The effect of stocking rate and fertilizer usage on income variability for dairy farms in England and Wales

Abstract

AbstractA mathematical model of grass production and utilization on a dairy farm is described. Using the model an assessment has been made of the extent to which financial uncertainty arising from year‐to‐year variability in grass yields, coupled with a preference among farmers for minimizing risks, may explain the relatively low stocking rates and observed nitrogen usages on many dairy farms in England and Wales. The degree of risk has been equated with the probability of profits in a particular year being less than those required to cover the consumption needs and short‐term borrowing requirements of the farmer. The results of the analysis indicate that a strategy of minimizing risks may lead to a significantly lower stocking rate than one of maximizing profits. Thus, considerations of risk may lead to stocking rates which are suboptimal from the viewpoint of economic and biological efficiency. However, there is no evidence to suggest that the comparatively low average usage of nitrogen on dairy farms in the UK is determined by risk considerations. On the contrary, increasing nitrogen usage lowers the apparent financial risk at a given stocking rate.