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UNIT 6

Do the $$$’s stack up?

 

6.4  Factors affecting profitability

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Many research projects and farmer case studies have shown that saltland pastures that increase the feed available for livestock can be profitable across a broad range of environments within Australia.

However, the profitability associated indirectly with saltland pastures is more complex than just the added production from that unit of land. Unlike conventional pasture improvement on non-saline land, up to half the benefits from saltland pasture typically come from the pasture providing support for the cropping and grazing on the rest of the farm. This may be out-of-season feed allowing a higher stocking rate across the rest of the farm; the additional grazing resource allowing more cropping while maintaining stock numbers; shelter (at least with saltbush) for lambs or off-shears sheep when they are most vulnerable to the elements; and increased value of their real estate asset when the salinity problem is seen to be manageable. In any event, many farmers establish saltland pasture to improve the amenity value of their working and living environment, and will readily accept a lower rate of return on saltland pasture. A site assessment is an important stage in the process prior to action and pasture renovation.

All this makes it difficult to generalise about the profitability of saltland pastures but there are key issues that affect profitability and which need to be considered by farmers in their planning. The SGSL program clearly identified several factors that limit the profitability from saltland pastures. These include infrastructure costs; establishment costs; and the production & utilisation of the pasture.

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Infrastructure costs

Infrastructure costs are very site-specific and depend on the scale of the saline site, its location on the farm and position in the landscape, and the extent to which existing fencing and water supplies can be utilised. Across 21 sites in the SGSL program, infrastructure costs averaged $216/ha, but these were higher than would be expected commercially because of the ‘experimental’ sites were often small and split into multiple plots.

While farmers cannot chose where their saline land will occur, paddock layout and revegetation options can be planned to minimise capital costs and to avoid costly mistakes, particularly in the early stages of developing saltland pastures:

  • Scale – small sites will have higher fencing costs per hectare, and often the cost of providing stock water is independent of paddock size. Steel posts and fencing wire will rust far more rapidly in moist saline conditions. There may therefore be some benefits to running the fence along the edge of the adjacent good (non-saline) land.
     
  • Location on the farm – sites that are closest to existing infrastructure (such as stock water) will have the lowest infrastructure costs per hectare. As saline sites are usually low in the landscape, it is often possible to gravity feed water from farm dams or tanks.
     
  • Location in the landscape – if a saline site is waterlogged, establishing productive saltland pastures may require some earthworks to improve surface drainage from the site, or to prevent surface water running onto the site.
     
  • Grazing management – fencing costs can be reduced or sometimes eliminated from saltland patches if rotational grazing is used across the farm. Overgrazing of saline land invariably occurs with set stocking, but high intensity/short term grazing can minimise this within larger grazing paddocks. Temporary electric fencing can be a cheap and effective option, particularly because damp salty sites generally provide a particularly good earth return.
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Establishment costs

Profitability of saltland pastures is a balance between production gains and the costs of establishment. Clearly, the lower the cost of establishment the better the chance of a short payback period, as long as success of establishment is not compromised. The key issues that affect establishment cost include:

  • Species selection – farmers wanting to establish new pastures on saltland would be wise to obtain good agronomic advice because experience in the SGSL project has greatly improved understanding of what grows well where. Different saltland species are adapted to different conditions, so species should only be considered if there is a good chance they can contribute significantly to the planned pasture.
     
  • Sowing method - Direct seeding is much cheaper than establishment of nursery raised seedlings (eg saltbush) or runners (eg marine couch) but this needs to be assessed against site characteristics and therefore risk of failure. There is no doubt that seedlings had a higher success rate than direct seeding during the relatively dry conditions that prevailed during the SGSL program (2002-2007) – however, direct seeding can be very successful in the right soil and moisture conditions. For large areas, direct seeding becomes ever more compelling.
     
  • Chance of failure - The costs associated with a saltland pasture are magnified if there is an establishment failure. Not only is there a doubling up of most of the direct costs when re-establishment is attempted the following year, but there is also another year’s delay in receiving any returns. The main contributors to establishment failure are:
    • Misalignment of sown species and the site capability. If the site is more saline, more waterlogged or drier than the capacity of the sown species to adapt, then either failure or poor on-going performance of the pasture is guaranteed. Farmers should attempt saltland pasture establishment first on sites that are not overly hostile, and should look for local examples of success or failure. Often the severity of the site can be estimated from the naturalised “indicator species” growing on the site. These can be identified using SALTdeck cards.
       
    • Weeds. Despite the fact that saline sites often appear not capable of growing anything, cultivation of a site and protecting it from grazing will often trigger a major weed germination. Lack of effective weed control is one of the most common causes of either establishment failure and/or poor survival. Planning and preparation (possibly including spray-topping in the season before establishment) for saltland pastures is as important for the establishment of a saltland pasture as it is to the establishment of any other perennial pasture.
       
    • Rainfall zone. As a general rule, successful establishment of saltland pastures is more likely in the higher rainfall zones where the sites tend to be ‘softer’ and more suited to perennial plant species compared to the relatively ‘tougher’ lower rainfall sites. Production from saline sites in low rainfall areas also tends to be lower, so that profitability is even more dependent on minimising establishment costs but not at the risk of failure at the first attempt.
       
    • Bad Luck. Adverse conditions post sowing (eg an excessively dry or wet period) can have a much greater impact on saltland pastures than would usually be the case for pasture established on non-saline soils. The window of opportunity for successful saltland pasture establishment is smaller than for other sites, making luck (good conditions post-sowing) a more significant feature. If the season appears to be drying off, it may be best to wait another year before establishing the pasture.
       
    • Persistence. There is always a payback period within which a new pasture is in debt. Clearly it is important that all components of the pasture persist beyond this period and continue to be productive. Balansa clover is an example of a pasture plant that is often sown on waterlogged saline sites and performs well in the establishment year, but seldom persists. Saltbush usually persists well, but it is not grazed regularly (at least annually), it can loose leaves and become less valuable as a feed, as well as growing above sheep grazing height.
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Pasture production & utilisation

The production from a saltland pasture and its utilisation by grazing animals is the other major issue which impacts on profitability. Profitability from saltland pastures can be significantly greater if the timing of the feed availability coincides with a period of pasture shortage on the rest of the farm. However, timing of pasture supply aside, the profitability of saltland pasture depends on there being sufficient extra stock feed to pay for the cost of production.

This is well illustrated in Figure 6.2 showing the how sensitive profitability on saltland pasture is to variations in the stocking rate achieved. On this case study farm, a stocking rate of 5 DSE/ha or greater was required to generate a profit – i.e. a NPV (net present value) greater than 0.

Figure 6.2

Figure 6.2. The impact of stocking rate on the net present value (NPV) of a saltland pastures in northern NSW.

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