Risk Management Resources
Whether you take out an LGM for Dairy policy, contract your milk and feed, consciously build up a rainy day fund, or do a combination of these, there are many ways to protect yourself when dairy margins fall. However, not doing anything at all is no longer an option.
Here are a few risk management options:
- Dairy Margin Coverage (DMC)— Dairy Margin Coverage is a voluntary risk management program for dairy producers administered by the Farm Service Agency. DMC replaces the Margin Protection Program (MPP). DMC was designed to be most cost-effective and beneficial for dairies milking about 250 cows or less.
- Dairy Revenue Protection (DRP)—Dairy Revenue Protection is a quarterly revenue protection insurance program administered by the Risk Management Agency. It is a highly customizable way to protect quarterly revenue due to unexpected drops in milk prices.
- Livestock Gross Margin for Dairy—This program is similar to DRP but is more restrictive. It provides dairy producers with protection when feed costs rise or milk prices drop.
- Milk Price Contracting— Most cooperatives will allow dairy farmers to contract a certain milk price for a certain volume of production for each month.
- Hedging with Futures/Options— Dairy farmers can forward contract milk through the Chicago Mercantile Exchange by working through a private broker. There are some cooperatives that allow their members to do forward contracting through the cooperative rather than a private broker.
The Center for Dairy Excellence and the Risk Management Agency can help you develop a risk management plan for your dairy. Zach Myers, the center’s risk education manager, can visit your farm or with small groups of farmers to help you think through how to better manage your on-farm risks.
To contact Zach, call him at 717-346-0849 or email firstname.lastname@example.org.
To request additional assistance or information on these resources or other Business Tools offered by the center, please complete this form.
For more information on dairy markets and risk management: