Applying New Science to Farm Decisions Is Economics Required

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Applying New Science to Farm Decisions - Is
Economics Required?
Mark NealRisk and Sustainable Management Group
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Outline

• The Scientists advice
• Dairy farming in Australia
• A recent scientific trial
• Results Scientific vs Economic criteria
• Conclusions

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1. The Scientists advice

• Measure inputs and outputs
• Tend to advise in terms of what they know
• Eg Maximise output per unit of input (BM)
• What role for
• Prices?
• Substitution between multiple inputs?

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Review Production economics

• The three most important words in production
  economics are
• Marginal
• Marginal and
• Marginal.

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A production example

• Growing Maize on 1 ha of land.
• One input fertiliser.
• How much fertiliser?
• No fertiliser grows 8t maize

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Production function (TE)
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Revenue, Cost and Profit
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Results

• If I advised my farmer to maximise production,
• Fertiliser580kg Production19.6t Profit 795
• If I advised my farmer to maximise output per
  unit of fertiliser,
• Fertiliser 0kg Production8t Profit 800
• If I advised my farmer to minimise costs,
• Fertiliser 0kg Production8t Profit 800
• If I advised my farmer to maximise profits,
• Fertiliser300kg Production16.7t Profit 1,075

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2. About Dairy farming

• 10,000 dairy farms
• 240 milking cows per farm
• 5,000 litres per cow
• 12 billion litres milk produced
• 0.30 per litre
• 3.6 billion farmgate value

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Dairy regions of Australia
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A Dairy Farm
Paddocks
Paddocks
Paddocks
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A Dairy Farm
Paddocks
Paddocks
Animals
Paddocks
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A Dairy Farm
Paddocks
Climate data
Paddocks
Animals
Paddocks
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A Dairy Farm
Paddocks
Climate data
Paddocks
Animals
Paddocks
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A Dairy Farm
Paddocks
Climate data
Paddocks
Animals
Paddocks
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A Dairy Farm
Paddocks
Climate data
Paddocks
Animals
Paddocks

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Nutrition for a cow

• Appetite
• Limited capacity to consume
• Energy
• Fuel
• Protein
• Building blocks
• Fibre
• For proper digestion

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Milk production and Appetite
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Diminishing marginal production
Hulme, Kellaway and Booth (1986)
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3. A scientific trial - Forages

• Based at University of Sydney
• 33 forage species
• Measured over 3 years
• yield
• nutritive quality
• water use
• 3 replicates by 3 water treatments

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Species evaluated
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Plot design
2000 sprinklers, Kilometres of pipe and wiring
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Yields (PA)
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Energy Density
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Seasonal Distribution
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4. Results Scientist vs Economist

• 200 Hectare (500 acre) farm (4.6m)
• Calving all year round
• Maximum 800 cows
• Full irrigation, fertiliser as required
• Yields reduced from trial by 67-85
• Average genetic merit cows
• Max production 6000L per cow
• Diet balanced for ME, CP and NDF

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Model

• Linear Programming
• GAMS platform (TM)
• 23,300 variables
• In 3,000 equations
• Tableau would be 100 Excel sheets wide

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Scientists Criteria

• Highest yield
• (MaizeWheat)
• Highest yield - all grazed
• (KikuyuRape)
• Highest Water Use Efficiency
• (Maize)
• Highest Energy Density
• (Perennial Ryegrass)

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Highest Yield
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Highest Yield
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Highest Yield All grazed
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Highest Energy Density
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Highest Water Use Efficiency
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Increasing water price
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Summary

• A mix is optimal
• Complete irrigation
• Prairie grass is a big proportion
• After economic optimum
• Energy density criterion next best (All RP)
• Similar to current practise!
• Increasing water price
• Little effect on optimal mix

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5. Conclusion

• Applying New Science to Farm Decisions - Is
  Economics Required?
• Get the science right
• Get the economics right
• The client makes money
• Everyones happy

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Questions?

• Mark Neal
• Risk and Sustainable Management Group
• Room 519
• m.neal_at_uq.edu.au