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Milk Farmers' Risk Attitudes: Influence of the Dairy Processing Company

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  • Belhenniche, Geoffroy
  • Duvaleix-Treguer, Sabine
  • Cordier, Jean

Abstract

European market deregulation is destabilizing the economic environment of French farmers leading to an increase in market risks. In the dairy sector, the 2003 CAP reform has lead to major changes (removal of export subsidies and increase in the European milk quota). The dairy supply chain is now coping with higher production and price risks. The dairy supply chain is thinking of new management tools in order to both maintain stability in dairy farm income and secure supply to industrial facilities. One solution may be to strengthen marketing contracts. In this perspective, the knowledge of dairy farmers' risk attitudes is necessary. The goal of this paper is to provide empirical insight into: dairy farmers‘ perceptions of risk and risk management, and the influence of the relationship between farmers and their dairy processing firm on these risk perceptions. Data originate from a sample of eighty livestock farmers in Normandy, one of the three biggest French milk production areas. The survey was carried out during a face-to-face interview in summer 2008. The questionnaire survey focuses on risk perception and strategies used to manage the risk, by asking the farmers to score risks sources and strategies on Likert-scales as in Bard and Barry (2000), and Meuwissen et al. (2001) and on the elicitation of dairy farmers‘ risk preferences using Pennings and Garcia‘s methodology (2001). As in previous studies (Gunjal and Legault, 1995; Meuwissen et al., 2001; Flaten et al., 2005; Fausti and Gillespie, 2006) we show existence of a diversified spectrum of risk preferences and rank risk sources. Institutional risk and price volatility of inputs and outputs are perceived as the main threat on farm income. However, our main contribution is to examine the influence of dairy processors on farmers‘ preferences and the study attempt to establish a link between the type of contractors (eg. private vs. cooperative) and farm managers‘ risk aversion.

Suggested Citation

  • Belhenniche, Geoffroy & Duvaleix-Treguer, Sabine & Cordier, Jean, 2009. "Milk Farmers' Risk Attitudes: Influence of the Dairy Processing Company," 2009 International European Forum, February 15-20, 2009, Innsbruck-Igls, Austria 58711, International European Forum on System Dynamics and Innovation in Food Networks.
    • Handle: RePEc:ags:iefi09:58711
    DOI: 10.22004/ag.econ.58711
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    References listed on IDEAS

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    1. Joost M.E. Pennings & Philip Garcia, 2001. "Measuring Producers' Risk Preferences: A Global Risk-Attitude Construct," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 993-1009.
    2. Kachelmeier, Steven J & Shehata, Mohamed, 1992. "Examining Risk Preferences under High Monetary Incentives: Experimental Evidence from the People's Republic of China," American Economic Review, American Economic Association, vol. 82(5), pages 1120-1141, December.
    3. Fausti, Scott W. & Gillespie, Jeffrey M., 2006. "Measuring risk attitude of agricultural producers using a mail survey: how consistent are the methods?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 1-18, June.
    4. Paul N. Wilson & Roger D. Dahlgran & Neilson C. Conklin & Dennis Armstrong & Tim Luginsland, 1993. ""Perceptions as Reality" on Large-Scale Dairy Farms," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(1), pages 89-101.
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    Cited by:

    1. Waithira, Waweru Caroline, 2017. "An Analysis Of Risk Attitudes And Risk Management Strategies Among Dairy Farmers In Murang’A County, Kenya," Research Theses 276428, Collaborative Masters Program in Agricultural and Applied Economics.
    2. Waweru, Caroline Waithira & Nyikal, Rose & Busienei, John R, 2017. "An Analysis Of Risk Attitudes And Risk Management Strategies Among Dairy Farmers In Murang’A County, Kenya," Dissertations and Theses 271063, University of Nairobi, Department of Agricultural Economics.
    3. Perrin, Augustine & Martin, Guillaume, 2021. "Resilience of French organic dairy cattle farms and supply chains to the Covid-19 pandemic," Agricultural Systems, Elsevier, vol. 190(C).

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