I~lPACT OF AOOPTl()N <lP strsTAINAilLE

l,RODrCTION SVSTE~lS ()N 'FARNI P:ROFJTABlLIT\'

by

IAN ROBll\SON 3H ~rrRATFORfJ ST.,. MOGGILL, Q 4070

(forr:1erly Queensl(ll1d Departments of Pril:1.nry Industries and Natural Resources)

PAPER TO 41ST ANl~UAL CONFERENCE OF THE AUSTRALIAN AGRICULTURAL AND RESOURCE ECONOlVflCS SOCIETY

JANUAR:Y 1997

ACKNO\VLI~llG~lKNTS

Thts paper provides nn overview report of the work of the foll()Wirtg agricultural cconmmsts employed b:v tht;! Queensland Department of Primary £ndustries (QDPI):

James OafTney cTomvoo111bn) .. Brondacre Gmtn~ Darling Downs Peter Donaghy and James Gnffncy CFmcrnld)-- Uroadncrc Gntin and Beet~ Central lllghlands

ran Otbbons (~1ackny) .. Sugar Cane~ Mackay Dtstnct Ueorge Antot1y {!3risbanc} .. Green Beans. Oymptc Dtstri.ct Peter llnrdman. <Brisbnne) Bcef'Agrol.orcstry, SJ:. Queensland HI! I Holmes (Towns\ ille ) .. Beet: Northen1 Savannah George M'illcar tLongreachl.;. \V(ml. Mitchell Grass CC\VQ) Paul Clark (Chnrleville(r .. Wool. Mulgn Lands (SWQ\

The work of Rod Stmhan and Pattlmsamthy K:tlrmna .. (1\ttn:sters students at the University of Queensland) supervised by Mar \Vegcncr is also acknowledged in ar1alysing ngrotbrcstry ar1d sugar production systems rcSJicctlvcly,

George Pusstnore !Dcpurtmcm of Natural Resources) made. n major contrib~ttion to the fonnulat.ion of the methodology used in the ptojcct.

Appreciation is also expressed to several other coiJeagues who assisted at various stages m this project. These include Ross Bt!rndt, NoelDawsont Trevor Wilson. Johtt Mullins* Greg McKeon, David Freebalni and Bob Reilly.

...

l~tJlACT Ott AI>OI~TION OF SUSTAJNAIJLf: I•ROl>EC1lON SYSTICi\IS ON FAR~tt•ROl(ITAniLlTY

I.IJ. llobimmn

Prelumnu~ tcsults from the nnalySJS of nltl'! ntUJOr ngnculturul prtiduction systems by ()DPJ economJsts urc presertted m this report. These systems include gratn~ sugar1 beet' and wool nnd n.rc t;hstnbuted throughout Quec:mslnncL

Com pan sons of dtscowllcd eush llo\\tS were made over n thtrty year pcdod jn asscsstng prol1tabtllly of tradtttonnl mtd su.,tninnblc systems The adequacy of mtbmmttonused Hi nmdcUtng these <;~:stems is dtscussed (]lven the hmitcd ttnte nnd re~ources nvmlnble fhr the pn:ucct n not sutprts.mg conclusion is thnt further unntysts JS rcqu1red to extend the genernhty of the results

Comment 1.s rtl~m made on the unpticatmns uf the results ~~,r· the tssue or whether addttmnat gm-crnmcnt imhuttves might be rcqutrcd to stunulnte ndot,tion of more sustrunable systems

Background

The endorsement tn 1992 by a.H States nrtd the Connnon\vealth* of the National Strategy for Ecologicnlly Sustt\i.nt\blc neveloprtlcnt ucted ns n, cutnlyst: for the Queensland Department of' Primary lndustric!t !QDPt) in the preparation of riC\\. Natural, Rcsourct! Management (NRlvfJ tegis1ntion

The obJective or the new Act was w brirtg together eight existing Acts dealing scpntntely wtth spectf1c natural resources suoh t's sod; wntcr, fishettes and forests and ht doing so to cstnblish a common approach to prote~t the sustainable ')ttlductive, cnpactty of nntu.tal resources in Queenqlnnd.

h 1994 a. major d1scu~sion p~per 111he Sustainable Use and Mtinagement ofQue~msland's Natural Resources•• wns issued b~ the QDP!, ;rhis wns followed by .~· peri(Jd ofintensiv~ consultation with iJtterested part~<~s to elicit comment on ·(he pror>osuls in the discussion paper

As part or this consultattvc process some filly workshops were held in all regions uf the State to facilitate the flow of cmm11ettt front n wtde range of primary indt•stty. l:onscrvattott and other commumty groups.

The smglc most comm(11lly tdcnttl1cd issue at these Wt)rkshops was that ·of how the adoptwn of sustnmo.hle production systen1s would uffcct the profltnbility and vntbility of mml enterprises. ln restxmse to this concern it \vas agreed that the QDPl sb(m\d itntiatc a proJect designed to thm\"'' some hght on thts tssue and Hl domg so possthly remove one of the nnpedunents ttl more wtdesprcad ndoptmn or enhanced natuml resource mnoagemetlt by pnmary producers.

The J>rojcct

A detatled proJect proposal \vas endorsed by a steering conurnttee established to overvtew its trttplcmentatimt lhis Cl)1lltntttce compnsed industry represematives together Wtth representntwes. or the Austrahnn Bankers• AssociatiOtl and the Queensland Landcare Councd. The Olijceuves ofthe prq)ect were to.

a 1 Prepare represc.ntattve ntod~ls (case studies) for major fatming and grazing systems which assess the htl(Jact, both short and lxmg tefin;, on profitability and viability of adoption or sustainable management practices.

b) Identify on tl cnsc. study basis the locahsed indicators of sustuJnability which may be used to inlluence market behaviour in a posttivc v,.1ty so as to rew-ard good managers for their efforts,

c) Disseminate the results of these studies to key target audiences. including mdustryt finance an.d cortlillUnlty groups. This will ittcJude the linkage between long-tenn profitabihty and .land values. This frtfotttHttion wtH be czmweyed to tlroducers together with other relevant: information

d) Assess what further intbrmatiou or policy initiatives may be required to facilitate the adoption of sustainable rnanagem¢nt practic¢s.

Regmnat agncult.\lttd econo;msts were seen tts key resource fX!Ople l'n C()Otdinating the proJect at regional level und in C()nductmg me requited econom.ic analysis. A workshop vvns held m February l996 t.o lbclhtnte iJltemctton between SJiCCtUHst rnodellcrs and n.•g10nul agncuHural econamt('ts

nus pnpcr reports the work dm1.c on selected ibnntng and grazing systems by 11rqjcet tcums coorduu1tccl by rcgmntll e<;.tlnotmsts For t\\tl of the produchon systems (sugar nt Bundnbcrg and ugroforestry ll1 }i[~Ql tho tmui~KitS \\aS conducted by rtlaster,t; students itl

agnculturai t~ononucs at the l~mvcrstty of Queensland

Due to limitaHons ofboth hme nndtCSOlltCCS it: has not been J)OSStblc to address all of the obJccuves outhned ubo"e ObJccltve (a.) most directly addresses the concerns expr¢ssed by landh()ldcrs 11nd fbr th1s rcasort etTort was f~)cused on thts objective,

Farnr·ng Systems An;dyscd

Wlulst an attempt \Vas made to include most tnajor agricultural systems in the State, this proved to be somewhat ambrtwus gtven limitations due to the nvaJhlhiUty <>f skilled .stair to work on the project~ the availabi.Hty und quality or in.fonnatioh required in making comparisons betwccr\ conventtottal and sustmnablc systems and gettcntl constraints or Hmc and limited funding Nevertht!less a fairly con1prehensive range of systems was

studied as fbll.ows

CrOJJ(ling

Broadacre Grain ... Oarl ing Downs Broadacre Grain and Beef., Central Highlands Sugar Cane .. Mackay District Sugar Cane .. Bund~berg District Green Beans - Oympfe. District

Grazing Wool Growing .. Mulga Lands, SWQ Wool Growing,.. Mitchell Orass, C\VQ Beef Production .. Northern Savannah Beef/Forestry "' South East Qu¢~ns1and

5

rhe lbllowtng m~tp provtdes a broad Jndi(;utl.on ot;- the IQcu,tmn of the tbtming systems stud1ed

\tf:THOUOJ.OGV

for each or the agrtcultuml systems selected fhr nnnlysts. project tcrm1s tlgtecd on the \\,·lectton ot a typtcnl property \Vlnch was broa<Uy rcprescntuttvc of the system in terms or hm .. phrsu:ul att.nbutes. enterpnsc pattern, pn1dttcuvtty nnd profitubll.tty

r·or the represcnttHive properties .. two rnnnngement systems were then deOned "' con\enttonal or trndltuma.l und su~t.umnble Wlulst there hns been a lot or gcnernl d1scusston ofsustmnabthty ofagriculttmll systems in recentyear!l* project tcu.m members commonly had difficulty m definmgjust \\:hat wns meant tbr the production system being t(lcused upnrt

rhe next step WU$ to specif): phys1<.:nl perf(Jmu.mce for both the tonvcntlortal and sustamablo systems being: compnrcd m terms of crop ytclds over umel stock futnof't wool cuts etc AppHcation of pncc data. and costs of inputs then generate cnsh t1ows of nnnual returns and costs which were discounted over the period selected.

As the adverse effects or natural resource de&rrndation carr take many years to become ev1dent tt was necessary to conduct the analysis over a long period. For this project 30 years was proposed to project tenms. From a discounting point ot view cash flows beyond that pt.!riod are of little significance. Where the differences in ~~sh tlows between the conventional ahd, sustainable systems are substantirtl, it was ,proposed that restdual values at the end nf the 30 year perf(~d be used although this was rtof generally done in the individual analyses.

For this project. it was proposed that project .analysts ndopt discount rates in the, range used by the Land and Water Resources Research and Pevelopm<mt Cotp<>raUon <LWRRDC)vit. 4%,7% and tO%.

In modellinf.4 the performance or conventional and sustainable systems~ the single must powerful determirnUlt of petfotmatu!e will be seasomd climatic influenc~s espechdly

:; d ~#

Eme,l-1;;, ;~llt/1

MAP SHOWING BROAD

INDICATION OF

LOCATION OF

FARMING SYSTEMS

i: ·~ ~ CENYU1 ~-~ f r HIGHLANDS

6

ram fall Droughts in pmticulur will haven profound effect on cattle .and sheep numb~rs and output nnd Otl crop yields. They will often nlso gt.ve rise to episodes of seric>us resource degradntion.

sc, ern I or the studh~s incorporated a mnge of sensons m modclhng perlhrmance ov(!r the 30 year period. Others did rmt due mnmly to thu absence or productivity i11formnti<m rdatcd to chmnttc varitttions

< )ther factors which will u1l1uencc. pro.fitubilily nnd. viability nre the mix: or enterprises adopted (where tl choi.cc exists) und the SJlt;! Qf the enterprise. Wh~re relevant, altt:mattve COnlblflUtlOilS of' crops have been tested, "l'he effect of Size hUS hOt been addressed at thrs stage but could castly be mcorpoffltcd m t\uthcr work.

As wHh the discount rate and pent1d* project nnnlyst.s were nsked to adopt comrnmt commodtt.y pnces for thetr production systems in order to enhance the capacity to draw conclusions for the project as a whole

A number of options were ltYttiJublc ror dutcrmimng prices csed, These mclude current pnces, average real prJ.ces over a t(:cent: period. (1988 to 1994), application of a tnmd denved frol)l earlier year "¥£dues or nn, nvernge of ABARl~"s Jong .. term forecast. price.s. The second of these was recommended i.e. an average of prices over the period C f,988·89 to 1994 .. 95) lit real terms, These nt~ shown m Table L

Unit Sugar $Jtsugar Wheat Sit Barley $/t Sorghum $/t Wool CEustem c/kg c1eiln Marl(et Jndieator) Beef ctkg

Avcr~gc ,350 16.5 t~s 115 730

220

r~ow 250 150 l2S JSO 520

200

High 420 2SO 200 2SO tOOO

300

7

Sources of Data·

All proJeCt teams sought to use the best available datu.. Sources mcluded research work conducted m the rcgton both on research stt.ttotls and on properties~ surveys of furm performance h} ABARE or by QDPl personneL ens~ studies of mdividual prop<~rttes and lor.al consensus data tLCD> agreed upon by QDPr personnel m COilJUtlction with primary producers

There was a great vartatton m the quality of data available f<>r particular systems Thi!> 1mpacts on the confidence that can be pluced m the results of the analysts and the concluswns drawn. Spectal attent1on 1s patd to thls tssue in subsequent discussion,

Off .. Farm Effects

Because the primary objective of thts proJect IS to estimate the impact of more sustamable production systems on fann p.rotltabll1ty,. off-farm effects, such ns siltation and damage to i.nfrnstructure and excessive nutrients Jeadmg to water degrndation. are not c<mstdered

These off .. farm or off .. site en:ects Qflen. have adverse eflbcts on other resource users and would be evaluated in broad economic studjes of resotitce' use .. such as tho~c co:~ducted

on a whole catchment basis

RESeLTS

For each producticm system analysed a report has been. pr~pa.re;l, These reports are unpublished at this stage and are available from i,ndiv.iduat authors as listed in the acknowledgments and references, A very briefsurtunaty ot" each study follows:

...

Ra·oadar.re C:rnin ... oarUng Downs

The current cmpplng system 1s conc;idered to be htgh1y sustnutable and includes several components wh1ch contnbute to ttus sustaint~bihty includmg stnp ctoppmg and stubble mulching. The ·mor<f susttunnble system mcorporates zero tillage and tnt~tt<;nl applrcouons of nnrngett as wen

It I\ concluded that the more -;ustamuble system 1s equally ptof.1tnhJe tf no extra hmd IS

tarmed lf20 Qn more Innd ts culttvnted as u result of savrngs mt labour and mnchjncry use. pmtitnbthty mcreascs h~ $10 000 p lt Ass~ssed <>vern .30 year perwd this latter optwn generates ntt additlonal Nf'V ofS 132 000 However the SUp(morJty of this system ~~not unqu.aht1ed as profits appear to he less H1 po<Jr ycurs and subJeCt to gn~nter "anahrht}

Rroad~tct·e Grnin nod Deer .. Certtral Highhwds

Prncuce~ analysed Hllhc susuunablc system are mumnum .tHinge and use rJf fertihser n1trogen In the cropping enterprise and. lower sto(~kmg rutes for the beef enterprise.

ft ~~ concluded that in the short term the susuu.nable system will got1urate tmd extra profit of Sl o 000 p,u High profitability for cropping offsets losses from livestock m the early years In the long .. fcrm over a 30 year period an addttwmd NPV of S l4S 000 is gcnerntcd

Sugar Cane i"· Mflckay Uistrict

Management p.racuces assessed m the susttu.nable system. m thts sttrJy are mmrmum tillage and green cane trash blanketing.

The conservation system js estimated to generate udditional ptot1t·(>frtboutSJ1 OlJO PJl.

consisting largely of reduce<! labour. and capital.C(>sts. Ow~r a 30 yenr period .it genetat~s dn additional NPV or some $235 ooo. lt is suggested that a, fatmf!r could cuitiv(ue up to 50°1o mote tand with this s~stem dtte to reductions in Jabout inputs.

9

Sugar Cane"' lJlmd~betg l)istrict

'rt thts study t,;rcen cane trash bJankeung 1 gctb >.and dnp nrig;ation u.re ttnalyscd as the :un components ofthe sustAtnable system lt l'> neknnwledged. that <>ther practices such

a~ nnunum tdlage. controlled tmffic and on farm water storage would further crmtnbute to ~' ')tama.bthty

Rt!sult!<t mdtcate sup-en or prot1tabdtty thr the sus\UJnable system. Over a 30 yenr period and addu tonal NPV ofS 146 000 is esumated for the gctb and an extra $237 000 for tlle dnp trngatwn Heducttons m y1eld ra.r the conventmnaJ system would enhance the supenonty of the sustnmablc system

Green IJctuts "'(;ympit District

Three production b)'St.ems incorporatutg varymg degree~ of reduced or nt.lrlimum ti I! age arc exammcd Itt this nnalys1s

Gross margi.ns are used to asses~, dtfferences m proiltabthty for the conventional and more 5>ustamahJe systems Creferred tons Best Prncttce 1~2 and 3} Dtscmmted cash flows arc not used as informatmn was not avaJlable on long term effects It 1s c;cmcluded that profitability ofthe more sustainable systems ts .equivalent to the conventional system.

Wool Growing .-1\1ulgltiAH1ds~ S\VQ

Thts analysis~ which JS .mcomplete at th1s stnge,, compares Hghter st:ocking 'rates for the sustamable grazmg system compared with the conventicmnl system,

Using data from a ttwl conducted i.n th~ region it is estimated thnt. the tighter stocking system mcreases prot1tabthty by about $12 000 p.a. A partly completed simulation model run ove,; a 22 year per1od sht>ws higher returns for heavier stocking but does J1ot mcorporate changes in numbers .and values or st<>ck r~sulting from seasonal ch~nses such a.~ droughts.

10

f'lm; study compares higher nnd JoW\!r stocking nttcs with dry sheep ~quivnJents lluctuaung between 9000 und 19500 tor the cmweutiomd system and bet\veeu 7500 'lnd 1 .:ooo fhr the sustaina.ble systtHll occording to th~ type ofsl.!oson ~m:muntered.

1\s~.~cssc,:d over the 30 year permd (lt)()J to I 992) the low stockingt sustatnublc r;ystcm l$ c~tunatcd to gen.crate Ull addllmnal NP''!l of$216 oon

< 11\ en an nhttost <·ompletc Inc~ ofinformatmn or • , . lty respouses to rcdu(:ed ~tockmg rates! th1s analysrs assutlH.$ a rcducholt !~r 30q1o. und then estimates the producuvJty improvement reqmrcd .to hr~ak even with the cmwcntional higher stocking rate system, ThJs tmprovetnl::tll cnmprised a n!duction in breeder mortalHi<~s. increased hrandmg rate and an mcr~nse m stcet pricas. The author indu:tncs that the estimated productivity impruvem~nt would seer 1 to be ncdJicvabJe tmd hwh ... ~ ,comment form other e)Cpcrt p~.!rsonneL

neef I Forestry .. S~:Q

lh1s anal~sls compares a beef only enterprise with one alsa mcorporaHng an area of ttrnber producing eucalyptus saw logs afler 25yeant

It 1s concluded dun the mixed enterprise would have only .a margfnat impact on proHtability if curtent prices fbr timber are maintained. Additional NPVover the 25 ~ears \,Yt.uf.d be only $18 000. However r~aJ prices for this tyr>e of timber are expected to mcrease at: a rate of L l~'o p.a. This would increase the ftddiuonal NPV to $84 000.

ll

The following table summttrises thes~ estimated impacts on pmfitabi1ity.

Sys~em

13roadacre Gmm .. Darling D<lW11S

Bmadacre Gram and Beef' .. Central Highlands Sugar Cane .. Mackay Sugar Cane ,. I3unda.berg Green Beans .. Gympte Wool Growing ... SWQ vVool Growing .. CWQ Beef .. Northem Savannah

.Beef~'Forestry .. sEQ

CONCLUSIONS

Ch3nge in ·rrofit:lbility (Additiorull NI~V)

nil if no extntland NPV of$132000 tf~xtnlland

NPV <~f$145000

NPV of$235000 NPV of $383000 nil results incomplete NPV of $216000 not estimated NPV of$18000 at current prices NPV of $84000 at forecast prices

Prom this information it: appears that for flve of the nine systems, profitability is enhanced by the adoption of sustainable systems~ tbr two of the systems profitability is roughly equivalent and tor the remaining two, the impact on profitability is unknown until more work is done,

Reliability of Results

The degree of confidence which can be plu:.:ed in the results of the nine studies H detennined principally by two factors .. the availability m;d quality of'1 information upon which the analyses were conduct~d and the adequacy of the methodology used in evaluating the conventional and sustainable production systems. The critical issue in

asse"smg the adequnoy of the methodology used is whether a sufficiently broad mnge of outcomes has beet1 tested.

Fach l)f the studies has been subjectively rated ()n a scale of high~ medium or low tor these two factors, ln doing this it ts emphasised tht\t this !l\ting is not an assessment or the work and eftort of the analysts All participants comttlitted as much to these P'ojects as the lnmted Umefnune and restricted resources penttitted. It will also be obvious that \\·here a study is rated 1()\V t;O far as the availability and quality of information is concerned. thts is largely a retlectitm or pas\ research activity and nothing to do with the application of study teams.

1 Brondacrc Grnm- Darling D0\\1lS

2 Broadacre Grain & Beef­t'entral Htghlands 3 Sugar Cane .. Mackay 4 Sugar Cane .. But1daberg 5 Green Beans .. G)~mpie 6 Wool- Mulga Lands 7 \rVool .. Mitchell Grass R. Beef .. Northern Savannah 9 BeePT;{)rest .. SBQ

Avt\il, & Quality of lnformation Use~l

High

Low

Medium Medium Medium

High Low Low

Mediun1

Atlcquacy of ~leth\ldology

M.edium

Medium

M'edium Medium

Low Medium Medium

Low Medium

The degree of confidence that can be placed .in the results is art amaJgant of the factors shown above. Thus projects rating high artd medi.urtl indicate reasonably robust results and those with low ratmgs indicate results in which only limited confidence can be placed at this stage.

It can accordingly be tentatively c~mctuded that four of the systems studied (2;· 5, 7 & 8) will require more analysis before th'~ results can. be considered robust. System 6 although rated high/medium will also require more work as it was not completed within the timeframe of this project !he othet 'tour systems have delivered results which appear to

13

he reasonably robust at thts stage. Nevertheless none of the studies huve generated suf1ictentJy general results to conclude that there is ·no need for further work.

\Vhtlst nus ptOJCCt hns managed to address a key issue facing landholders, 1t is emphnstsed thut the work done to clute represents only a first step. Much work remains to be: done to c~tettd the gcnerahty or the conclusmns~ to nnnlysc other major production G\ stems und to encompass aspects nnd rssues whh;h have not been touched u)J<)Jl so tar,

I· or c'\:umple~ the analyses reported upmt h~tve not looked at restoratiOn ot~degrnded areas through strategies such as removmg stock~ pasture establishment and so on. Another aspect whtch has n<)t been addressed is that of.· ~ouscrvtng speciill areas of ecological ~tgmtlcancc <>n properties, A related aspect 1s that t>f strategic pfnnhng of trees to stabtftse runll.landscnpes

Takmg stock of the avadabdity orprofesstOnal resources Jn Queenslnnd there is n distin\:t gap m the bio-ccatl()mtc modellmg area whieh wi.H Jtnpede progress 1n dt)ing further \H>rk on the systems reported upo.r1 and m addressmg the areas whtch have been ignored t<> date The Queensland Departments of Prima.ry [ndustrtes tutd Natural Resources have establtshcd professional modeUittg units which focus on bio-physical aspects of agncult.uraJ systems. There is a pnmity requircrnent t<l complement the skills in these umts wtth n small etlrc gt<lUP (perhaps 3 or 4) or bm-economic mode Hers to ensure that progress ts made m analysihg. sustamabtlity issues

Models co.nstructcd .in ~na!ys1ng the stJstainabtlity ot'' ngricultuml systems \\<ill have a general utilttv in examining many other issues cr.mfronting landholders and State nnd Federal Govcm.mcnts, Issues such ns structural adjustment • the impact of new technolosies. the effects or eHmatio varhbihty and climate change and the impacts of changes in the terms oftrade are exnmptes,

Although the situation in other stat~s i$ not knowt1; it Is pethiJpS .not unlikely that. there fs a need for these skiHs in Departments elsewhettt in Australia. Because of the fundamental importance of this work to the rural sector thute appears to be a c~tse for the

14

Research and r>evelopmet1t Corpomt1ons t<l pmvtde some timmcial support in addressing thts dctictency

Modelhng ngncultuml systems ts htghly ultcgruuvc and calls upon the skills of mnny dtsctphncs One of tim benefictttl outcomes or thts prOjCCl has been the advn.ncc made in dctimng \\hat sustmnnbtht:y means tbr the S' ·sterns analysed and in integrating ptecemcal research results

ln mtcgrntmg th(! components of the sustanmt~le sy~tems ~!xammed rt is not surprising that gaps were tdcntttied m the mf~)nnnhon nvallable Thts highlights the need for n closer dmfoguc he tween modctlcrs and R&n ~JerS<)nnell>arti~ulatly when pnorities ate b~tng established for fundia1g

C0!\1J\tENTS ON l'(ltlCV ~ff~ASeRt~S

Notvv1thstandiug the tcntn:uvc conclustort that the adoption of sustainable systems may enhance profi.tabiht)1 there tS a need to assess whether new ()overtunentinitiatjves might be required to nccelcrate the rate of udopti<m of these syst~~~~s thereby reducing the rate of natural resource degradation:.

Current Natural Re'Source Situation

Whtlst community uttitude~ towards sustainabihty have changed markedly in recent yeats the continuing dcclille in the quality ofnatural resources used ln agticu'lture temaihs. In Alexander's (1996) assessment, t~ it would. be difficult to claim that we were W¢ll

down the road towards an ecologicaJt ecormmic and socially sustainable ttgricultunll sector~'. She goes on to state that the condition of Australia's natur-al resources is still declining and thnt adjustment pressures are profound.

A similar assessment has been made by Douglas (l99S) who indicates that whi.Jst the establishment of some 2200 tandcare dtoups has profoundly changed attitudes towards

'" better nnturnl resource numngement~ the nnplcmontatitHt or on--gmum,l w(nks. prnctices and svstcms ts JUSt. begiflhUlg und lt wtll tnk~ sevcruJ dccndc., to turn urouJ1d ·th~ dunUtf!e v~h•ch has occutr~d mn lh~pnst

I cker1;k~\ 'l98Q) has esttmnted the CtiSts of't~tnd degradntum ut $2 bttlron per ttntttU\l wtth <i ~ o ,, of' land used tor ugnculture m tt~ed of r¢lmbihto.ttml

Economic Sfuuttinn

It 1s JUSt us easy to comptle mn:nttU\Uotl \\:htch dcmonstmtes thllt the current economic and finuncull siw~mon uftha rural. sector ts pnrlmts .. notwtthstundmg. the tien f,;(lOd wheut crop tor se.\ .... ni years

·\ stnkmg Jttstoncnl perspecttve un tht.! dechne trt lh~ rtuol sectors economic. '\UStanmbtllty has been proHded by Clusholm n 992t \\lto has shown thnt Uvt tcol Net Value of Fnrm output luts declined by close to 60 °u between tho 1950's und the l980~s. rhts hns been ncconl{:Hmied by fl. dechne in the real vitlue. of total farttt cnpttnl

A current nssessn1ent hns been prov1ded by the f:edcr.nf muustcr ror Prtmnry htt.lustrics \\hen openmg the recent Rurnll~'tttnnco SummH He indJcnted thnt as many us two durds of Austraha":s 150 000 commercutl fbrtns arc nt nsk due to: low ensh incomes" Cash mcomcs of less th(1tl $50 000 rut ts the bench murk used m mnkmg. this assessment

The 1m pact of this poor e~ononuc situation on t.hc capacity and w1llH1gness t.)i"' prtn1nry producers to undertake bett~r nttt:urul resource .m~Ul;tgernent hns been .sumrtutrised by Alexander

.. Emotionallyt physi.caHy and cc.on()mioafly stressed pcoJtle do t10t manage resources welL u

Similarly in. a survey of gra~dets attitudes. towards udoptiun of' sustain~bl~ .Sy$t<!ms, Lawrence ( 1992) fou11d that lahdholders~ ~ottservntion and ecolfJgicul ideals wc;r~ cleudy over .. ruled by the ~co nomic fi(!cessity of making as much money as possible to m¢et short term economic needs to r¢cover from high interest rates. inflation, recession · and continuing drought pt:riods.

16

l~ossibl~ lnitisdivcs

tit\tm the cuntnt.umg deehne Hl the. condHioo or the ftuturnl resources used in agriculture and the low \~~\put.it.y of tnndholdcrs (O lfiVCSt in ~tnd Implement m<>re SUSU.tinablc SyStt!ll1S,.

tt ts rmportemt: to CtUWtlSS new mltlat!vcs wh1.ch rrnght ass 1st tn improving natural resource management

( i) ncsearch n•Hll~xtcoslon

A sugg~...stwn has already been rtuufe for dus area of nctavity vir.. the establishment' of small bto-CC()UOmic modellirtg umts H1 State Departments or Agrrcuhure or Nutural Resources.

<her ume as these model.ling uruts prov1de reliable inf<>rmati()n o.n the impacts of adoption of more sustainable systems;. this lnfotmnhon can be included in 1-!Xtension and mfbrmatton programs. The exrstins Property Management Ptirtnfng <PMP) ptogmm provides a good vehicle for the provision of this intbrmnt1on and ror integrating the many d1'.:erse parts of sustainability pnckagQs,

The relationship between sustainnbility, profitability and land values is esp<!ciaUy 1mportant in rewarding good NRM. and this type of information should be placed in the public domain once the information is considered to be reliable,

Parts of sustainflbility packages such as integrated pest management. and drip irrigation have been referred to as precision t~chno!ogi~s by Zilberman (1996) .. They (lre characterised by their ability to respond to varying environmental conditions in a way which reduces waste levels tlf inputS'. Another characteristic is thllt they require better knowledge and understandh1g' of systems and substitute knowledge for ex¢css inputs. Developing skills. amongst 1andhold¢rs to use such technologic$ alpng· with rltik and business manar-'tr. ltskillsshould be a priority for extension attd information ptosrams.

17

(ii) Rural Adjustment Schernes

It IS generally accepted that there tS a better cha.nce of achievmg good NRM n~ tutal holdmgs are hu·gec There hns bt:en a lm or debate over mnny years us to whether the rate. of stn1ctural u9justtnent has been ndcqunte nnd the urgency of achievmg a higher ru.te of udopuon of more sustnm:.tble systems adds weight to the cnl.l f<lt an increase in the tate of ad.J ustrnent in the rural sector.

The Rural AdJUStment Scheme tRASl \Vtts given something of a sustninnbility emphasis when 1t wa.c; revie\ved m 1992 and there IS now a case to further reinrorce this emphasi!t Such a focus could prov1de a rn.tJonale tbr continuing RAS wtt.h an emphnsis on achmvmg property amalgamations and adoption of sustnmnble production systemn

When the conlponents of' sust.amable systems are better defined nnd accepted there may be a case f()r RAS autbortties to assist hmdlmld~rs to .finance those pnrts of these systems whtch are important m nch1evwg susta1nnbility but whi~h are n.ot. attractive as shott tetm mvestments to hmdholders or tu the comtncrcial providers of t1nunce,

Another component pnrt of RAS which should be continued attd even expanded is th~ regtonal approach where specific regtotts and a~:.rrnmltural systems are targeted to achieve structural adjustment nnd better NRM through the provisi.on of addhim1al inducements to landholders leave small properties and to umnlgamatc and consolidate larger· holdings. An example of this in Queensland is the Snuth West Strategy which is seeking to redress the wide scale degradation of the Mulga lands.

There is a growing consensus umongst some comrnentatDts (Alexander. Douglas~

Roberts, et.al.} th«tt primary J''''d:uc~rs as uustodinns of natural. resoun::¢s should b¢ able to negotiate with Governments for a contribution to be made for their services Jn maintaining the$e resource$ in good. condition for other rcsv.urce users both now and in the future.

Morton and Staflbrd .. Smith 0 994) ¢:<press support for the cmu:e~t of landholders M

stewards receiving support. in exchan~e for managing .special llreas in an ecologically

18

su$tatnuhie· wny, The provision of c ,tirdship snlnriest wc>uld pnttJy relit;v~ lnndhnld~rs of tht! economic un~rttuve to muke a prollt out orsuch nrens.

Alexander considers thttt tt ts beyond the cupucJ.ty or producers to mvest in nature. conservutton" stnbthse water tubles und mnnnge weeds nnd pests on the .scale necessary. A natrona! deb1~te ott Uus .tssuc should lead to cost $ihttring nrro.ngemcrns which would actueve the uggt<:gute l~v~l of uwestment necessary to nrrest current l.evels of' d~wnorntmn It 1s also recogmsed that. the tntornatwnnl trend 1s for d~l't!ct income support for filrmers Ul dehvenng pubhc go<>ds such as env,ronmct1tttl tllaJtagcmcnt.

Cmnmentmg ()Jl the ments nf dlfTerent types of .economtc msttum<;tntst Peterm.:n (I 99.5) has concluded that to the ext~nt that cxtcrttahtu~s JUStify tnndcftte n1ensures, subsidtes would be better targeted If provided directly tnther than lhrough the tax system. Da~,ocnp<)rt t 199Si has provt.ded n thorough critique of t.he use or tnx concessions in asMsUng nnplemcutat1on oflandcttre measures

Douglas bns cnncludcd tlmt Jmpiementahon of good NJUv1 practices .is proving dttli(!ult and thf1t gove.rnment mvestmcnt ts smnlt tmd pm>rly tnrgcted. He proposes several brQad strategies tu S1Jmulme nct.lon one or wluch JS the provismn of targeteo incentives nt landholder level it has been estnnatcd thut a 3 ~o level em mdes (lffood and bev¢rages at the wholesnle levy would provide $300 mill•on p.a. to finance nddihonal initiuttves ..

To probrress thts idea of stt'"watdshlp payments or ~mnts a. httle, further it is suggcst~d thttt an effectrve first step m wrgctmg such payments would be to identif1r for major farming and grazmg system those purticular pract1cest works or measures which wHl not be attrncuve to Inm.lhf>lders but which ure very important ht achieving sustninabJe production through the reduction of degradatt<>t1 processes and, the r¢Storation of damaged, areas,

Exnmtnatitm oft he detailed costs of these n~siduaJ. cornp.ment.~ of sustainubHity packages would provide a guide to cost sbittUlS" ~lrrttngements und fo the level or direct finaueittl support that governments mi,gbt: U(,tree lo.

Accountability f<)r such arrangements could be secured thr-ough linking stewttrdshfp gmnts to a PMP type process using accredited practitioners.

19

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!num.al nfAgncuhur,a.LEconomJcs. 36! l i:J .. 29

CLARK. P and HEALE~,J c l996J usustnmable Clr;i.Zl.ng 1n the Mulga Lands of Southwest (,>ucenslnnd~·* ltttemal Report to Queensland Dept of Natural Resources

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