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Identifying Financially Versatile Milk Production Systems

  • Anderson, Duncan J.
  • Jack, Claire G.
  • Connolly, Niamh
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    The European dairy industry faces an increasingly uncertain world. There is uncertainty about, for example, subsidy payment levels and compliance conditions, global competition, price variability, consumer demand, carbon footprints, water quality, animal welfare, food safety, and the environment. Farmers can reduce their exposure to these uncertainties by adopting production systems that are financially versatile over a wide range of possible circumstances. In this research project we develop a profit maximizing whole-farm model and employ it to identify financially optimal milk production systems for a typical Northern Ireland farm under varying market, policy and farm family conditions. The systems assessed range from lower yielding New Zealand type systems based on grazed grass to very high yielding North American type systems based on concentrates and conserved forage. The model also incorporates a disaggregated specification of time use within farm households and links intra-household human resource allocation to the process of agricultural technology adoption. Model results indicate that the optimal dairy system for a typical Northern Ireland farm is one that is somewhere between the extremes of those systems adopted in North America and New Zealand. Moderate input-moderate output milk production systems (i.e. 7,000 to 8,000 litre yields) are shown to be financially robust over a wide range of milk prices, concentrate prices, fertilizer prices, and farm family conditions. Low input-low output (New Zealand style) and high input-high output (North American style) systems are found to be less financially versatile.

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    File URL: http://purl.umn.edu/122460
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    Paper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122460.

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    Date of creation: 24 Feb 2012
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    Handle: RePEc:ags:eaa123:122460
    Contact details of provider: Web page: http://www.eaae.org
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    1. Beth Allen, 2000. "The Future of Microeconomic Theory," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 143-150, Winter.
    2. McCown, R. L., 2002. "Changing systems for supporting farmers' decisions: problems, paradigms, and prospects," Agricultural Systems, Elsevier, vol. 74(1), pages 179-220, October.
    3. Mullen, John D., 1996. "Why Economists and Scientists Find Cooperation Costly," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 64(02), August.
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