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Title: From total farm to household risk: Implication for risk management
Authors: DE MEY, Yann 
Wauters, Erwin
van Winsen, Frankwin
Lauwers, Ludwig
Issue Date: 2012
Source: 123rd EAAE Seminar on Price Volatility and Farm Income Stabilisation, Dublin, Ireland, 23-24 February 2012
Abstract: Modeling the farm level impact of risk management programs, policies and instruments is traditionally been done on a farm-level basis. Hence, farm-simulation models typically use the behavioural assumption of profit or utility maximization is risk aversion taken into account. However, abundant - albeit indirect - evidence from different literature sources suggest that minimization of household risk - being the chance of falling below a certain treshold level of household cash flow - might be more realistic behavioural assumption. In this paper, we present concepts of operational, financial, total farm and household risk. Further, using a stochastic simulation model on two typical Belgian dairy farms, we illustrate possible farmers responses in the presence or absence of farm income stabilization mechanisms. Although some limitations to the current model are mentioned, the results already suggests the usefulness of considering household risk when assessing the impact of risk management programs, policies and instruments.
Keywords: household risk; typical dairy farms; stochastic stimulation; household buffering capacity
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Category: C2
Type: Conference Material
Appears in Collections:Research publications

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