THE CLIMATE KELPIE BLOG: ‘You got to know when to hold ‘em’ – managing livestock in extended drought

Posted by BCG on 27th July 2020

When a season fails, the decision to maintain livestock or to sell can have a big impact on cash flow, but when one ‘tough’ season turns to two or more, the consequences can become far reaching.

This is one of the most significant challenges identified by industry reference groups from the Southern Red Meat and Dairy industries as part of a Forewarned is Forearmed project to help farmers identify and proactively manage extreme climate events.

In response the reference group manager, The University of Melbourne, is developing response scenarios to help producers weigh up their options.

Deciding whether to sell off livestock or feed the entire herd through a period of drought is critical to farm business success. Source: Lisa Warn

Considering the options

“We’ve been working with the Southern Red Meat and Dairy Industry Reference Groups to identify the extreme climate events that will have the most significant impact on their business,” said Dr Ann-Maree Graham, project manager with the University.

“We want to help producers to proactively manage extreme events, as well as increase the awareness of relevant products, risk management tools and potential responses to different scenarios.”

The industry reference groups identified extended wet or dry conditions, floods, humidity, fire, heatwave, extreme cold, frost and wind as the extreme events of most consequence to their industries.

“One of the most critical issues identified is the decision of whether to sell off livestock or feed the entire herd through the drought” said Dr Graham.

“Producers have been faced with several years of drought over the last 20 years. That decision about whether to maintain and feed livestock, particularly breeding stock, or whether to sell down and buy back when conditions improve is particularly challenging.”

“While there are a number of tools available to help producers plan budgets around this decision, by default, most are configured to handle a single failed season. Understanding more about the impact of prolonged drought on cash flow and herd structure can be more difficult to navigate.”

The project commissioned livestock consultant, Lisa Warn, to develop a response scenario that compares the sell and maintain options on an actual farm in Central Gippsland over two failed seasons. It is important to note the following case study assumes availability and accessibility of alternative feed sources and a strategy that avoids severe overgrazing of the natural resource base.

The availability of containment areas and the work demands of managing larger numbers of stock in containment are also important considerations. Source: Lisa Warn

Assessing the longer-term

The 1,500-hectare property at Darriman has an average annual rainfall of 570 mm. The case study follows the property through a severe drought period from spring 2017 to spring 2019 when the 2018 rainfall was 372 mm, one of the lowest years on record, and the 2019 rainfall was 433 mm.

The enterprise consists of Merino wool, prime lambs, beef cattle on improved grass/legume pasture and a small area of irrigated pastures and hay.

“The study has shown that while there is short-term benefit to reducing livestock numbers that results from limiting financial losses (Figure 1), the longer-term loss of income and the cost of rebuilding numbers can have a substantial impact on profitability (Figure 2),” said Dr Graham.

Figure 1. In this example, scenario analysis showed that selling livestock in response to drought will help the annual cash flow in the short-term at a mixed livestock farm in Central Gippsland, but it will take longer to recover than if stock were maintained. The property experienced drought from spring 2017 to spring 2019.
Figure 2. In this example, analysis of two drought response scenarios at a mixed livestock farm in Central Gippsland shows that the multi-year cumulative cash flow is better when stock are maintained rather than sold, provided there is sufficient feed and labour to manage holding the stock. The property experienced drought from spring 2017 to spring 2019.

“For an individual producer, the decision to keep and feed stock or reduce numbers needs to be done on the basis of commodity prices at the time, as the analysis is highly sensitive to relative costs of feed and prices for livestock products. The cost and need for finance are also important considerations.”

“There are other issues such as the ability to keep up with the work demands of maintaining larger numbers of stock in containment and feeding over a longer period of time. The need to build containment areas and destock paddocks in a timely manner are also important considerations.”

The Darriman drought case study illustrates that a return to profitability was more rapid when animals were retained, however this is a feasible strategy only if supplementary feed is available for the duration of the drought. If this was not the case then this strategy could result in severe overgrazing of the pastures.

Retaining and feeding livestock is only a feasible strategy if supplementary feed is available for the duration of the drought. Source: Lisa Warn

In addition to the drought case study, the UoM component of the FWFA project is looking at the impact of extreme heat events, specifically, the potential for deep-rooted pasture species to address those heat impacts in southeast Australia and the impact of heatwaves on dairy production. A case study focused on extended wet events is planned for late 2020 into 2021.

Contact

Dr Ann-Maree Graham, 0481 008 051, annmareeg@unimelb.edu.au

Forewarned is Forearmed project information

The Forewarned is Forearmed project is supported by funding from the Australian Government Department of Agriculture as part of its Rural R&D for Profit program. Project research partners: Bureau of Meteorology, South Australian Research and Development Institute, University of Melbourne, University of Southern Queensland, Birchip Cropping Group, Agriculture Victoria, Monash University and Queensland Department of Agriculture and Fisheries. Rural R&D Corporation partners: Meat & Livestock Australia, Dairy Australia, Wine Australia, Sugar Research Australia, Grains Research & Development Corporation, Agrifutures Australia, Cotton Research & Development Corporation and Australian Pork.

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