Excluding Kangaroos from grazing areas – does it pay?
Excluding kangaroos from grazing areas using exclusion fencing – does it pay?
Summary
Excluding kangaroos from your farm using exclusion fencing may pay good dividends. To pay for the up-front investment into fencing, every kangaroo excluded needs to be replace with the equivalent number of productive DSEs. However, there is a minimum number of kangaroos that need to be replaced by productive DSEs, and this depends on the size of the intended exclusion area. The smaller the exclusion area, the more kangaroos that need to be excluded relative to larger exclusion areas. Read on to find out how many kangaroos you need to replace with productive DSEs to justify exclusion fencing on your farm.
Introduction
Excluding kangaroos from grazing areas represents a few benefits, the main one being that grazing resources consumed by kangaroos can be redirected to productive DSEs.
However, to exclude kangaroos from grazing areas there needs to be an investment into fencing, broadly termed ‘exclusion fencing’. As with any capital investment on a farm, it needs to be subjected to scrutiny by way of economic and financial analysis.
Economic analysis tests whether an investment is worthwhile in economic terms, i.e., is it profitable? Financial analysis tests whether an investment is possible for a particular business given its current financial circumstances, i.e., is it feasible?
This article only deals with the former – whether investing into exclusion fencing for the purpose of excluding kangaroos is profitable.
The investment analysis
The profitability of investing in exclusion fencing relies on being able to generate enough additional gross margin to justify the up-front capital costs of the investment.
This simple analysis determines whether the investment into exclusion fencing is profitable based on the number of kangaroos excluded from grazing areas. For simplicity, it does not seek to quantify other benefits, such as potential increases in pasture production and quality due to improved management, or the exclusion of wild dogs. A more detailed analysis is required to consider the investment in individual circumstances.
The yardstick of profitability, in this instance, is classed as a 12% internal rate of return – roughly an eight year pay-back period. This is a conservative yardstick, but appropriate given the low level of risk involved – if you know how many kangaroos you have, all you have to do is exclude them with a fence and run the extra livestock to pay for it! Some businesses will have different profitability target, depending on their competing alternatives for capital allocation.
As the answer is unique for individual businesses based on the amount of exclusion fencing needed and the number of kangaroos that can be excluded, the answer is represented as the required number kangaroos excluded per hectare for different sized exclusion areas to achieve a 12% internal rate of return.
The following assumptions have been applied:
$10,000 /km - The cost of exclusion fencing (will vary greatly, but suitable for the purpose of this exercise)
Exclusion area is configured as a square, be it a paddock, farm or aggregate of farms
$150 /DSE - Capital value of a DSE
$50 /DSE – Gross margin of a DSE
0.7 DSE – DSE rating of a kangaroo
30-yrs – Lifespan of exclusion fence
$0 – Salvage value of fence
Results
The graph provided shows the required kangaroos per hectare to be excluded for six different exclusion areas to achieve a 12% internal rate of return.
Because the capital value of fencing per hectare goes up as areas get smaller, so too does the required number of kangaroos to be excluded.
In order to justify the use of exclusion fencing around a 100 ha paddock, there needs to be 2.26 kangaroos per hectare excluded and replaced with productive DSEs. This equates to 226 kangaroos.
At the other end of the scale, to justify the investment for a 100,000 ha grazing area, there needs to be 0.07 kangaroos per hectare excluded and replaced with productive DSEs. This equates to 7149 kangaroos.
The graph provides a rough visual indication of the kangaroos to be excluded for a 12% internal rate of return for areas between those provided.
Note that the kangaroos do not need to ‘live’ in the grazing area; all they need to do is obtain their nutritional requirements from it. They could live in the forest next door and enter the paddock only to graze.
If the cost of fencing, the fencing configuration, the gross margin per productive DSE or the DSE rating of kangaroos varies, the outputs of this analysis will change.
It will be up to individual grazing managers to estimate whether they are able to replace enough kangaroos with productive DSEs to generate the additional gross margin required to make a 12% return on the initial investment.
