24Sustainability, externalities and economics: the case of temperate perennial grazing systems in NSW

Jones RE and Dowling PM (2004) ‘Sustainability, externalities and economics: the case of temperate perennial grazing systems in NSW’, Economic Research Report No.24, NSW Department of Primary Industries, Orange.

Executive Summary

There have been significant declines in the perennial grass content in native and sown pastures across temperate Australia. Not only has this reduced agricultural productivity, but has contributed to a range of external costs associated with serious degradation such as loss of soil and biodiversity, decreasing water quality, and dryland salinity caused by rising watertables. This paper presents an economic framework for examining a range of on-farm production and environmental issues in a perennial grazing system in the New South Wales temperate perennial pasture zone. This involves a combination of simulation and dynamic programming models, with the state of the system represented by variables that measure the perennial grass composition and soil fertility. The paper considers a range of management strategies that increase the perennial grass composition in terms of net income from grazing, and the impact upon externalities. The study concludes that long-term economic returns are improved by strategies that lead to an increase in perennial grass composition over time. The study also determined that environmental factors such as deep drainage, runoff and soil loss are reduced as perenniality is increased. However, the study suggests that it is not appropriate to claim that the grazing systems are actually ‘sustainable’. The concept of a sustainable agricultural system can only be considered at an industry or a catchment level, not at paddock or farm scale studies as reported here. Consequently, we suggest that there are positive economic and environmental effects from the adoption of grazing systems that result in greater perenniality, however we are unable to discern the overall impact upon the catchment processes from such adoption and whether agriculture is more sustainable as a result.