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Margin Protection requires decisions, commitment from dairymen

Scott Brown, ag ecnomist at the University of Missouri, makes a point about the Margin Protection Program for dairymen, Columbia, Mo., Sept. 29, 2014.The new Margin Protection Program for dairymen will require choices to be made by producers, and will require some financial commitment from them.

Just the same, Scott Brown, a livestock and dairy economist at the University of Missouri, tells Brownfield Ag News that producers should not fear the decisions or the investment.

“From my standpoint, being able to customize this decision helps producers pick what’s best for their operation,” said Brown, in Columbia on Monday.  “So [there are] more choices to be made, and yes, I might have to pay a premium for higher levels of risk coverage, but what a great help if I’m in an operation that needs some risk protection.”

What’s protected by the program is the margin between the milk price and the cost of feed, so Brown acknowledges that there is some forward thinking involved in selecting the appropriate level of coverage.

“Looking ahead, it’s what do you think margins are going to do in 2015 and really all the way through 2018, so every year we’re going to make this choice of what kind of margin level do we want to cover,” said Brown.  “If you think it’s a bad year, you may want to buy higher levels of margin coverage, so it just depends on what you think the next year looks like and how much risk can you withstand.”

Dairymen who want greater protection can buy it.  Brown says that producers need to look at it as another tool to manage risk.

“Maybe at times futures markets, forward contracting, other tools are going to be better to use, but it’s a new tool that producers should take advantage of,” said Brown, “and I think, in some cases, it’s going to be relatively inexpensive.”

There are several online programs to help producers determine what level of protection is right for them.  Registration for the program is annual and can be done at Farm Service Agency offices for 2014 and 2015 by November 28th.  For the years 2016-2018, registration periods will be from July 1 until September 30 in the year prior to the one for which registration is being made.

Brown talked to Brownfield Ag News at the first in a series of a half-dozen informational meetings for producers in Missouri.  In addition to the first meeting, which was held Monday in Columbia, Missouri, and a webinar, also held on Monday, five meetings will be held:

  • Oct. 14, 10 a.m.-noon, MU Extension Center, Jackson, Mo.
  • Oct. 15, 1-3 p.m., Park Casino, 101 S. Lincoln, Monett, Mo.
  • Oct. 16, 10 a.m.-noon, Park Casino, 101 S. Lincoln, Monett.
  • Oct. 28, 10 a.m.-noon, Springfield (Mo.) Livestock Marketing Center, 6821 W. Independence Drive, Springfield, Mo.
  • Oct. 29, 10 a.m.-noon, Laclede Electric Cooperative meeting room, 5900 Highway 5, Hartville, Mo.

    AUDIO: Scott Brown (9 min. MP3)

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