Leif Jarle Asheim, Tor Lunnan and Hanne Sickel
German Journal of Agricultural Economics, Volume 63 (2014), Number 2: 81-95
In this paper the economics of seasonal production of cheese in the mountain in Norway is investigated and compared with keeping the cows at the farm, investing in a common pasture or in co-operative dairy farming.
The comparison is based on calculations in a linear programming (LP) farm model supported with Stochastic Dominance with Respect to a Function (SDRF) for risk analysis. Mountain dairy farming involves free ranging cows on natural pastures for about 70 days.
The contents of polyunsaturated fatty acids, CLA and various antioxidants in the milk increase when cows graze alpine pastures affecting its processing properties, and flavor and chemical content of dairy products.Seasonal mountain cheese production is found to be generally preferable to the other alternatives for risk neutral as well as risk-averse decision makers. This is due to a higher price for mountain products, subsidy payments for mountain farming, and exemption for farm processed milk in the national milk quota.The risks are partly price risks but also yield and output risks as well as downside political risks since the profitability depend strongly on subsidies and premiums, and exemption for farmprocessed milk in the milk quota.
Investments in farming co-operatives were unprofitable due to less subsidy payments compared to individual farmers. Effects of calving time, introducing fertilized pastures or night pens, and supplementary feeding to extend the mountain period and sustain milk yields are examined. The premium price for “mountain products”, animal welfare, and farmer co-operation on marketing are discussed.