THE EFFECT OF CLIMATIC RISK ON DRYLAND FARM-MANAGEMENT

A model of the dryland farming system in the eastern wheatbelt of Western Australia is briefly described. The model, named MUDAS, explicitly accounts for climatic risk and dryland farm management responses to such risk. Results from this model are compared with those from a model based on expected values and which therefore excludes climatic risk. The performances of the models are compared assuming two price scenarios. Results from the models show that climatic risk and its associated farm management responses lead to decisions often different from those generated by sole consideration of expected values. Levels of activities selected, in the model based on expected values, are often substantially, different from those generated in MUDAS. However, the expected value model that ignores climatic risk and tactical responses to such risks still correctly identifies the desirable direction of strategic response to a change in price regime. Tactical decision-making, in response to climatic risk, is shown importantly to contribute to farm profit and to influence production decisions including the mix of enterprises. Profitable tactical decision-making in response to climatic risk causes wide variation across seasons in crop and pasture areas and crop and livestock management, and overall greatly modifies the farm management decisions that might otherwise be based on expected values, Results from MUDAS show that rigid adherence to rotations is not the most profitable managerial response to climatic risk. Instead managerial flexibility causing marked changes in crop and pasture areas across seasons is more profitable. The value of tactical decision-making and managerial.flexibility illustrated in the MUDAS results points to a potentially profitable area of research and extension, this being the development of information or innovations that facilitates tactical decision-making.