This paper analyses household decisions in producing cereal crops, green fodder crops, and milk, for the case of mixed’ farming in the Pakistan Punjab. In the Punjab agriculture, increased household income and increased yields of cereal crops after the Green Revolution have resulted in the growing importance of milk in household economy. Using a sensitivity analysis based on a household model of crop choices under uncertainty, this paper emphasises the constraint that fodder represents for further increases in food-grain output. Results show that the welfare cost of production risk is significant, it is higher for land-poor households, and its significant part is attributable to green fodder price risk. The welfare and supply effects of more elastic fodder demand and increased fodder yields are investigated. These innovations in fodder technology are suggested to have a higher potential to improve household welfare and to induce a robust supply response of cereal crops with respect to their prices, than a crop insurance scheme to hedge against yield risk.