Risk Analysis of Australia’s Victorian Dairy Farms Using Multivariate Copulae

Sosheel Solomon Godfrey, Ryan H. L. Ip and Thomas Lee Nordblom

Journal of Agricultural and Applied Economics, 2022, vol. 54, issue 1, 72-92

Abstract: The study provides comparative risk analyses of Australia’s three Victorian dairy regions. Historical data were used to identify business risk and financial viability. Multivariate distributions were fitted to the historical price, production, and input costs using copula models, capturing non-linear dependence among the variables. Monte Carlo simulation methods were then used to generate cash flows for a decade. Factors that influenced profitability the most were identified using sensitivity analysis. The dairies in the Northern region have faced water reductions, whereas those of Gippsland and South West have more positive indicators. Our analysis summarizes long-term risks and net farm profits by utilizing survey data in a probabilistic manner.

Date: 2022
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