Risk Based Milk Pricing Model at Dairy Farmers Level
Abstract: The milk price from
a cooperative institution to farmer does not fully cover the production cost.
Though, dairy farmers encounter various risks and uncertainties in conducting
their business. The highest risk in milk supply lies in the activities at the farm.
This study was designed to formulate a model for calculating milk price at
farmer’s level based on risk. Risks that occur on farms include the risk of cow
breeding, sanitation, health care, cattle feed management, milking and milk
sales. This research used the location of the farm in West Java region. There
were five main stages in the preparation of this model, (1) identification and
analysis of influential factors, (2) development of a conceptual model, (3)
structural analysis and the amount of production costs, (4) model calculation
of production cost with risk factors, and (5) risk based milk pricing model.
This research built a relationship between risks on smallholder dairy farms
with the production costs to be incurred by the farmers. It was also obtained
the formulation of risk adjustment factor calculation for the variable costs of
production in dairy cattle farm. The difference in production costs with risk
and the total production cost without risk was about 8% to 10%. It could be
concluded that the basic price of milk proposed based on the research was
around IDR 4,250-IDR 4,350/L for 3 to 4 cows ownership. Increasing farmer
income was expected to be obtained by entering the value of this risk in the
calculation of production costs.
Keywords: production cost;
milk price; risk; dairy farmer; income
Author: W. Septiani, Marimin
Marimin, Y. Herdiyeni, L. Haditjaroko
Journal Code: jppeternakangg170059
