Market risk management and the demand for forward contracts among Irish dairy farmers

Irish dairy farmers have entered into a period of significant change with the European-wide abolition of the milk quota regime in April 2015. This abolition provides the opportunity for many profitable Irish dairy farms to increase their production levels. Market risk will influence decision-making at the farm level. Dairy farmers have recently acquired more experience of market risk through highly volatile market prices. This has the potential to affect risk attitudes and the farmers' selection of tools available to manage market risk. In this paper, we utilise econometric methods to examine the demand for the forward contracting risk management tool among Irish dairy farmers. Our findings suggest that recency effects are significantly associated with such demand as the recent price history appears to have significant effects on decision-making. ‘Within the farm-gate diversification’ and the ‘number of children’ in particular age categories have a positive and significant association with the adoption of forward contracting