Grazing Management Under Risk: A Case Study In The Western Australia’s Sheep Zone

Abstract

There have been many biophysical studies on various aspects of the management of sheep grazing annual pastures in Australia. However, economic studies have been much more limited in number, particularly studies that take into account the dynamic and risky nature of an annual pasture/sheep production system. A biophysical simulation model and several dynamic programming models are combined to investigate the effect of risk aversion on optimal grazing management practices for sheep in a region of Western Australia. The simulation model represents the annual pasture system, grazed by sheep, on a weekly time step over 20 years, using an actual sequence of rainfall records. It is used to estimate the effects of various combinations of management practices (stocking rates and lengths of pasture deferment) on biological outputs (wool production, sheep liveweights, pasture production, and future pasture condition) in a wide range of climatic, biological and managerial conditions. The simulation outputs are then used as inputs for the dynamic programming models, which determine the optimal combination of stocking rate and pasture deferment in different circumstances. A stochastic under riskaverse dynamic programming model is used in the present study. Results of the study show that the influence of risk aversion on optimal stocking rate and optimal length of deferment is minimal. Higher levels of risk aversion tend to favor lower stocking rates. At any given stocking, meanwhile, higher levels of risk aversion tends to favor longer period of deferment of grazing.