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Evaluation of the Dairy Options Pilot Program

Evaluation of the Dairy Options Pilot Program. Monte Vandeveer, ERS-USDA Dairy Policy Workshop September 25, 2002. DOPP background. Authorized in FAIR Act of 1996 Implemented by Risk Management Agency Goal: help dairy producers learn how to use options to hedge price risk

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Evaluation of the Dairy Options Pilot Program

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  1. Evaluation of the Dairy Options Pilot Program Monte Vandeveer, ERS-USDA Dairy Policy Workshop September 25, 2002

  2. DOPP background • Authorized in FAIR Act of 1996 • Implemented by Risk Management Agency • Goal: help dairy producers learn how to use options to hedge price risk • Approach: educational programs for producers and subsidies for option premiums and broker’s commissions

  3. DOPP background • 4 annual phases: Jan 1999 - Dec 2002 • Phase IV: 300 counties in 40 states • Up to 100 producers per county, up to 3 years for each producer • USDA pays 80% of premium cost, up to $30 per transaction for broker’s fee • Can hedge up to 600,000 lbs of milk during 12-month period (35-40 cows)

  4. Initiative for study • DOPP: evaluation after 4 years of activity • RMA requested evaluation of program from ERS • Report to RMA by September 30, 2003

  5. Some issues for study • Nature of price risk faced by dairy producers • Effectiveness of milk options for hedging price risk • Patterns of producer participation • DOPP and other price risk management strategies

  6. Project Personnel • Leigh Maynard, University of Kentucky • Richard Heifner, Adjunct professor at UK, former ERS economist • Terry Crawford, Adjunct professor at New Mexico State U, formerly at ERS • Don Blayney, ERS-USDA • Monte Vandeveer, ERS-USDA

  7. Your input • Your experiences and reflections on DOPP • Current and previous studies on price risk issues in dairy • Data • Review and feedback

  8. Contact info Monte Vandeveer Economic Research Service 1800 M Street NW, Rm N5081 Washington DC 20036 Phone: 202-694-5158 Email: montev@ers.usda.gov

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