Abstract: Agricultural practice is facing multiple challenges under volatile commodity markets, inevitable climate change, mounting pest pressure and various other environment-related constraints. The objective of this research is to present a dynamic optimization model of crop rotations and farm management and show its suitability for economic analysis over a 30 year time period. In this model, we include management practices such as fertilization, fungicide treatment and liming, and apply it in a region in Southwestern Finland. Results show that (i) growing pest pressure favours the cultivation of wheat-oats and wheat-oilseeds combinations, while (ii) market prices largely determine the crops in the rotation plan and the specific management practices adopted. The flexibility of our model can also be utilized in evaluating the value of other management options such as new cultivars under different projections of future climate and market conditions.

Abstract: Climate and socio-economic change will affect the land use and the economic viability of Dutch dairy farms. Explorations of future scenarios, which include different drivers and impacts, are needed to perform ex-ante policy assessment. This study uses a bio-economic farm model to assess impacts of climate and socio-economic change on dairy farms in a sandy area in the Netherlands. Farm data from the Farm Accountancy Data Network provided information on the current production levels and available farm resources. First, the farm plans of individual farms were optimized in the current situation to benchmark farms and assess the current scope for improvement. Secondly, simulations for two scenarios were included: a Global Economy with 2 °C global temperature rise (GE/W+) and a Regional Community with 1 °C global temperature rise (RC/G). The impacts of climate change, extreme events, juridical change (including abolishment of milk quota), technological change and price changes were evaluated in separate model runs within the predefined scenarios. We found that farms can increase profit both by intensification and land expansion; the latter especially for medium sized farms (less than 70 cows). Climate change including the effect of increased occurrence of extreme events may negatively affect farm gross margin in the GE/W+ scenario. Lower gross margins are compensated for by the effects of technology and price changes. In contrast with the GE/W+ scenario, climate change has positive impacts on farm profit in RC/G, but less favourable farm input-output price ratios have a negative effect. Technological change is needed to compensate for revenue losses due to higher input prices. In both GE/W+ and RC/G scenarios, dairy farms increase production and the use of artificial fertilizer. Medium sized farms have more options to increase profit than the large farms: they benefit more from the abolishment of the milk quota and better adapt to negative and positive impacts of climate change. While the exact impact of different drivers will always remain uncertain, this study showed that changes in prices, technology and markets have a relatively larger impact than climate change, even when extreme events are taken into account. By using whole farm plans as activities that can be selected, the model is grounded in observations, and it was shown that half of the farms are gross margin maximizers as assumed in the model. The model therefore indicates ‘what could happen if’, and gives insights in drivers and impacts of dairy farming in the region.