Comparing the profitability of sheep, beef, dairy and grain farms in southwest Victoria under different rainfall scenarios

Dryland farming is commonplace in Australia so the profitability of dryland farms often depends on the amount and timing of rainfall. With drier weather conditions featuring in climate change projections for southern Australia, it is important to understand the relationships between rainfall, commodity prices and farm profitability. Using correlated farm commodity and input prices from the past nine years, farm profitability was calculated for a range of farm types in southwest Victoria under low, average and high rainfall scenarios. Fourteen representative farms were examined that included production of Merino fine wool, prime lamb, beef cattle, milk, wheat and canola. This paper compares and contrasts the spread of profitability of these farms against the backdrop of price variability and rainfall scenarios. Inferences about the resilience to climate and price volatility of the different farm types are made. The type of metric used to describe profitability is shown to importantly affect the nature of inferences to be drawn through the comparison of farms.