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Economist says look long-term when using risk management tools like Dairy RP

A dairy economist says producers should consistently take advantage of the new Dairy Revenue Protection program as far ahead as possible. 

Dr. Marin Bozic with the University of Minnesota says dairy prices are better now than they have been, which means futures prices also trend higher, so locking in program prices into 2021 now is a wise move. “The entire term structure for the next 24 months seems to be lifted, so the prices right now for 2021 are probably at the level that where a lot of producers can either cover their costs or at least secure a floor that would not be too painful if the prices falls.”

Bozic tells Brownfield producers should enjoy the next few quarters, but history shows the good times don’t last, so start thinking beyond 2020. “If you’re keen to invest, maybe consider investing in your resiliency rather than more steel and concrete, and there are two ways to do that. First, would be to rebuild your equity so pay down some debt even though it means paying taxes, which nobody likes, and also to engage with risk management programs.”

Bozic says Dairy Revenue Protection signups are open for April through June of 2021 now, and by signing up now for Dairy Revenue Protection for April through June of 2021, producers will get the security of a price floor without having to pay until July 2021, preserving cash flow now.

Bozic spoke to Brownfield at the Dairy Business Association’s Dairy Strong Conference in Madison, Wisconsin.

Dr. Marin Bozik discusses futures, the Dairy Revenue Protection program, and what producers should be looking at now.

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