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Don’t fear risk management, take opportunities

A dairy risk advisor says farmers should be taking advantage of opportunities to protect risk on both milk and feed cost sides of their balance sheets.

Kyle Schrad with StoneX says the more prices move, the more opportunity there is to reduce risk through trading.

“People think about trading, using forward contracts, using futures and options, using even insurance tools like the government offers, and they think, ‘I’m speculating,’” he says. In reality, Schrad says if dairies don’t have some type of forward sale on their milk, the farm is 100 percent speculating.

He recommends creating a hedge plan to manage costs and reviewing all options for protecting risk.

“A lot of times what we see is a basket of these tools,” he says.

Since the onset of the pandemic, Schrad says Negative Producer Price Differentials have also pushed more farmers toward the Dairy Revenue Protection Program and made them more involved in their hedging strategies.

Shrad was a featured speaker during a recent National Milk Producers Federation Young Cooperator webinar.