A bioeconomic simulation of forage-beef systems under risk conditions

Uncertain forage production and price conditions provide much of the business risk facing Tennessee cattle producers. This study focused on the evaluation of pasture improvement and calving strategies in terms of their biological and economic performance in this complex and uncertain environment.

Eight production alternatives were examined. Included were four forage systems, grass pastures of tall fescue and bermudagrass/tall fescue and each grass pasture renovated with red clover and annual lespedesa legumes. Each forage system was evaluated with spring and fall calving beef herds. A cattle operation in the southwestern portion of Tennessee was used as the unit of analysis.

Simulation analysis was the chosen methodology. The simulation model developed in this study was dynamic, stochastic and recursive. Six interrelated components; namely climatic, forage, cattle, managerial, price and cost, and budgetary components comprised the model. Operation of the model involved monthly periods during which accumulated forage and cattle variables were estimated, and then evaluated to determine management decisions. Using Monte Carlo techniques, random climatic conditions, forage production and cattle weights were simulated over a ten-year planning horizon for 100 iterations. Stochastic cattle prices were also developed by projecting the cattle cycle via harmonic functions.

Several output variables, including annual forage, cattle and financial performance measures, were summarized and compared among the production alternatives. Stochastic dominance was used to determine efficient sets for cattlemen who were risk adverse, risk neutral, and risk loving. Preference ordering of the eight production alternatives was identical for each risk aversion category. Tall fescue pastures with fall calving was most preferred. Renovated bermudagrass/tall fescue pastures with fall calving ranked second. Grass forage pastures were generally preferred to renovated pastures, as was fall to spring calving.

Several limitations of the model were apparent. Among these were difficulties in estimating the annual distribution of forage production and production variability. The analysis of pasture renovation was also restricted. Many of these limitations stem from a lack of primary data necessary to reliably estimate functional relationships over the range of possible outcomes. Caution, therefore, must be exercised when attempting to interpret the results in practical terms.