Finally, milk is produced in very heterogeneous areas across
the United States. Dairies in the Northeast and upper Midwest
have relatively moderate summer temperatures, though
very high temperatures and high humidity do occur on occasion.
Dairies in the Southeast and Southwest are exposed to
relatively hot summer temperatures. An important difference is
that the southeast has both high temperatures and high humidity
during the summer while the southwest has even higher temperatures
but generally lower humidity. California dairies generally
face less heat stress exposure than dairies in the Southwest
and Southeast but more than those in the Northeast and upper
Midwest. Future research should examine whether the results
reported here for a representative southeast dairy farm could
be replicated for dairies in other regions. It is quite likely that
the relationship between heat stress and milk production varies
across regions. The magnitude of both spatial and temporal basis
risk may also vary across regions. If so, the THI insurance
design presented here may need to be modified to better fit
conditions found in other regions.