Part II will investigate the impact of different risk management strategies and policies on farm welfare and behaviour, as well as the interactions between farmer’s strategies and government programme. The risk environment analyzed in Part I is used to calibrate a stochastic model of a representative risk averse farmer in the UK and Australia confronting uncertain yield, output price and cost, and simulates farmer’s response to risk and government policies. The main focus of the stochastic simulation is to analyze the policy impact on the distribution of farm income, farm welfare and farm risk management behaviour.