Looking beyond rainfall to incomes for the coming season

Figure 1: Farm incomes for the central southern cropping regions of WA 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 effects to rural communities. The 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 the 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 agriculture departments in WA 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 Southern Oscillation Index (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, incomes in the central and southern cropping regions of WA are more variable and less likely to exceed the long-term median in the coming year (Figure 1, red box). This is in contrast to years with a positive or rising SOI at the end of May and June, when incomes are less variable and more likely to exceed the long term median (blue box).

A similar pattern emerged from ABARE"s work for WA"s drier eastern and northern cropping areas, with even more pronounced variability of incomes in years with a negative or falling SOI at the end of May and June. Results show the movement of the SOI over May and June provides a useful indicator of how the season might finish in WA. While too late to alter pre-sowing decisions, forecasts of farm incomes 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