Probability of economic success for Netherlands dairy farmers moving operations to the United States
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Dairy producers in the Netherlands are struggling to stay in business due to increased environmental legislation, population density, intensity of farming systems, costs of production and quota restrictions. One option available to Netherlands dairy farmers is to liquidate the value of their assets, put the money into an international bank, and buy an established dairy farm in the United States. The primary objective of this research is to compare the economic viability of a Netherlands dairy farmer staying in the Netherlands versus moving to the United States, assuming they will bring over all of their equity to put towards the purchase of a U.S. farm. The hypothesis that a Dutch dairy farmer would have a greater probability of economic success by relocating to the U.S was tested using a whole farm simulation model (FLIPSIM) to simulate the economic activity of a representative dairy farm in the Netherlands and 23 representative U.S. dairy farms in the major dairy producing regions over the 2002-2011 planning horizon. FLIPSIM generated an empirical probability distribution for net present value to rank the representative farms using stochastic efficiency with respect to a function (SERF) for risk neutral and risk averse decision makers. The FLIPSIM results showed that six of the twenty-three U.S. dairy farms would give the Dutch farmer a 99% chance of economic success. The added risk on income in the U.S. would result in these U.S. farms having a 1 to 99% chance of negative ending cash reserves (ECR) and a 1 to 99% chance of negative net cash farm income (NCFI). In a complete SERF analysis, seventeen of the twenty-three U.S. farms were preferred over the Dutch farm. In conclusion, the research shows Dutch dairy farmers with adequate equity would be financially better off by relocating to the U.S. if they desire to continue dairying, rather than staying in the Netherlands.
Duncan, Anthony Ray (2004). Probability of economic success for Netherlands dairy farmers moving operations to the United States. Master's thesis, Texas A&M University. Texas A&M University. Available electronically from