LOW CAPITAL DAIRY STRATEGIES IN WISCONSIN: LESSONS FROM A NEW APPROACH TO MEASURING PROFITABILITY

Bradford L. BARHAM (), Jean-Paul Chavas () and Richard M. KLEMME ()

No 381, Staff Papers from University of Wisconsin Madison, AAE

Abstract: This paper proposes a new way to evaluate the role of profitability and risk in the dairy industry, one that incorporates the effects of uncertainty about future returns when investments are irreversible, or sunk. The usefulness of this new approach is demonstrated by the light it sheds on recent attempts by Wisconsin dairy farmers to develop low capital investment strategies and why these initiatives might be crucial to the vitality of the state's industry as a whole. The value of this paper, however, reaches beyond the contribution it offers to comparisons of the viability of alternative investment strategies in dairy, because it is applicable to evaluating profitability and risk in any economic activity, inside or outside of agriculture, where much of the investment is irreversible and uncertainty about future returns is important.

Date: 1994-10
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Related works:
Working Paper: Low Capital Dairy Strategies in Wisconsin: Lessons from a New Approach to Measuring Profitability (1994)
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