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Livestock Gross Margin-Dairy Insurance: An Assessment of Risk Management and Potential Supply Impacts

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  • Mosheim, Roberto
  • Blaney, Don
  • Burdine, Kenneth H.
  • Maynard, Leigh J.

Abstract

Public risk management policies for dairy producers have the potential to induce expansion in milk supplies, which might lower farm-level prices and offset risk-reduction benefits. An evaluation of USDA’s Livestock Gross Margin-Dairy (LGM-Dairy) insurance program finds economic downside risk significantly reduced, with potential to induce modest supply expansion (0 to 3 percent) if widely adopted. Supply impacts are likely limited due to relatively low participation levels and a minimal (“inelastic”) supply response to risk. LGM-Dairy is more flexible and convenient than other risk management tools, such as hedging directly in futures or options markets, especially for small farms.

Suggested Citation

  • Mosheim, Roberto & Blaney, Don & Burdine, Kenneth H. & Maynard, Leigh J., 2014. "Livestock Gross Margin-Dairy Insurance: An Assessment of Risk Management and Potential Supply Impacts," Economic Research Report 164606, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersrr:164606
    DOI: 10.22004/ag.econ.164606
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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. Loughrey, J. & Thorne, F. & Kinsella, A. & Hennessy, T. & O'Donoghue, C. & Vollenweider, X., 2015. "Market risk management and the demand for forward contracts among Irish dairy farmers," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 4(4), July.
    3. MacDonald, James M. & Cessna, Jerry & Mosheim, Roberto, 2016. "Changing Structure, Financial Risks, and Government Policy for the U.S. Dairy Industry," Economic Research Report 262200, United States Department of Agriculture, Economic Research Service.
    4. 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.
    5. Mane, Ranjitsinh & Watkins, Bradley, 2016. "Stochastic Analysis of Margin Protection (MP) Crop Insurance in Arkansas Rice Production," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229877, Southern Agricultural Economics Association.
    6. Vincent Chatellier, 2017. "International, European and French trade in dairy products: trends and competitive dynamics," Working Papers SMART 17-05, INRAE UMR SMART.
    7. Erickson, Kenneth W. & Featherstone, Allen M. & Subedi, Dipak & Nehring, Richard F. & Harris, James Michael, 2017. "How Fluctuations in Farm and Off-Farm Income Could Affect the Financial Performance of U.S. Farm Operator Dairy Farms: A Farm-level Analysis," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258488, Agricultural and Applied Economics Association.

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    Keywords

    Agricultural and Food Policy; Livestock Production/Industries;

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