Estimating the economic benefits from weather radar investments in the Western Australian wheatbelt

As part of a major technology upgrade to the Bureau of Meteorology's radar network, the Western Australian State Government committed a $23 million investment in three Doppler radars across the Western Australia wheatbelt. Although it is assumed that this new technology will enable farm business to make more accurate and timely on-farm decisions, there is limited information about the actual potential agricultural gains from the investments. The present study, commissioned by the Bureau of Meteorology (BoM), is the first to address this gap.
This report aims to summarise the main findings of the ‘Wheatbelt Radars Project’. We first provide a general overview of how farmers use weather information (reported in detail in Lacoste and Kragt, 2018). We then discuss the range of potential benefits generated by timely and accurate weather information, and the economic value of such benefits for farm businesses in the wheatbelt. Unlike previous studies, we focus on farmers’ actual behaviour as evidenced from information collected first-hand through extensive interviews with farmers in the wheatbelt. Investment in Doppler radars have the potential to provide significant economic benefits for the wheatbelt agricultural region. These expected economic returns greatly depend on the forecast improvements that new weather radars will generate over time, which cannot be anticipated with certainty. In this study, we assumed that improved weather and forecast information would generate a 5% marginal benefits (through higher production or lower losses). Based on (i) this conservative 5% estimate, (ii) the new radars’ coverage (≈80% of the wheatbelt), and (iii) current farming practices, the economic return in the region were estimated at $3.36 million/year. These benefits accrue mostly because of reductions in downgraded wheat or less wheat losses, lower re-spraying or chemical application costs, and less sheep losses. Reduction of downgraded wheat is the benefit contributing to the highest economic return.
The sensitivity analysis revealed that the estimated economic benefit is highly sensitive to changes in the quality of forecasting service. The higher the marginal benefits, the greater the expected economic return for the wheatbelt region. For instance, the potential agricultural gain could range from $1.35 million/year to $10.1 million/year, for a 2% and 15% marginal benefits respectively.
A cost-benefit analysis was conducted to assess whether the benefits to the agricultural sector outweigh the investment in new weather radars in the wheatbelt. This showed that a 5% marginal improvement in weather forecasting accuracy could increase the region’s profitability by $9.98 million (7% discount rate) in net present value (NPV) terms over the 17 years of analysis. This represents a benefit-cost ratio (BCR) of $1.54 for each dollar invested. Even using a higher rate of discount (10%), the investment is identified to be economically viable ($5.7 million NPV and BCR of 1.33) over the 17 years of analysis. In fact, at a standard 7% discount rate, the project breaks even within 7 years of radars operation.
In addition to the economic gains, farmers highly appreciated the range of non-economic benefits enabled by the new weather radar infrastructure. For instance, daily revision of general planning is unlikely to impact greatly farmers’ economic profit, however, it contributes to their well-being (e.g. lowering stress through easier organisation and logistical adjustments). Such additional benefits have not been assessed in the current study. If the non-priced effects (e.g. social and environmental) were quantified, much higher net benefits from enhanced weather and forecasting information would apply to farmers and other rural stakeholders in the region.