Seasonal Climate Forecasting and the Management of Rangelands: Do Production Benefits Translate into Enterprise Profits?

Abstract

There are increasing opportunities for farmers to use climate forecasts to assist with their management of grazing enterprises, but the value of the forecasts needs to be assessed in the whole enterprise context, with the realistic consequences of management decision-making. We used a linked model of pasture growth (GRASP) and herd dynamics and property economics (Herd-Econ) to simulate whole enterprise management on a cattle station in north-east Queensland. The simulations realistically included the costs and benefits of buying and selling stock, and the impacts of differing stocking rates on resource condition and animal production rates (growth, death and birth rates). We examined a Constant stocking rate and a trading Reactor strategy over the 104-year weather record, then added 6 or 12 month forecast information to the farmers’ decision-making. We found that -

• (i) In general the optimal level of response to a forecast (increasing stock numbers in good years and decreasing them in bad) increased with increasing certainty. An inappropriate response to the forecast could be worse than no response, highlighting the sensitivity of forecasting advice to this factor. The differences in cash flow between different levels of response to a forecast could be considerably larger than the difference between strategies.

• (ii) At the optimal response levels, forecasts provided a modest benefit in cash flow over baseline strategies, with more benefit to be gained from a 12 month forecast than a 6-month forecast. The same level of cash flow could be achieved for a much lower risk of environmental degradation (as measured by a soil loss index) with forecasting; however, if advantage was taken of an increased cash flow, then the risk of soil loss changed little. The benefits found in production per unit area (see companion papers by McKeon et al. (2000) and Ash et al. (2000)) do not translate to economic output at the whole enterprise level in a simple way.

• (iii) The outcomes were sensitive to changes in market prices. In general, trading strategies (Reactor, and 6 or 12-month forecasts) were relatively more favoured over a Constant stocking rate strategy as sale prices rose, and especially as the margins between sale and purchase prices increased. Higher stocking rates were also favoured at higher prices in Reactor strategies.

The study highlights the importance of assessing the value of forecasts in the context of the whole management system. There are many other aspects of risk management from which producers could benefit before forecasting becomes the limiting factor in management. However, a seasonal forecast with current skill has some value for production and resource protection when used to trigger appropriate responses; future developments should deliver more.