Bio-economic modelling of decisions under yield and price risk for suckler cow farms

Abstract

Applying a bio-economic whole-farm model, we assess the impact of price and weather risk as well as different risk-management strategies on the variability of the gross margin in Swiss suckler cow production. For instance, flexible adjustment of fodder composition, feed stocks, or land use as well as gross margin insurance are considered. Our results show that assuming moderate risk aversion farms’ gross margin variability is rather high, with a coefficient of variation of gross margin ranging from 19 to 21%. Accounting for on-farm risk-management strategies we find that gross margin variability can be reduced significantly, causing only low reductions of average gross margin levels. We find that the use of maize as a switch crop and a market for the trade of roughage are the most efficient risk-management strategies. Our results also indicate that gross margin insurance is not attractive for farmers. Thus in particular promoting better access to markets for feedstuffs provides a valuable opportunity for farmers to manage gross margin risks.

Self-insurance and multi-peril grassland crop insurance: the case of French suckler cow farms

“…The simulated on-farm risk management strategy consists ex ante in reducing stable capacity (and consequently average herd size) and to increase the hay storage capacity. This is consistent with previous empirical (Mosnier et al, 2010b) and simulation studies Briner et al, 2015) that found that lower stocking rate reduces risks of shortfalls in fodder. We assumed that farm structure and grassland insurance are chosen simultaneously, which is not true at short or mid-term.…”

“…This is consistent with the literature that finds supplementary feeding is a key element of grassland risk management (Diaz-Solis et al, 2006;Kobayashi et al, 2007;Veysset et al, 2007;Mosnier et al, 2009Mosnier et al, , 2014Briner et al, 2015). The more expensive and scarce are feed substitutes on the market, the more incentives farmers would have to reduce their stocking rate and to purchase grassland insurance.…”

“…An econometric analysis by Patrick (1988) found that only a minority of farmers were interested by an insurance on wheat and they were not willing to pay more than 110 percent of the actuarially fair premium rate. Briner et al (2015), using a DSP model, find that gross margin insurance with a fair premium was not purchased by Swiss cow-calf farmers.…”

“…More than enables to simulate complex production systems and to consider several decision stages. Following other livestock farm models (Lambert, 1989;Jacquet and Pluvinage, 1997;Lien and Hardaker, 2001;Lien et al, 2007;Briner et al, 2015), we developed a DSP model but between-year dynamics are added.…”

Economic benefits from plant species diversity in intensively managed grasslands

“…However, accounting for forage quality is crucial for the performance of the production system as it determines the potential to produce meat and milk (e.g. Briner et al 2015). As an exception, Binder et al (2018) economically assessed the diversity effect on crude protein contents, in addition to the plant species diversitybiomass yields relationship.…”