare and retained profit per hectare of farms in a majority of their respective quantiles. Many farms that experienced consecutive drought were forced to make structural changes, shifting away from livestock production towards additional cropping. These structural changes boosted farm performance over the decade. The incidence of drought affected some measures of farm performance differently whilst others were affected similarly. Understanding these metrics of farm performance and the structural changes underway in an agricultural region helps form a more complete view of drought impacts. [ABSTRACT FROM AUTHOR]

Australian agriculture generated 15% of national greenhouse gas emissions (GHGE) in 2011, with CH[Sub 4] and N[Sub 2]O accounting for 12 and 3% of national emissions, respectively. In 2011, the Australian government introduced a voluntary carbon offset scheme called the Carbon Farming Initiative, which enables farmers to earn carbon credits by lowering GHGE or sequestering carbon. One way of reducing emissions is to decrease the number of replacement animals required on-farm and increase the amount of product that animals produce across their lifetime. This study explores two options for reducing GHGE over an animal's lifetime: (1) changing from an annual calving system to extended lactation system on dairy farms; and (2) increasing the longevity of ewes on wool enterprises to produce an extra year of wool and offspring. The biophysical models DairyMod and GrassGro were used to simulate the dairy and wool enterprises, respectively, and GHGE were calculated using the Australian National Inventory methodology. Extended lactation produced lower total emissions and emissions intensity (t CO[Sub 2]e/t milk fat plus protein) than annual calving and also resulted in higher operating profits. The GHGE from increasing longevity on sheep enterprises was similar to the baseline scenario, largely as a result of similar stocking rates. Extended lactation had greater potential of reducing emissions than increasing longevity on wool enterprises because there was a larger increase in the production of milk fat plus protein across cows' lifetimes, as well as greater reductions in the number of replacement animals required on the enterprise. This research demonstrated that the profitability of farm enterprises would be driven more by productivity than claiming carbon offsets from these management changes. [ABSTRACT FROM AUTHOR]

If agriculture were to be included in Australia's carbon price scheme, a key decision for government would be how to estimate greenhouse gas emissions. We explore the consequences of three different methods for measuring on-farm emissions: national accounting methods, an amended version of those methods and use of best-available local data. Estimated emissions under the three methods can vary widely; for example, on a case study farm in Western Australia, local data indicated 44 per cent lower emissions than did the national accounts method. If on-farm emissions are subject to an emissions price, the impact on farm profit is large and varies considerably with different measurement methods. For instance, if a price of $23/t of CO2-e applies then farm profit falls by 14.4-30.8 per cent depending on the measurement method. Thus, the choice of measurement method can have large distributional consequences. On the other hand, inaccurate measurement results in relatively minor deadweight losses. On-farm sequestration through reafforestation may lessen the impact of an emissions price on farm businesses, although it will require a high carbon price to be viable, especially if sequestration rates are underestimated or low. [ABSTRACT FROM AUTHOR]