This study was carried out to explore potential approaches to managing production and market risks associated with climatic variability in dryland grazed systems. The methodology is novel in that it considers farmers’ ability to make sequential adjustments to their production activities when information on uncertain events becomes available. Traditional approaches to evaluation of farmers’ response to risk assume perfect knowledge of production resources and that risk emanates from uncertainty in yield returns. Strategic approaches are mostly considered in evaluating farmer’s risk attitude implying that managing the variability (risk) assumes that different production activities resource requirements are known (non-embedded risk). In real farming systems, the producers make sequential decisions and adjust the timing and methods of their activities as a season progresses and more information on uncertainty becomes available (embedded risk). This chapter describes a platform adopted in making destocking and marketing decisions by simulating the impact of implementing alternative tactical adjustments. The algorithm was successfully tested in a research that investigated the physical and economic impact of incorporating tactical responses in risk management strategies in dryland sheep production systems in New Zealand. The algorithm can be integrated into existing grazing models and can also be used as a standalone system.
Part of the book: Theory and Application on Cognitive Factors and Risk Management