Risk perception and risk management strategies on New Zealand dairy farms according to ownership structure and geographic location

Abstract

New Zealand has had many changes in the dairy industry during the last twenty years. As NZ dairy farming has particular characteristics (e.g. differing ownership structures, geographic areas) risk perception and management strategies may differ significantly between them. No studies have been undertaken regarding the differences in perception of risk and risk management strategies used by different gr oups of dairy farmer s. A survey of 1000 NZ dairy farmers was conducted in 2004 and further analysed to address this need. In the survey the dairy farmers were asked to assess their perception of risk sources and the importance they attached to risk management strategies. Using a 1 to 5 scale, mean scores of both risk sources and management strategies were compared (Z-test) by ownership structure and geographic location. The differences in the perception of risk between sharemilkers and owner-operators were mainly in the sources categorised as "market" and "human". "Changes in land prices" was highly important for sharemilkers. Differences of risk management strategies were noted in the "financial" and "production" categories. The main sources of risk perceived differently by farmers in the North and South Islands were in the production side of the business. Although farmer s from both islands were similarly focused on controlling risk through production management strategies, those from the South Island were keener to use financial responses. In conclusion, sharemilkers were more concerned with the changes of prices of both inputs and outputs than owner-operators. Sharemilkers were more production-orientated to manage risk than farm owners, and they also were more focused on off-farm income and debt management. Differences in both the risk perception and the risk management strategies used in each island are related to differences in farm sizes and the developmental stage of the dairy sector in each island. Keywords: risk perception, risk management strategies, sharemilkers