Australian Agricultural and Resource Economics Society 52 nd Annual Conference , 2008 Net Benefits from growing lucerne ( Medicago sativa ) on

Clearing of trees and native vegetation over the past 160 years has led to increasing rates of dryland salinization in the Goulburn-Broken Catchment area. In its dryland section, within the Goulburn Highlands, South West Goulburn, and the Broken Highlands subcatchments, hydrologic balance exists. But in the Riverine Plains comprising the Goulburn and Broken Plains sub-catchments, where average annual rainfalls are less than 600 mm per annum, it will be many decades before hydrologic balance is achieved. This study is set in the Broken Plains sub-catchment where over the next 100 years, it is expected that deep drainage of annual rainfall will cause watertables to rise to within two metres of the ground surface. Such rises of groundwater will lead to marked land degradation, initially in the form of induced waterlogging and ultimately increased dryland salinity. There is therefore a critical need to redress this increasing problem. One main way of doing so is by introducing deeprooted perennial species such as lucerne into the landscape. Lucerne has a higher level of water extraction than annual crops and pasture. However, one of the barriers to farmers changing from annual subterranean clover pasture to lucerne is uncertainty about the effects of such a change and the chance of reduced average profit or its volatility. This study seeks to reduce that uncertainty by investigating changes in profitability and cash flow across the Broken Plains sub-catchment where farming with lucerne replaces cropping with subterranean clover pasture.