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