Whole-farm returns show true profitability of three different livestock management systems

Abstract

On the New South Wales Northern Tablelands, sheep, wool and beef cattle production account for most agricultural output. The industries have been challenged in recent years by environmental and economic factors and are therefore looking for modified or alternative livestock management systems that are capable of sustaining profitability. The Cicerone Project aimed to address these issues by comparing three different grazing and pasture improvement systems. Some recent livestock industry analyses have been based on gross margins which do not include overhead costs. This is an important limitation; economic analysis needs to report key whole-farm business performance measures since overhead costs can differ significantly between livestock management systems. A representative farm approach was used to compare the profitability of the three different livestock management systems. Commercial-scale whole-farm and cash flow analyses over a 5-year period were used to evaluate profitability. No particular system could be recommended to graziers because the test period was not sufficiently representative of the long-term climate to make an adequate assessment about their long-term profitability. Nevertheless, it is apparent that whole-farm level budgets are essential for comparing the overall profitability of different livestock management systems. It is concluded that analysts, consultants and graziers should use whole-farm and cash flow analyses to gauge profitability of different livestock management systems particularly where sustainability issues are important.