Using a Spatial Farm Microsimulation Model for Australia to Estimate the Impact of an External Shock on Farmer Incomes

Abstract

A greater uncertainty in climate conditions in Australia and external price shocks in commodity prices has posed a real question for communities on the impact of these external factors on farmers. Spatial microsimulation models are ideal for understanding the spatial impacts of various external shocks, including changes in commodity prices; changes in climate conditions; and changes in Government policy. This study demonstrates the building of a spatial microsimulation model to identify farmer financial stress in the Australian State of Victoria, and then shows how this model can be used to estimate the impact of an external shock such as a drop in the price of milk. The model is estimated for the Australian State of Victoria.