PR - Quantifying The Sources Of Dairy Farm Business Risk And Understanding The Implications For Risk Management Strategies

The major sources of variability of net farm income on individual New York dairy farms over the past 10 years are identified using methods in variance decomposition. The most important source of income variability is the fluctuation in the price of milk received by farmers, followed closely by year-to-year variation in the quantity of feed purchased. The degree of success in engaging in activities that increase diversification that lead to a reduction in the variance in farm income is higher for older farmers and for those that milk in a milking parlor, use recombinant bovine somatotropin, have greater assets per cow, and have engaged in activities to earn income from off-farm sources.

Keywords: dairy farm income variability, risk, variance decomposition.