Linking Natural Capital with Farm Profitability

Tim and Suzanne Wright have put natural capital at the forefront of their 3300 hectare superfine wool property, Lana, in Balala on the NSW Northern Tablelands, since the late 1990s. Every eight months, the Wrights shear 2000 self-replacing Merinos, producing 5 kg of 16.5 to 17 micron wool per ewe. They also manage 400 beef breeders, the majority of them are privately owned. The Wrights’ strategy may have been driven by production efficiencies and economic feasibility, but landscape preservation was always an important element of the equation.

Of course, they can now receive payments for the natural wealth they’ve created, such as biodiversity and carbon credits. Because the Wrights sequester significantly more carbon than they sell, a carbon tax will never be imposed on them. While Mr Wright feels that in a world where climate change is inevitable, factoring in natural resource enhancement will be the future of farming, he believes that crunching the figures to verify the relationship with long-term farm profitability will be the key. That’s why, as part of a groundbreaking large study on natural capital accounting and agricultural profitability, he’s willing to share what he’s done and open his business accounts.

PwC Australia is collaborating with the Macdoch Foundation and the National Farmers Federation to launch one of the largest research projects in this industry. While there is some evidence that improving natural capital leads to financial gains on and off the farm, the people behind Farming for the Future claim that this research is small-scale, and that implementable large-scale research specific to Australian conditions is needed to develop a compelling case for change.

According to a study, farms that improved their natural capital were able to increase their average yearly net revenue by more than 40%, according to a discussion paper explaining the programme. More than 1500 farms from all over Australia will join the Wrights in sharing their experiences as part of this large study effort. Natural capital will be measured and assessed across all participating farms as part of this project.

Article by: Hari Yellina (Orchard Tech)