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Livestock Gross Margin–Dairy: An Assessment of Its Effectiveness as a Risk Management Tool and Its Potential to Induce Supply Expansion

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  • Burdine, Kenneth H.
  • Kusunose, Yoko
  • Maynard, Leigh J.
  • Blayney, Don P.
  • Mosheim, Roberto

Abstract

An evaluation of the risk-reducing effectiveness of the Livestock Gross Margin–Dairy (LGM-Dairy) insurance program, using historical futures price data, predicts economically significant reductions in downside margin risk (24–41%) across multiple regions. Supply analysis based on the estimated risk reduction shows a small supply response, assuming minimal subsidization. A decomposition of the simulated indemnities into milk price and feed price components shows comovements in futures prices moderating the frequency and levels of indemnities.

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  • Burdine, Kenneth H. & Kusunose, Yoko & Maynard, Leigh J. & Blayney, Don P. & Mosheim, Roberto, 2014. "Livestock Gross Margin–Dairy: An Assessment of Its Effectiveness as a Risk Management Tool and Its Potential to Induce Supply Expansion," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 46(2), pages 245-256, May.
    • Handle: RePEc:cup:jagaec:v:46:y:2014:i:02:p:245-256_00
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    References listed on IDEAS

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    Cited by:

    1. Mark, Tyler B. & Burdine, Kenneth H. & Cessna, Jerry & Dohlman, Erik, 2016. "The Effects of the Margin Protection Program for Dairy Producers," Economic Research Report 262192, United States Department of Agriculture, Economic Research Service.
    2. Mark, Tyler B. & Burdine, Kenneth, 2015. "Will the New Dairy Margin Protection Program Reduce Risk for Dairies?," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196878, Southern Agricultural Economics Association.

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