Impact of milk price volatility on French dairy farm profitability - A data-driven approach combining econometric modeling and machine learning

Aug 6, 2026

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Most French dairy farms remain exposed to volatile milk prices despite milk packages designed to encourage contractualization and stabilize pricing. The study examines how asymmetric milk price volatility affects farm profitability, supporting resilience. Volatility is measured with APARCH using aggregate milk prices represented by the Production Price Index for Agricultural Products. The analysis covers 385 dairy farms (2010–2022) from the French Farm Accountancy Data Network (FADN), and profitability is evaluated via return on assets using machine learning algorithms. Results indicate differentiated effects of volatility on profitability.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages14

Reading Time35 min

AccessFree to download

Abstract

Introduction

Data and Methodology

Collection and Integration of Data

Impact of milk price volatility on French dairy farm profitability: A data-driven approach combining econometric modeling and machine learning Islem Kedidi, UniLaSalle, INTERACT UP 2018.C102, 60000 Beauvais, France, [islem.kedidi@unilasalle.fr](islem.kedidi@unilasalle.fr) ; Hamilton Araujo, [hamilton.araujo@unilasalle.fr](hamilton.araujo@unilasalle.fr) et Marie Rose Randriamarolo, UniLaSalle, INTERACT UP 2018.C102, 60000 Beauvais, France, [marie-rose.randriamarolo@unilasalle.fr](marie-rose.randriamarolo@unilasalle.fr) [Session type] prepared for presentation at the 2025 AAEA & WAEA Joint Annual Meeting in Denver, CO; July 27-29, 2025 Copyright 2025 by Islem Kedidi, Hamilton Araujo and Marie Rose Randriamarolo. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Impact of milk price volatility on French dairy farm profitability: A data-driven approach combining econometric modeling and machine learning Abstract Most french dairy farm are still exposed to volatile milk price despite the implementation of milk package that aim to enforce contractualization and stabilize price. In this context, our study aims to investigate the effect of asymmetric price volatility on french dairy farms' profitability which is necessary to enhance resilience. We use APARCH to measure the volatility of aggregate milk prices represented by the Production Price Index for Agricultural Products. We focused our analysis on 385 dairy farms observed from 2010 to 2022 in the French Farm Accountancy Data Network (FADN) . The evolution of farm profitability, indicated by the return on assets, was assessed by using machine learning algorithms. Findings show that there are differentiated effects of milk price volatility on farm profitability. Keywords: Dairy Farm Profitability, milk price volatility, Garch-model, machine learning, Random Forest, K-Means clustering, agricultural risk management. Introduction Despite efforts made by policy makers to stabilize the price of milk paid to farmers, the price of French cow's milk remains highly volatile (PERROT et al., 2024) . Contractualization between milk producers and purchasers was enforced to compensate for the reduction of public market intervention, of guaranteed milk prices, and for the abolishment of milk quotas in 2015 (Baritaux et al., 2018) . However, according to Lambaré et al. (2018), contracts' ability to reduce price fluctuations vary in function of the specificity of the milk and the structure of the dairy industry. As most dairy farms are in such conditions, they are still exposed to this market hazard. This exposition represents a great concern because scholars has demonstrated that agricultural price volatility, significantly reduce the marketing margins (Morales, 2018), the optimal farm plan (Briner & Finger, 2013) and the agricultural product supply (Sedghy et al., 2016) . and investment decisions (Schulte et al., 2018). The most alarming issue is how price volatility affects dairy farm profitability. (Tey & Brindal, 2015a). Defined as “the ability of farms to guarantee an adequate level of income” by Coppola et al. (2020), profitability is perceived by farmers as essential to enhance resilience (Reidsma et al., 2020). Based on selected Flemish dairy farms cases, Winsen et al.,(2011) have shown that a 12% increase in milk price is needed to compensate for the effect of increased volatility on return on assets. However, price fluctuations do not necessarily imply an upward shift in the average price level. Due to the potential for asymmetric variations, such fluctuations may also result in a downward trend. Consequently, losses in profitability may not be offset. In this sense, Wolf et al. (2016) have highlighted that milk price volatility raises US dairy farm financial risk composed by profitability, solvency, and liquidity. Their study reveals th

FAQs

Why do French dairy farms still face milk price volatility?

Policy measures such as contractualization aim to stabilize prices, but milk prices remain highly volatile and contract effectiveness can vary by milk specificity and industry structure.

How is milk price volatility measured in the study?

The study uses APARCH to estimate volatility of aggregate milk prices, represented by the Production Price Index for Agricultural Products.

What methods are used to assess the impact on profitability?

Farm profitability is proxied by return on assets, and machine learning algorithms are applied to evaluate how volatility affects profitability across dairy farms.

Aug 6, 2026

Upload by Hazel