Management

The current economic context implies a high level of market uncertainty. Consequently, caution should be exercised when it comes to major expansion or investment projects. Yet, things will eventually settle, and preparing now to be ready to implement future projects could be time well spent.

The coronavirus threw a monkey wrench in dairy sales. State and local governments issued stay-at-home orders. “Non-essential” businesses were mandated to close in many localities and states.

The milk price risk management landscape has changed immensely over the last few years. This article takes a brief look at available programs and highlights what to consider when evaluating how to manage that risk.

Modern milk price risk management has been around for more than 20 years. As we have seen in 2020, with the impact of COVID-19 on the dairy market, milk price volatility is not going away.

Milk price volatility continues to be a major concern for U.S. dairy producers. That volatility – along with the recent experience of large negative producer price differentials (PPDs) – can have a significant impact on net milk prices.

Editor's note: There are several risk management tools available to dairy farmers (see Risk management: Forward strategy based on 2020 hindsight), and one may be a better option than another based on your dairy.

Dairy Revenue Protection (Dairy-RP) and Livestock Gross Margin for Dairy (LGM-Dairy) are the two insurance-based risk management products available to dairy producers.