Pasture development revisited: A model to analyse the physical and financial risk of developing pastures on sheep and beef cattle farms

Abstract

In order to assist pastoral farmers determine whether investment in pasture development is worthwhile, a spreadsheet model was developed to analyse its effect on farm production and profit. The model incorporates a feed budget that accounts for the proportional impact of pasture development on the seasonality, quality and total supply of feed, and this is utilised to support additional livestock. The impact of pasture development on costs and revenue are accounted for in a yearly cash flow template because cash balances over the development period are a measure of feasibility. The effect of climatic conditions on pasture production, and hence livestock performance and sales, and of variation in future product prices were analysed for two case farms: one in New Zealand and the other in southern Brazil. The results, presented in terms of a probability distribution of the net present value (NPV) of the net profit after tax and before interest (NOPAT) for the pasture development programmes, provide a farmer with more insight into the physical and financial consequences of pasture development than an analysis based on current average costs and prices. Keywords: investment analysis, pasture development, profitability, risk, spreadsheet model