Economic models of the Northern Tablelands livestock grazing system for assessing sheep industry technologies in a whole-farm context

Abstract

The Northern Tablelands region of New South Wales is mostly used to produce wool, and sheep and cattle for slaughter. Major issues for Northern Tablelands farmers relate to the economic and environmental sustainability of the beef and sheep grazing system. Economic models of this system are a useful first step in understanding the nature of the biological and economic constraints facing farmers in their decision-making. A representative whole-farm economic model of the Northern Tablelands livestock grazing system was developed from ABS and ABARE survey data, from published literature, and from discussions with local farmers and extension officers. A whole-farm perspective was taken because of the nature of the enterprises commonly run on mixed farms in the region. This representative farm comprises 920ha of which about half is native pasture and about half is introduced pasture. The farm runs a flock of 1,108 first-cross ewes, a flock of 1,732 Merino wethers, and a herd of 127 cows producing 18 month old steers suitable for the heavy feeder steer market. The annual whole-farm operating budget, based on long-run average prices and costs, shows a total gross margin of $86,191 and total overhead costs of $24,720. This results in a farm cash income of $61,471 and a farm operating surplus of $37,471 after depreciation and interest costs. Total assets of the farm are $1,498,060 and liabilities are $100,000 which equates to an equity level of 93.3%. The farm operating surplus achieved on this model farm as a percentage of the owner’s equity is 2.7%. The expected impact of a proposed new pasture variety that costs more but gives improved growth in winter was examined with the model. It is shown that a 10% increase in winter pasture growth on the introduced pasture area of 450ha would result in a 5.0% increase in farm total gross margin and a 6.9% increase in farm cash income. These improvements in profitability are achieved by increasing the investment in prime lamb and cow activities and decreasing the investment in the Merino wether activity. This indicates that under the current assumptions of the model, the prime lamb and young cattle activities better utilize the new pasture resource than other activities.