Using a marginal criteria to determine optimal fungus-free fescue establishment

A marginal revenue criteria was used to determine what reduction in average daily gains from fescue toxicity could be tolerated before it was economically profitable to establish endophyte-free fescue pastures. The current expected net revenue from infected pastures was compared with average net revenue generated from the establishment of endophyte-free pastures. Using the marginal criterion, when net returns from the current infected pasture operation are equal to or less than the "average" annual returns anticipated from establishing a fungus-free pasture, fescue renewal is profitable. A 10 to 15 percent reduction in average daily gain was required under the assumed conditions before pasture renewal was undertaken. When uncertainty of the stand life was incorporated into the analysis, a further 4 percent reduction in average daily gain was required before establishment was profitable. When no value or decreased value was assumed for crops from the establishment of fungus-free pastures, a further reduction in average daily gain was tolerable. The discount rate and planning horizon also influenced the timing of pasture renewal.