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Abstract
This paper reports on the increased volatility in the milk price received by Flemish dairy
farmers and its consequence on the risk profile of selected Flemish dairy farms. The
volatility of the milk price has doubled since January 2007. It is suggested that this
increasing volatility could have a significant impact on the risk profile of dairy farms.
Indeed our results show that the risk profile is changing depending on the volatility and
average price for milk. However this change is not very substantial compared to some
other subsectors. Also we show that in our case study of selected farms that if the milk
price volatility doubles an average milk price increase of about 12% compensates for the
increased volatility on return on assets. Finally this paper demonstrated the importance of
regarding risk and return together when making normative statements on the
consequences of milk price volatility.