RISK ATTITUDE AND DRYLAND FARM-MANAGEMENT

A model of the dryland farming system in the eastern wheatbelt of West ern Australia is briefly described The model named MUDAS, explicitly a ccounts for climatic and price risk, and dryland farm manangement resp onses to such risk, assuming certain risk attitudes of the farmer. The management decisions associated with various risk attitudes, ranging from risk neutrality to extreme risk aversion, are presented. These de cisions are compared and contrasted assuming two price scenarios. Resu lts show that in both price scenarios the effect of increased risk ave rsion was to shift resources away from cropping toward the livestock e nterprise and to change the tactical management of the farming system. In particular, increased risk aversion reduced the area of crop in th e favourable weather-years and enabled pastures to be more productive thereby supporting more sheep at higher stocking rates.