Enterprise risk and returns in the Riverina district
Author: | Date: 10 Aug 2017
For the first time in 30 years, the pasture enterprise is at least, if not more profitable than the crop enterprise (Figure 1) and this is contributing to a move towards more consecutive years of pasture in Riverina rotations based on a Farmanco analysis. Eric Nankivell of Farmanco presented at the recent Mulwala GRDC Farm Business Update and analysed a range of factors influencing enterprise risk and return for growers in the region.
Figure 1. Comparison of cropping and mixed farming rotations as measured by rotation operating profit ($/ha/year).Crop yields (t/ha) are listed after the rotation (example, LW 2.0\3.8)and the productivity of the pasture phase is measured by the stocking rate (DSE/arable winter grazing hectares) which is listed after the rotation (example PW 10\3.7).
Figure 1 indicates that Farmanco analysis suggests that a legume crop (lupin (L), faba bean (Fb)) rotation is likely to be much less profitable than a rotation containing pasture (P). The most profitable crop rotation (Canola (C) and Wheat (W); C/W) is high but not currently as profitable as the pasture rotations (PW or PPCW ).
“Of course, the sheep enterprise does not have the same up-side that a crop has in a good year, but at current livestock profitability levels, there is not a severe financial penalty, and therefore, the enterprise profit level ($/ha/year) is higher for pasture rotations compared with crop rotations”.
Eric says that there is a noticeable move towards five or six consecutive years of pasture followed by as many consecutive years of crop. This is in recognition that pasture production improves year on year if it is well managed, but it eventually needs to be cropped to rejuvenate the pasture area.
“In general, currently the livestock enterprises are more profitable than the cropping enterprises – even at prices below the current market levels. However, it is important to bear in mind the relative yield or stocking rate differences you might expect on your farm when considering these margins” he says.
Currently one of the hardest decisions for the mixed farming business is ‘if, and by how much do I increase the livestock enterprise? Any increase in pasture area needs to be met with an increase in livestock numbers which means a reduction in sales while prices are at record highs. With this in mind, many clients are making incremental moves to increase their exposure to livestock, particularly where they have a high level of water logging risk and areas of land that are unsuitable for cropping.
Eric Nankivell, Farmanco - Albury