Looking beyond rainfall to incomes

Figure 1: Farm incomes for the Darling Downs simulated by ABARE

By Dr Rohan Nelson

When it comes to climate variability and drought, what we are really interested in is the impact on farm incomes and the flow-on effect to rural communities.

GRDC is at the forefront of seasonal climate forecasting, supporting the natural evolution of income forecasting from past investment in rainfall and crop forecasting systems.

A project recently completed for GRDC by ABARE has shown that seasonal climate forecasting can be extended to crop farm incomes. This new technology is built on crop and pasture forecasting systems developed by the Departments of Agriculture in Western Australia and Queensland, and the Queensland Department of Natural Resources and Mines.

ABARE"s model simulates farm incomes from 1900 onwards across all of Australia"s cropping regions, assuming current farming conditions and technology.

When combined with the same SOI forecasting approaches used to forecast rainfall and crop production, ABARE"s model shows the impact of expected seasonal conditions on farm incomes for the coming financial year.

For example, when the SOI is negative or falling at the end of May and June, crop farm incomes across the Darling Downs are more variable and have a lower probability of reaching the long-term median in the coming year (Figure 1, red box). This is in sharp contrast to years with a positive or rising SOI at the end of May and June, when incomes are far less variable and more likely to exceed the long-term median (blue box).

A similar pattern emerged from ABARE"s work for cropping regions in northern New South Wales.

ABARE"s results show that the movement of the SOI over May and June does provide a useful indicator of how the season might finish across the northern grains belt.

While this is too late to alter pre-sowing decisions, forecasts of farm income are useful for industry planning and policy decisions. This research also shows that GRDC is leading the way in the natural evolution of seasonal climate forecasting beyond rainfall and crop production to what really matters to growers - the bottom line.

For more information: Dr Rohan Nelson, 02 6263 6070
Full report at www.abareconomics.com
Dr Nelson is on secondment from ABARE to Land and Water Australia.

Region North