Analysis of Price Risk Management Strategies in Dairy Farming Using Whole-Farm Simulations

Combinations of futures and options contracts on milk and feed were simulated to determine their influence on a representative dairy farm’s ability to meet cash flow requirements and reduce the variance of net income. Compared with the reference scenario of selling milk and procuring inputs on a monthly cash basis, the risk management activities did not result in a significant change in either the level or variance of net farm income. The results suggest that on average the current marketing procedure of monthly cash milk pricing and monthly feed purchases (and pricing) produces a strong built-in natural hedge for dairy farmers.


Editor(s):
Marchant, Mary A.
Bosch, Darrell J.
Issue Date:
2013-05
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/149131
Published in:
Journal of Agricultural and Applied Economics, Volume 45, Number 2
Page range:
313-327
Total Pages:
15
JEL Codes:
D22; Q12; Q13




 Record created 2017-04-01, last modified 2017-08-27

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