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An Evaluation of Risk Management Strategies for Dairy Farms

Published online by Cambridge University Press:  28 April 2015

Darrell J. Bosch  and
Christian J. Johnson
Darrell J. Bosch
Affiliation:
Department of Agricultural Economics at Virginia Polytechnic Institute and State University
Christian J. Johnson
Affiliation:
Department of Agricultural Economics at Virginia Polytechnic Institute and State University
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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.

Keywords

feed costscrop yieldsstochastic dominancesimulationcrop insurancehedging
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 24 , Issue 2 , December 1992 , pp. 173 - 182
Copyright
Copyright © Southern Agricultural Economics Association 1992

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