Shawano one of two counties in program for dairy farmers

Leader Reporter

One hundred Shawano County dairy farmers now have the chance to sign up to take part in a unique new pilot program.

The Dairy Options Pilot Program (DOPP) was authorized under the Federal Agriculture Improvement and Reform (FAIR) Act of 1996. Farmers in both Shawano and Barron counties can enroll in the program which includes an innovative cost-share program that lets them learn about hedging milk prices.

According to Dr. Robert Cropp, agriculture economist with the University of Wisconsin-Madison, in the program dairy producers purchase options on a maximum amount of milk. Through option contracts the producers are then able to buy a kind of price insurance.

"When prices fall below the floor (or strike price) bought, the option contract increases in value, making up the differences," said Cropp. "It's a kind of insurance and farmers that get involved in the program really can't lose."

"Options will protect participating producers from long periods of low prices," said Cropp. "In this pilot program producers are responsible for just 20 percent of the cost of the premium for each option. The USDA will pay the remaining 80 percent of the premium."

"They can also pick and choose the amount of deductible they want," according to Cropp. "It can basically be in any amount, $200, $500, or whatever. It ensures a minimum price for their milk."

Cropp agrees the program could be a very valuable risk management tool that farmers in Shawano and Barron counties should take advantage of if at all possible.

This is the second round of the pilot program. About one year ago six other Wisconsin counties were also eligible to take part. Cropp says there were good comments about how that phase operated.

The be eligible to participate in DOPP producers must: Operate a farm locally in either Shawano or Barron counties and have a documented production history of at least 100,000 pounds of milk produced during any six-month period over the last 12 months.

A four hour training session is required of both producers and brokers involved in the program. It gives an overview of how put options work and how to apply them, along with more information on the rules of DOPP.

Producers will also be given tips for selecting a broker. Participating producers will attend one training session and then begin locking-in milk price floors for themselves.

Shawano County UW-Extension dairy and livestock agent Tom Anderson says the program will be a great learning experience for dairy farmers and he encourages producers to enroll.

If you are interested in enrolling in the DOPP you can contact Anderson at the UW-Extension by calling 526-6136.

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By Joe Vandel
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