A statistical analysis of sources of variance of income on sheep farms in New Zealand

Abstract

This paper uses a variance partitioning technique to attempt to measure the relative contribution of several factors to variation in sheep farm incomes. The analysis covers individual farms, individual regions, and the sheep industry as a whole. Although wool price fluctuations were identified as the principal source of variation in gross farm incomes, the results of this study confirm that the relative importance of product prices as a source of income variation increases as the scene shifts from the individual farm to the regional level and then to the industry level. This suggests that price smoothing may be more effective in terms of macroeconomic policy than as a palliative for the problems of income variation for individual farms.