1.06 - Drought management decision points.
This checklist outlines the important issues that should be considered with drought management and the points in time (decision points) when they should be considered.
When faced with a below average/drought season:
- Determine current value of livestock.
- Estimate the cost of feeding (and/or agisting) each livestock class:
- secure sources of fodder (roughage), concentrates (energy) and supplements
- consider options to reduce price risk.
- Estimate the value of any production gained if the livestock class is kept.
- Calculate likely cost benefit of drought management options for each livestock class:
- selling and replacing after drought
- capital cost of replacing stock
- agistment during drought.
- Consider cash flow implications, including peak debt, ability to fund feeding and impact on profit for at least 3-5 years post drought.
- Are funding sources secure and will they last for a period of drought?
- Consider natural resource management:
- maintaining pasture resources, including the ability of vegetation to regenerate
- securing water resources.
Decision points are dates by which decisions are made and actions are taken each year. Experience shows that those people who work to decision points, and act on their decisions, come through tough periods in a better frame of mind, and with their business in a stronger position. Knowing your decision dates and having strategies in place to deal with a range of circumstances, means decisions are actually being made before you are under stress, which is when people have a tendency to make irrational decisions.
Decision point dates are normally used for:
- making stocking rate decisions,
- developing a livestock production calendar, and
- conducting on-property monitoring.
For example, when should breeders be calving to optimise the performance of both the breeder and the offspring? Production and hence profit will not be maximised if cows are calving when then is little chance of having plentiful feed on the ground.
How to determine a decision point
The first step in determining decision points is to have a good understanding of seasonal rainfall patterns. Understanding rainfall pattern is a bit more involved than just knowing the annual and monthly averages. Averages can be very misleading, particularly in the more northern regions where infrequent cyclonic rains can distort the figures and give false impressions of expected rainfall.
Rainfall averages can be misleading, the use of rainfall probabilities will give you a better indication of the reliability of rainfall in any month or season.
Critical Rain Date: The date beyond which you do not expect to receive effective rainfall (ie don’t expect pasture growth). It is mainly used for stocking rate decisions and for determining when to turn-off livestock. The critical rain date can vary from year to year depending on the preceding seasonal conditions.
Key Date: The date by which there is a 70% chance of the growth season having started. It is mainly used for stocking rate decisions and planning the production calendar. Typically the same key date is used each year, as it is based on long term seasonal data.
Long term considerations
- use forward contracts
- use financial instruments to manage price risk
- maximise profitability in good seasons to ensure adequate equity and financial strength to manage poor seasons