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RESEARCH ARTICLE
Contents Vol 58(10)

From rainfall to farm incomes—transforming advice for Australian drought policy. II. Forecasting farm incomes

Rohan Nelson A D , Philip Kokic B and Holger Meinke C
+ Author Affiliations
- Author Affiliations

A CSIRO Wealth from Oceans Flagship, GPO Box 284, Canberra, ACT 2601, Australia, and formerly ABARE, GPO Box 1563, Canberra, ACT 2601, Australia.

B ABARE, GPO Box 1563, Canberra, ACT 2601, Australia, and CSIRO Wealth from Oceans Flagship, GPO Box 284, Canberra, ACT 2601, Australia.

C Crop and Weed Ecology, Department of Plant Sciences, Wageningen University, PO Box 430, 6700 AK Wageningen, The Netherlands.

D Corresponding author. Email: rohan.nelson@csiro.au

Australian Journal of Agricultural Research 58(10) 1004-1012 https://doi.org/10.1071/AR06195
Submitted: 14 June 2006  Accepted: 21 June 2007   Published: 30 October 2007

Abstract

Australian drought policy is focussed on providing relief from the immediate effects of drought on farm incomes, while enhancing the longer term resilience of rural livelihoods. Despite the socioeconomic nature of these objectives, the information systems created to support the policy have focussed almost exclusively on biophysical measures of climate variability and its effects on agricultural production. In this paper, we demonstrate the ability of bioeconomic modelling to overcome the moral hazard and timing issues that have led to the dominance of these biophysical measures. The Agricultural Farm Income Risk Model (AgFIRM), developed and tested in a companion paper, is used to provide objective, model-based forecasts of annual farm incomes at the beginning of the financial year (July–June). The model was then used to relate climate-induced income variability to the diversity of farm income sources, a practical measure of adaptive capacity that can be positively influenced by policy. Three timeless philosophical arguments are used to discuss the policy relevance of the bioeconomic modelling. These arguments are used to compare the value to decision makers of relatively imprecise, integrative information, with relatively precise, reductionist measures. We conclude that the evolution of bioeconomic modelling systems provides an opportunity to refocus the analytical support for Australian drought policy towards the rural livelihood effects that matter most to governments and rural communities.


Acknowledgments

The research carried out in this project was partly funded by the Grains Research and Development Corporation, building on earlier research for the Managing Climate Variability Research and Development Program. The vision and support of these two agencies are gratefully acknowledged. Some of the key concepts explored in this research were conceived years before it commenced, in discussions with Graeme Hammer and Roger Stone. The authors gratefully acknowledge the assistance of Vernon Topp, Lisa Elliston, and Peter Martin in helping to refine earlier versions of this paper. For their generous collaboration the authors gratefully acknowledge the efforts of Andries Potgieter, Dorine Bruget, John Carter, and Beverley Henry. The insightful comments of an anonymous referee are gratefully acknowledged. The authors also thank Australia’s farmers, their accountants, and marketing organisations for providing data through ABARE’s farm surveys, and ABARE’s capable team of field survey officers, who made this research possible.


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