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The Effects of the Margin Protection Program for Dairy Producers

Tyler Mark (), Kenneth Burdine, Jerry Cessna and Erik Dohlman

No 262192, Economic Research Report from United States Department of Agriculture, Economic Research Service

Abstract: The Margin Protection Program for Dairy Producers is a voluntary risk-management program for dairy farmers—it offers protection when the national average margin (the difference between the U.S. all-milk price and the estimated average feed cost) falls below a level selected by the dairy farmer. This study examines the potential impact of the program on average margins and risk at different levels of coverage for both the protected margin ($4.00-$8.00 per hundredweight) and the percentage of production history covered (25-90 percent). Margins are constructed for 13 major production regions, and risk-reduction levels are assessed using regional milk and feed prices as though the program had been in place during 2002-13. Results suggest that small operations (those with a 4-million-pound production history) would have seen increases in average margins and reductions in downside margin risk with more milk covered at higher coverage levels. Larger operations (those with a production history of 20 or 40 million pounds) would have generally seen increases in average margins when protected up to the $6.50 level, with margins being maximized at $6.00 coverage.

Keywords: Agricultural and Food Policy; Livestock Production/Industries; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 38
Date: 2016-09-01
New Economics Papers: this item is included in nep-agr and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uersrr:262192

DOI: 10.22004/ag.econ.262192

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