Farming systems in the pastoral zone of NSW: An economic analysis

Khairo SA, Mullen JD, Hacker RB & Patton DP (2008) Farming Systems in the Pastoral Zone of NSW: An Economic Analysis, Economic Research Report No.31, NSW DPI, Trangie, NSW.

Summary

This economic research report presents a ‘broad brush’ picture of the major farming systems in the pastoral zone of NSW. The report contains a description and analysis of a “representative farm”, which is defined as a reference farm for a group of farms with similar resources and constraints and with a standard form of management practice. Representative farms have been developed for the Upper Darling, the Murray-Darling and Far West regions of the pastoral zone of NSW.

The description of each representative farm comprises a summary of capital assets, liabilities, enterprise budgets, operating and overhead costs and some financial performance indicators viz. equity, farm business profit and business return on equity. When formulated as spreadsheet models these representative farm descriptions can be used to assess the financial impact of introducing new technologies and management practices.

The representative farm in the Upper Darling region, which runs both sheep and cattle enterprises, has about $1.5 million capital with equity of 85% and about 6.7% business return on equity. The representative farm in the Murray-Darling region, which integrates both livestock and cropping, has about $1.4 million capital with 84% equity and about 13.3% business return on equity. The representative farm in the Far West region, which predominately runs sheep for wool and meat, has about $0.9 million capital with about 80% equity and 14% business return.

The representative farm models were used to compare the traditional Merino-based sheep enterprises with (1) self replacing Merinos with a proportion of ewes mated to a terminal sire for prime lamb production (2) Merino wethers only (3) self replacing Merinos ewes only and (4) self replacing Dorper and Damara enterprises. Given current commodity prices we found that the farming systems that have evolved in these areas are well suited to their respective environments and that the economic incentives to switch to more meat focussed sheep enterprises were not strong.