Determinants of downside risk exposure of dairy farms

We investigate determinants of dairy producers' risk exposure using a unique combination of foci on i) downside risks, ii) a holistic representation of revenues from milk and animal sales, iii) climatic extremes and iv) the role of animal health. A sample of German dairy farms reveals that animal health and heat stress indicators influence mean and semi-variance of revenues. For instance, heat stress exposure reduces expected milk revenues significantly. In the case of animal health related indicators, our results show trade-offs between expected revenues and downside risks. Furthermore, variabilities in revenues from milk and animal sales are significantly interrelated.