An evaluation of the impact of long-range climate forecasting on the physical and financial performance of wool-producing enterprises in Victoria

Abstract

Improved climate forecasting has the potential to increase the ability of farm managers to cope with a variable climate. In this study a simulation model of a breeding ewe flock was used to make a preliminary assessment of the value of climate forecasting for wool-producing enterprises in Victoria. Stocking and selling policies were modified in response to long-range forecasts of weather conditions. The effects on pasture cover, sheep welfare and financial returns were compared with those of a traditional management policy for a period of 25 years. These comparisons were made at two locations, Hamilton and Rutherglen, and at two stocking rates. The effects of different levels of accuracy of the weather forecast on the value of the changes in stocking and selling policies were also evaluated. Altering the stocking and selling policies using an accurate forecast of seasonal conditions resulted in a reduction in the death rate of adult ewes and their progeny. Timely action when adverse conditions were imminent resulted in an increase in both pasture cover during autumn and winter and minimum liveweight of the sheep. Gross returns were increased on average by more than 5%. Much of this increase was contributed by higher wool returns associated with the increase in size of the flock during favourable conditions. Expenditure on sheep purchases was lower for the traditionally managed farms; however, knowledge of forthcoming conditions did allow stock numbers to be reduced before pasture reserves were depleted in poor seasons which in turn reduced the requirement for supplementary feed. The total cash costs tended to be lower on the traditionally managed farm, but this difference was not significant. Both the cash operating surplus and net cash income were significantly increased by altering stocking and selling policies using an accurate forecast of seasonal conditions at Hamilton, but, although the same trends were evident, the effect of using the forecast at Rutherglen was not significant. Where the forecast was accurate in only 8 years in 10 or 6 years in 10, the benefits of altering the stocking and selling policies were reduced, but even at the lower level of accuracy the average cash operating surplus for the 25 years of the analysis was higher than that achieved using the traditional management regime. However, in individual years, inappropriate policies adopted due to an incorrect forecast resulted in reductions in financial returns of up to 64%. Accurate forecasts can improve land care and animal welfare by changing pasture and animal management, particularly by reducing stock numbers. However, since the profitability of sheep enterprises in Victoria is highly dependent on the choice of stocking rate, recommendations to reduce stock numbers without considering the financial viability of sheep enterprises may go unheeded. Hence, in the short-term at least, it can be difficult to achieve improvements in land care and animal welfare while at the same time maintaining profitability. This study indicated that the financial benefits for wool producers of reliable seasonal outlooks in southern Australia are probably substantially less than generally anticipated, at least for the strategies investigated. Furthermore, the accuracy of seasonal forecasting in southern Australia is such that the benefits from correct forecasts can be partly offset in other years from decisions which have been made on the basis of incorrect forecasts. The study also highlighted a number of important issues that need to be considered in evaluating climate forecasts.