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An Evaluation Of Risk Management Strategies For Dairy Farms

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  • Bosch, Darrell J.
  • Johnson, Christian J.

Abstract

Variability in feed prices and crop yields are important sources of risk to dairy farmers. A simulation model of a representative dairy farm was used to evaluate crop insurance and hedging as risk management strategies. These strategies lowered expected net returns but also reduced risk. The preferred set of strategies at lower levels of risk aversion included hedging and crop insurance, although a base scenario in which no risk management strategies were employed was also efficient. The preferred strategy at higher levels of risk aversion was a combination of crop insurance and hedging.

Suggested Citation

  • Bosch, Darrell J. & Johnson, Christian J., 1992. "An Evaluation Of Risk Management Strategies For Dairy Farms," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(2), pages 1-10, December.
    • Handle: RePEc:ags:sojoae:29638
    DOI: 10.22004/ag.econ.29638
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    References listed on IDEAS

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    1. Meyer, Jack, 1977. "Choice among distributions," Journal of Economic Theory, Elsevier, vol. 14(2), pages 326-336, April.
    2. King, Robert P., 1979. "Operational Techniques for Applied Decision Analysis Under Uncertainty," AAEA Fellows - Dissertations and Theses, Agricultural and Applied Economics Association, number 181951, December.
    3. Lansford, Vernon & Madison, Daniel & Thompson, Wyatt & Willott, Brian & Adams, Gary M. & Babcock, Bruce A. & Beghin, John C. & Mohanty, Samarendu & Fuller, Frank H. & Chaudhary, Sudhir & Fabiosa, Jaci, 1999. "FAPRI 1999 U.S. Agricultural Outlook," FAPRI Staff Reports 32049, Food and Agricultural Policy Research Institute (FAPRI).
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    Cited by:

    1. Neyhard, James & Tauer, Loren & Gloy, Brent, 2013. "Analysis of Price Risk Management Strategies in Dairy Farming Using Whole-Farm Simulations," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(2), pages 1-15, May.
    2. Fernandez-Perez, Adrian & Frijns, Bart & Gafiatullina, Ilnara & Tourani-Rad, Alireza, 2022. "Profit margin hedging in the New Zealand dairy farming industry," Journal of Commodity Markets, Elsevier, vol. 26(C).
    3. Wolf, Christopher A. & Widmar, Nicole J. Olynk, 2014. "Adoption of Milk and Feed Forward Pricing Methods by Dairy Farmers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 46(4), pages 1-14, November.
    4. Ford, Stephen A. & Ford, Beth Pride & Spreen, Thomas H., 1995. "Evaluation of Alternative Risk Specifications in Farm Programming Models," Agricultural and Resource Economics Review, Cambridge University Press, vol. 24(1), pages 25-35, April.
    5. Yang, Xiao & Bosch, Darrell J. & Nordberg, Tone & Wolfe, Mary Leigh, 2000. "Phosphorus-Based Nutrient Management Planning On Dairy/Poultry Farms: Implications For Economic And Environmental Risks," 2000 Annual meeting, July 30-August 2, Tampa, FL 21756, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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