Where is the risk? Price, yield and cost risk in Swiss crop production

Risk management strategies are of increasing importance in agriculture. An important question is, what type of risk management strategies are required to reduce farmers’ income risks. Applying a variance decomposition approach using data of more than 3000 Swiss farms over a five year time period, this paper quantifies the direct and indirect effects of yields, prices and costs on net revenue variability at the farm‐level. We find that costs play only a minor role in determining income variability but price and yield risks are of outmost importance and very crop‐specific. For instance, price risks dominate for intensive wheat and sugar beet producer; while corn and barley producer tend to suffer more form production risks. Group comparisons and logistic regressions results show that more intensively producing farms tend to suffer more from price risk, while yield risks are dominant for less intensive producers.