IDEAS home Printed from https://ideas.repec.org/a/eee/agisys/v178y2020ics0308521x19307577.html
   My bibliography  Save this article

Using a two-price market value method to value extra pasture DM in different seasons

Author

Listed:
  • Lewis, Claire D.
  • Smith, Kevin F.
  • Jacobs, Joe L.
  • Ho, Christie K.M.
  • Leddin, Clare M.
  • Malcolm, Bill

Abstract

The challenges of estimating the value of growing and using extra pasture to the farm business often necessitates using complex systems modelling of individual farms. In this paper, a straightforward market value method is outlined, where technical substitutes for which there is a defined market price are used as proxies to estimate an equivalent value for extra pasture used in a farm system. The method can be useful for all grazed livestock production systems where substitutes for pasture are purchased and sold. The two-price approach presented advances on previous applications of using market values by accounting for differences in the value of extra pasture DM used on farm in different seasons. The value per extra kg DM harvested in seasons when pasture typically limits livestock production, for example during summer/autumn in temperate environments, and used on farm equates to the market price of the replacement cost as purchased supplementary feed. This is the maximum the extra pasture DM could be worth when used in the farm system. Conversely, the value per extra kg DM harvested in spring when extra pasture is likely to be in surplus of livestock requirements, equates to its market price if sold, as standing hay for example, termed the salvage value. This two-price approach was applied to value the previously published seasonal DM yield differences of 19 perennial ryegrass cultivars, compared to an industry standard cultivar, grown in three regions of Victoria, Australia. Results were then compared to the value of extra pasture DM previously estimated using system simulation analyses of three farms and applied to the same perennial ryegrass data set. The difference in the value of extra pasture DM estimated using the two methods ranged from $0.01/kg DM to $0.24/kg DM. Overall, the two-price method estimated an extra $24 to $200/ha.year benefit over the industry standard cultivar for the 19 cultivars across the three regions, similar to the extra $0 to ∼ $180/ha.year estimated by the previous system simulation analysis. The two-price market value method can be an efficient way to estimate the value of extra seasonal DM yield of pasture, with results easily generalised across a range of farming systems.

Suggested Citation

  • Lewis, Claire D. & Smith, Kevin F. & Jacobs, Joe L. & Ho, Christie K.M. & Leddin, Clare M. & Malcolm, Bill, 2020. "Using a two-price market value method to value extra pasture DM in different seasons," Agricultural Systems, Elsevier, vol. 178(C).
    • Handle: RePEc:eee:agisys:v:178:y:2020:i:c:s0308521x19307577
    DOI: 10.1016/j.agsy.2019.102729
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0308521X19307577
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.agsy.2019.102729?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Chapman, D.F. & Kenny, S.N. & Lane, N., 2011. "Pasture and forage crop systems for non-irrigated dairy farms in southern Australia: 3. Estimated economic value of additional home-grown feed," Agricultural Systems, Elsevier, vol. 104(8), pages 589-599, October.
    2. Bathgate, A. & Revell, C. & Kingwell, R., 2009. "Identifying the value of pasture improvement using wholefarm modelling," Agricultural Systems, Elsevier, vol. 102(1-3), pages 48-57, October.
    3. Malcolm, Bill & Ho, Christie K.M. & Armstrong, Dan P. & Doyle, Peter T. & Tarrant, Katherine A. & Heard, J.W. & Leddin, C.M. & Wales, W.J., 2012. "Dairy Directions: a decade of whole farm analysis of dairy systems," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 20, pages 1-20.
    4. Lowell S. Hardin & Glenn L. Johnson, 1955. "Economics of Forage Evaluation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 37(5), pages 1457-1459.
    5. Ludemann, C.I. & Cullen, B.R. & Malcolm, Bill & Smith, K.F., 2013. "Economic values of changes in energy concentration of pasture in contrasting temperate dairy regions in Australia," AFBM Journal, Australasian Farm Business Management Network, vol. 10, pages 1-15.
    6. Chapman, D.F. & Kenny, S.N. & Beca, D. & Johnson, I.R., 2008. "Pasture and forage crop systems for non-irrigated dairy farms in southern Australia. 1. Physical production and economic performance," Agricultural Systems, Elsevier, vol. 97(3), pages 108-125, June.
    7. Lewis, C.D. & Malcolm, Bill & Jacobs, J.L. & Spangenberg, G. & Smith, K.F., 2013. "A method to estimate the potential net benefits of trait improvements in pasture species: Transgenic white clover for livestock grazing systems," AFBM Journal, Australasian Farm Business Management Network, vol. 10, pages 1-16.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Lihui & Li, Songrui & Hu, Yitang & Nie, Qingyun, 2022. "Economic optimization of a bioenergy-based hybrid renewable energy system under carbon policies—from the life-cycle perspective," Applied Energy, Elsevier, vol. 310(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lewis, C.D. & Malcolm, Bill & Jacobs, J.L. & Spangenberg, G. & Smith, K.F., 2013. "A method to estimate the potential net benefits of trait improvements in pasture species: Transgenic white clover for livestock grazing systems," AFBM Journal, Australasian Farm Business Management Network, vol. 10, pages 1-16.
    2. Ludemann, Cameron, 2022. "Estimated Annual Value of a Forage Cultivar Selection Decision Tool for New Zealand Sheep and Beef Farmers," AFBM Journal, Australasian Farm Business Management Network, vol. 19(1), April.
    3. Ludemann, C.I. & Eckard, R.J. & Cullen, B.R. & Jacobs, J.L. & Malcolm, B. & Smith, K.F., 2015. "Higher energy concentration traits in perennial ryegrass (Lolium perenne L.) may increase profitability and improve energy conversion on dairy farms," Agricultural Systems, Elsevier, vol. 137(C), pages 89-100.
    4. Lewis, C.D. & Smith, K.F. & Jacobs, J.L. & Ho, C.K.M. & Leddin, C.M. & Moate, P.J. & Malcolm, B., 2024. "Using a two-price market value framework to value differences in metabolizable energy concentration of pasture across seasons," Agricultural Systems, Elsevier, vol. 217(C).
    5. Bilotto, Franco & Vibart, Ronaldo & Wall, Andrew & Machado, Claudio F., 2021. "Estimation of the inter-annual marginal value of additional feed and its replacement cost for beef cattle systems in the Flooding Pampas of Argentina," Agricultural Systems, Elsevier, vol. 187(C).
    6. Berger, Horacio & Bilotto, Franco & Bell, Lindsay W. & Machado, Claudio F., 2017. "Feedbase intervention in a cow-calf system in the flooding pampas of Argentina: 2. Estimation of the marginal value of additional feed," Agricultural Systems, Elsevier, vol. 158(C), pages 68-77.
    7. Young, Michael & Young, John & Kingwell, Ross S. & Vercoe, Philip E., 2023. "Representing weather-year variation in whole-farm optimisation models: Four-stage single-sequence vs eight-stage multi-sequence," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 68(01), September.
    8. Finlayson, John & Real, Daniel & Nordblom, Tom & Revell, Clinton & Ewing, Mike & Kingwell, Ross, 2012. "Farm level assessments of a novel drought tolerant forage: Tedera (Bituminaria bituminosa C.H. Stirt var. albomarginata)," Agricultural Systems, Elsevier, vol. 112(C), pages 38-47.
    9. Christie, K.M. & Smith, A.P. & Rawnsley, R.P. & Harrison, M.T. & Eckard, R.J., 2020. "Simulated seasonal responses of grazed dairy pastures to nitrogen fertilizer in SE Australia: N loss and recovery," Agricultural Systems, Elsevier, vol. 182(C).
    10. Kingwell, Ross S., 2011. "Managing complexity in modern farming," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(1), pages 1-23.
    11. Stirling, Sofía & Fariña, Santiago & Pacheco, David & Vibart, Ronaldo, 2021. "Whole-farm modelling of grazing dairy systems in Uruguay," Agricultural Systems, Elsevier, vol. 193(C).
    12. Tocker, Jonathon & Malcolm, B. & Heard, J. & Ho, C. & Behrendt, R., 2022. "Profitable Sheep Farming in South-west Victoria: Specialisation or Diversification Under Volatile Prices, Costs and Climate," AFBM Journal, Australasian Farm Business Management Network, vol. 19(1), April.
    13. Catalina Fernández Rosso & Franco Bilotto & Andrea Lauric & Gerónimo A. De Leo & Carlos Torres Carbonell & Mauricio A. Arroqui & Claus G. Sørensen & Claudio F. Machado, 2021. "An innovation path in Argentinean cow–calf operations: Insights from participatory farm system modelling," Systems Research and Behavioral Science, Wiley Blackwell, vol. 38(4), pages 488-502, August.
    14. Heard, Joanna & Malcolm, Bill & Jackson, T. & Tocker, J. & Graham, P. & White, A., 2013. "Whole farm analysis versus activity gross margin analysis: a sheep farm example," AFBM Journal, Australasian Farm Business Management Network, vol. 10, pages 1-14.
    15. Christie, Karen M. & Smith, Andrew P. & Rawnsley, Richard P. & Harrison, Matthew T. & Eckard, Richard J., 2018. "Simulated seasonal responses of grazed dairy pastures to nitrogen fertilizer in SE Australia: Pasture production," Agricultural Systems, Elsevier, vol. 166(C), pages 36-47.
    16. Tarrant, Katherine A. & Armstrong, Dan P. & Ho, Christie K.M. & Wales, W.J. & Malcolm, Bill, 2010. "An economic analysis of options for utilising additional land on a high rainfall Gippsland dairy farm," 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia 59164, Australian Agricultural and Resource Economics Society.
    17. Ludemann, C.I. & Cullen, B.R. & Malcolm, Bill & Smith, K.F., 2013. "Economic values of changes in energy concentration of pasture in contrasting temperate dairy regions in Australia," AFBM Journal, Australasian Farm Business Management Network, vol. 10, pages 1-15.
    18. Fariña, S.R. & Alford, A. & Garcia, S.C. & Fulkerson, W.J., 2013. "An integrated assessment of business risk for pasture-based dairy farm systems intensification," Agricultural Systems, Elsevier, vol. 115(C), pages 10-20.
    19. Chapman, D.F. & Kenny, S.N. & Lane, N., 2011. "Pasture and forage crop systems for non-irrigated dairy farms in southern Australia: 3. Estimated economic value of additional home-grown feed," Agricultural Systems, Elsevier, vol. 104(8), pages 589-599, October.
    20. Browne, Natalie & Kingwell, Ross & Behrendt, Ralph & Eckard, Richard, 2013. "The relative profitability of dairy, sheep, beef and grain farm enterprises in southeast Australia under selected rainfall and price scenarios," Agricultural Systems, Elsevier, vol. 117(C), pages 35-44.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:agisys:v:178:y:2020:i:c:s0308521x19307577. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/agsy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.