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Summary. 1 The paper deals with areas under the Mediterranean type of climate where periods of moisture supply and lower temperature with lowered evaporation alternate annually with periods of low moisture supply and higher temperature with increased evaporation. 2 The suggestion is made that in such areas where no system of economic production has already been evolved permanent pasture formation for stock production on a system of extensive husbandry would be economic. 3 That permanent pasture could be produced economically by a plant association capable of regenerating itself annually after the drought stress period owing to the production of a large number of seeds by its individual members. 4 That the stock carried by such a pasture during its production period could be carried over the alternating drought period of low or nil production by a self-perpetuating grain crop along the lines adopted in West Australia using the lupin. 5 Various difficulties and amendments of the system proposed are mentioned and discussed.