IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Upper Midwest dairy farm revenue variation and insurance implications

  • Christopher A. Wolf
  • J. Roy Black
  • Joleen C. Hadrich

Purpose – The purpose of this paper is to examine the sources and magnitude of variation in accrual adjusted gross farm revenue and farm revenue net of feed purchases on Michigan dairy farms representative of Upper Midwest dairy farms. The paper aims to assess whether adjusted gross revenue-type insurance instruments meet insurability conditions when applied to dairy farms. Design/methodology/approach – Accrual adjusted dairy farm revenue and revenue net of feed purchased from Michigan dairy farm panel data from 1995 through 2006 were detrended and summarized. Variance decomposition was used to identify sources of variation in adjusted gross revenue and adjusted gross revenue less feed purchases. In-sample insurance premiums were estimated and Monte Carlo simulations were used to adjust these premiums for out-of-sample considerations. Findings – Milk price variation was the largest source of variation while milk production per cow varied little. Farms with smaller herds and those with larger percentages of farm revenue from crop sales had higher relative revenue variability and would trigger a higher frequency of indemnities under a whole farm revenue insurance contract. Research limitations/implications – Because the data analyzed conclude in 2006, the volatility of the past couple of years is not reflected. Therefore, researchers are encouraged to test the proposed insurance feasibility further with more recent data. Practical implications – The paper addresses considerations for the development and commercialization of a feasible dairy revenue insurance instrument. Originality/value – This paper fulfils a need to understand magnitude and source of revenue variation on dairy farms and how insurance might mitigate negative consequences of this variation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:;jsessionid=E87BE0007C9CF743186ED5E5EBAC304C?contentType=Article&contentId=1822319
Download Restriction: Cannot be freely downloaded

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Emerald Group Publishing in its journal Agricultural Finance Review.

Volume (Year): 69 (2009)
Issue (Month): 3 (November)
Pages: 346-358

in new window

Handle: RePEc:eme:afrpps:v:69:y:2009:i:3:p:346-358
Contact details of provider: Web page:

Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Web: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eme:afrpps:v:69:y:2009:i:3:p:346-358. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.