Portfolio Optimization Techniques for a Mixed‐grazing Scenario for Australia's Rangelands

Abstract

Currently pastoralists in Australia view native mammal species as one of many variables that impact, usually negatively, on their productivity and therefore profitability. This does not necessarily have to be the case. The species with the largest impact, kangaroos, have a value that could be incorporated into their income stream as a method of both reducing risk and increasing biodiversity, and therefore increasing resilience. An investigation of the idea of optimally allocating stocking rates using techniques analogous to classical portfolio selection optimization is conducted. Using historical pricing data for beef, wool, and kangaroo meat, an efficient frontier is formed to analyze the best scenario dependent on an investors risk aversion. It is shown that there is a clear opportunity for pastoralists to benefit economically by the inclusion of kangaroos in a mixed‐grazing strategy for Australian rangelands.

The Economics of Conservation and Finance: A Review of the Literature

“…While in finance, assets represent stocks, bonds or commodities, in environmental settings, one can think of "assets" as genes, populations, species, or landscapes that have some inherent risks and returns. MPT has been applied to several ecological and conservation biology contexts including species and gene conservation (Figge, 2004;Koellner and Schmitz, 2006), fisheries management (Griffiths et al, 2014;Moore et al, 2010;Schindler et al, 2010), and forest conservation (Crowe and Parker, 2008;Moloney et al, 2011). Figge (2004) recognizes the need for diversification of genes, species, and ecosystems and uses portfolio theory to construct a "bio-folio" of species as a way to manage risks to biodiversity.…”

“…Crowe and Parker (2008) use MPT to design a planned adaption strategy using a case study of regenerating white spruce forests based on modeled seed performance and adaptation data under several different climate change scenarios. Moloney et al (2011) use portfolio selection to evaluate whether including kangaroo harvesting into a mixed-grazing strategy is beneficial for Australian pastoralists. Griffiths et al (2014) use portfolio theory to evaluate the most efficient salmon fishery portfolio based on long-term data of variability of salmon returns across and within individual salmon populations.…”

Simulating kangaroo farming: extending GRASP to include kangaroo population density simulation

“…With rapid increase in kangaroo numbers after a drought has broken (Dawson, 1995), the kangaroos ability to react to changes in weather could be used to mitigate the affect of droughts and post-drought recovery in marginal areas (Moloney et al, 2011). To fully explore grazing of kangaroos after drought has broken a model that responds to environmental factors such as weather and soil condition needs to be used.…”