of low and volatile farm income by Alex Sinnett, Jonathon Tocker, - - PowerPoint PPT Presentation

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of low and volatile farm income
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of low and volatile farm income by Alex Sinnett, Jonathon Tocker, - - PowerPoint PPT Presentation

May 21, 2023 171 likes •341 views

Using capital to counter the threat of low and volatile farm income by Alex Sinnett, Jonathon Tocker, Bill Malcolm DEPI Victoria Changes investigated for case study farm Base Farm ( status quo SQ) 560 ha; 16 dse/ha; 129% lambing C1. C2. C3. C4.

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Using capital to counter the threat

  • f low and volatile farm income

by Alex Sinnett, Jonathon Tocker, Bill Malcolm DEPI Victoria

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Base Farm (status quo SQ) 560 ha; 16 dse/ha; 129% lambing C2. Increase stocking rate on base farm 20 dse/ha (+4 dse/ha) Low Extra Capital $344,000 C3. Increase land area and run at same stocking rate as base farm 800 ha(+240 ha) High Extra capital $1,348,400 C4. Increase land area and stocking rate on base farm and extra land 20 dse/ha; 800 ha High Extra Capital $1,800,000 C1. Increase lambing % on base farm 145% lamb marking (+16%) Low extra capital $72,000

Changes investigated for case study farm

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Total Cost Total Fixed Cost Total Variable Cost Quantity of output

Total variable cost, total fixed cost and total cost

$

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Quantity of output

Average variable cost, average fixed cost and average total cost

$

Average Total Cost Average Variable Cost Average Fixed Cost

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profit profit profit

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Costs and Scale

Costs per unit of output and the number of units of output combine to create total profit. Increasing output increases profit and wealth by reducing average fixed costs per unit of

  • utput and increasing gross revenue.
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Base Farm (status quo SQ) 560 ha; 16 dse/ha; 129% lambing C2. Increase stocking rate on base farm 20 dse/ha (+4 dse/ha) Low Extra Capital $344,000 C3. Increase land area and run at same stocking rate as base farm 800 ha(+240 ha) High Extra capital $1,348,400 C4. Increase land area and stocking rate on base farm and extra land 20 dse/ha; 800 ha High Extra Capital $1,800,000 C1. Increase lambing % on base farm 145% lamb marking (+16%) Low extra capital $72,000

Changes investigated for case study farm

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SQ C1 C2 C3 C4

Costs per one dollar of income Total income over 7 year analysis period

Cost of producing a dollar of income

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What about Risk?

Business risk Financial Risk

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Return relative to total risk for each

  • ption

Indicator of Total Risk

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Business Risk compared with Financial Risk

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Each change increased productivity and increased income more than costs increased, thus increased profit, above that of the current farm system.

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Borrowing and buying and intensifying more land increased financial risk and business risk and at the same time increased the probable annual net cash flows and profits and growth in wealth.

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In this case, if buying more land, intensification was also required to better service the added debt that had to be taken on. Buying and increasing productivity was the highest return highest risk

  • ption.
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Who Bets?