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Abstract
The major sources of variability in net farm income on New York dairy farms over the past
10 years are identified using Dairy Farm Business Summary records. 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. These results suggest that forward pricing of
milk and feed purchases may be effective risk reduction strategies. Since a few farms have
large cull cow sales, probably due to disease or other production problems, new insurance
products to insure against disease may be useful to dairy farmers. It appears that older
farmers are more successful in engaging in activities that increase diversification and reduce
the variability in reductions in farm income. The same is true for farmers who utilize milking
parlors, use recombinant bovine somatotropin, have greater assets per cow, and have engaged
in activities to earn income from off-farm sources.