Working papers

Simulating the effects of climate change on the profitability of Australian farms ​

Recent shifts in the Australian climate including both higher temperatures and lower winter rainfall, have had significant effects on the agriculture sector. Despite these recent trends, there remains uncertainty over the future climate and its potential impacts on Australian farm businesses. In this study, a statistical model of Australian cropping and livestock farms is applied to simulate the potential effects of climate change on farm profits.

This farm model is combined with a range of downscaled projections for temperature and rainfall by 2050. The results provide an indication of adaptation pressure: showing which regions, sectors and farm types may be under greater pressure to adapt or adjust to climate change. The future climate scenarios produce a wide range of outcomes, with simulated changes in average farm profits (without adaptation) ranging from -2% to -32% under an ‘intermediate’ global emissions scenario (RCP4.5) and -11% to -50% under a ‘high’ global emissions scenario (RCP8.5), relative to the reference period climate of 1950 to 2000.

Published 29 July 2021.

A model of spatial and inter-temporal water trade in the southern Murray-Darling Basin ​

This paper presents an economic model of water markets and irrigated agriculture within the Australian southern Murray-Darling Basin (sMDB). A unique data set, detailing irrigation activity, water supply and prices over the period 2000-01 to 2018-19, is used to estimate a set of water demand functions by catchment region and irrigation activity. The resulting model can realistically simulate the market prices of water, carryover volumes and trade flows across the sMDB along with irrigation water use and area planted by region and activity.

The model is applied to simulate distributions for water prices in the sMDB, and to estimate the economic benefits of interregional water trading and carryover. Water markets are estimated to generate benefits to water users in the sMDB of $117m per year on average (around 12 per cent of the market value of water rights in the region). The benefits of water markets are reduced by around half in the absence of carryover.

Defining drought from the perspective of Australian farmers ​

The Defining drought from the perspective of Australian farmers working paper presents a new drought indicator as  an alternative to traditional rainfall measures.

The new indicator is found to more accurately reflect the effects of drought on farm profits than simple rainfall measures, accounting for the unique circumstances of each farm and the effects of movements in domestic commodity prices (i.e. high grain and hay prices).

The Defining drought risk report also presents data on farmer self-assessments of drought. These data show differences in farmer perception of drought once variation in climate conditions has been controlled for. This includes a tendency for farmers in New South Wales and Queensland to be more likely to self-assess as ‘in-drought’ than farmers in Western Australia. There is also a trend for current farmers to be less likely to assess as in-drought than farmers in the past.

Farmpredict: a micro-simulation model of Australian broadacre farms​

ABARES has developed a new model, farmpredict which can simulate the effects of price and climate variability on the production and profitability of Australian broadacre farms. farmpredict simulates the production of outputs, the use of inputs and changes in farm stocks at a farm level, given information on farm fixed inputs, input and output prices and prevailing climate conditions.

A micro-simulation model of irrigation farms in the southern Murray-Darling Basin​

This paper presents a new farm level microsimulation model of irrigation activity within the southern Murray-Darling Basin (sMDB), developed by ABARES on behalf of the Department of Agriculture and Water Resources.

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