Considering milk price volatility for investment decisions on the farm level after European milk quota abolition.

After the abolition of the milk quota in the European Union, milk price volatility is expected to increase because of the liberalized market conditions. At the same time, investment appraisal methods have not been updated to capture the increased uncertainty. Therefore, the objective of this paper is to assess the effect of changing price volatility due to quota abolition on investment decisions at the dairy farm level. To contribute to the objective and to approximate milk price volatility after the European milk quota abolition, the risk-adjusted discount rate for risk-averse dairy farmers is derived based on the milk price volatility of a milk price series from New Zealand. New Zealand dairy farmers have faced liberalized market conditions for more than 3 decades. Afterward, the risk-adjusted discount rate is applied to appraise milking technology investments for an average German dairy farmer. The results show that it is still more reasonable to invest in a parlor system than an automated milking system, although the net present value of the parlor system investment varies between €191,723 for risk-neutral dairy farmers and €100,094 for modestly risk-averse dairy farmers. For the automated milking system investment, the same calculations lead to €132,702 for risk-neutral dairy farmers and €31,635 for risk-averse dairy farmers. According to higher levels of milk price volatility after milk quota abolition, the reduction of the expected utility of the underlying investment decision for modest risk-averse dairy farmers is almost similar to a milk price decrease of 5% for risk-neutral dairy farmers. Therefore, the findings urge finance providers and extension services to consider the change of increasing milk price volatility after dairy quota abolition when giving dairy farmers financial advice. The risk-adjusted discount rate is a flexible tool to do so.

Survival analysis of dairy cows in the Netherlands under altering agricultural policy.

Culling of underperforming dairy cows by replacement heifers is a fundamental part of Dutch dairy farm management. Changes in national agricultural policies can influence farmers' culling decisions. The objective of this study was to analyse the relevancy of cow-level risk factors for survival of Dutch dairy cows under perturbations due to national policy changes related to the -milk quota abolishment of 2015 and the phosphate regulations since 2017. For this purpose, an accelerated failure time model was fitted on-longitudinal dairy cows' data at national level covering the period 2009-2019. The associated cow-level risk factors for culling such as lactation value (relative production level), parity number, rolling average of inseminations over all parities, very high fat-protein ratio (highFPR) and very low fat-protein ratio (lowFPR) in early lactation, test-day somatic cell count, were fitted in the model. Along with these, a factor representing three target policy periods, namely Milk Quota period (MQ), Post-Milk Quota period (PMQ) and Phosphate regulation period (PH) were fitted. The mean survival age for all producing cows was 441 weeks overall. The predicted median survival time for the policy periods MQ, PMQ and PH were 273 weeks, 271 weeks and 256 weeks, respectively. Risk factors such as lactation value, parity and highFPR, rolling average of inseminations over all parities were positively associated with survival time in all three policy periods. Risk factors such as test-day somatic cell count and lowFPR were negatively associated with survival time in all three policy periods. In conclusion, this study demonstrated the differences in survival of Dutch dairy cows in response to changing agricultural policy. The association of cow-level risk factors for culling was consistent across the three evaluated policy periods.