Identifying cost-minimizing strategies for guaranteeing target dairy income over feed cost via use of the Livestock Gross Margin dairy insurance program

Journal of Dairy Science
M ValvekarB W Gould

Abstract

Milk and feed price volatility are the major source of dairy farm risk. Since August 2008 a new federally reinsured insurance program has been available to many US dairy farmers to help minimize the negative effects of adverse price movements. This insurance program is referred to as Livestock Gross Margin Insurance for Dairy Cattle. Given the flexibility in contract design, the dairy farmer has to make 3 critical decisions when purchasing this insurance: 1) the percentage of monthly milk production to be covered, 3) declared feed equivalents used to produce this milk, and 3) the level of gross margin not covered by insurance (i.e., deductible). The objective of this analysis was to provide an optimal strategy of how a dairy farmer could incorporate this insurance program to help manage the variability in net farm income. In this analysis we assumed that a risk-neutral dairy farmer wants to design an insurance contract such that a target guaranteed income over feed cost is obtained at least cost. We undertook this analysis for a representative Wisconsin dairy farm (herd size: 120 cows) producing 8,873 kg (19,545 lb) of milk/cow per year. Wisconsin statistical data indicates that dairy farms of similar size must require an incom...Continue Reading

References

Mar 13, 2014·Journal of Dairy Science·M H BuzaV A Ishler

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Citations

Mar 13, 2014·Journal of Dairy Science·M H BuzaV A Ishler
Jun 23, 2012·Journal of Dairy Science·C A Wolf
Sep 22, 2016·Tropical Animal Health and Production·R R Posadas-DomínguezF E Martínez-Castañeda
Feb 3, 2018·Tropical Animal Health and Production·Rodolfo Rogelio Posadas-DomínguezJesús Armando Salinas-Martínez
Feb 16, 2011·Nutrition Research Reviews·Anestis DougkasAnne M Minihane
Jul 19, 2017·Animal : an International Journal of Animal Bioscience·V E Cabrera

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