Modelling the long-term eects on farm net worth of investments in pasture fertilizer under constraints of family expenditure

A simple dynamic farm model is developed and used to analyse the net worth of a family farm grazing enterprise producing wool on the Northern Tablelands of New South Wales, Australia, under alternative assumptions regarding family expenses and investments in fertilizer. The linkage between family costs and expenditure on fertilizer is explored over a 25-year period highlighting the feed-back e€ects of each type of expenditure on farm productivity and ultimately on net worth and thus farm viability. Inputs to the model include historic values for rainfall, fertilizer application rates, commodity prices and rates of interest and in ̄ation. In this way, the farm business performance is investigated over a wide range of climatic conditions and commodity prices, typical of the real conditions experienced by grazing enterprises in this region between 1967 and 1992. The results show that non-discretionary fertilizer applications had a large e€ect on the maintenance of soil fertility compared to discretionary applications (average available phosphorous levels of 29.0 and 9.2 ppm, respectively). This in turn resulted in higher average wool production per head (4.63 and 3.95 kg/hd, respectively) and higher carrying capacity. The ®nal (1992) net worth for a family farm applying discretionary rates of fertilizer varied from $0.13m to ÿ$1.00m for those families raising over 25 years zero or three children, respectively. For families applying fertilizer as a non-discretionary expense, the net worth in 1992 was estimated to be $3.5m and $2.6m for families raising zero or three children, respectively. Both the level of initial debt and the level of ®xed costs had considerable e€ects on ®nal net worth. Higher fertilizer applications also provided a bu€ering e€ect on the e€ects of debt, high ®xed costs and the costs of raising children. The results suggest that investments in fertilizer are essential for maintaining farm viability, regardless of the level of expenditure on raising children. The model provides a useful means of integrating the e€ects of competing expenditures on long-term pro®tability and net worth of a family farm.# 2000 Elsevier Science Ltd. All rights reserved.