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Low Capital Dairy Strategies In Wisconsin: Lessons From A New Approach To Measuring Profitability

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Author Info

  • Bradford L. BARHAM

    ()

  • Jean-Paul CHAVAS

    ()

  • Richard M. KLEMME

    ()

Abstract

This paper proposes a new way to evaluate the role of profitability and risk in the dairy industry, one that incorporates the effects of uncertainty about future returns when investments are irreversible, or sunk. The usefulness of this new approach is demonstrated by the light it sheds on recent attempts by Wisconsin dairy farmers to develop low capital investment strategies and why these initiatives might be crucial to the vitality of the state's industry as a whole. The value of this paper, however, reaches beyond the contribution it offers to comparisons of the viability of alternative investment strategies in dairy, because it is applicable to evaluating profitability and risk in any economic activity, inside or outside of agriculture, where much of the investment is irreversible and uncertainty about future returns is important.

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File URL: http://agecon.lib.umn.edu/wis/stpap381.pdf
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Bibliographic Info

Paper provided by University of Wisconsin Madison, AAE in its series Staff Papers with number 381.

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Date of creation: Oct 1994
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Handle: RePEc:wop:wiaesp:381

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Postal: University of Wisconsin, Dept. of Agricultural and Applied Economics, 427 Lorch Street, Madison, WI 53706
Phone: 608-262-8966
Fax: 608-262-4376
Email:
Web page: http://www.aae.wisc.edu/
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Cited by:
  1. Prelipcean Gabriela & Boscoianu Mircea & Lupan Mariana, 2009. "New Aspects Regarding The Evaluation Of Investments In Critical Infrastructure," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 2(1), pages 522-527, May.
  2. El-Osta, Hisham S. & Morehart, Mitchell J., 1999. "Technology Adoption Decisions In Dairy Production And The Role Of Herd Expansion," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(1), April.
  3. Collan, Mikael, 2004. "Giga-Investments: Modelling the Valuation of Very Large Industrial Real Investments," MPRA Paper 4328, University Library of Munich, Germany.
  4. Collan, Mikael, 2004. "Fuzzy Real Investment Valuation Model for Giga-Investments, and a Note on Giga-Investment Lifecycle and Valuation," MPRA Paper 4329, University Library of Munich, Germany.

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