News Articles
How to Manage Risk in the Dairy Industry
November 18, 2009
AgChoice Loan Officer Melinda Benedick assists dairy customers in a cost of production calculation.
Risk management has never been more important for today’s businesses, especially Pennsylvania dairy farms. Volatility of milk prices and other commodities has left many dairy producers asking what they can do to better manage their businesses and influence their profitability. For more than 60 dairy producers in the Chambersburg area, that meant attending a recent risk management workshop hosted by AgChoice Farm Credit.
“Understanding your farm’s cost of production is the first step to managing risk,” explained Crystal Standish, branch manager of AgChoice’s Cumberland Valley office located in Chambersburg, Pa. “Dairy producers who know their cost of production can better evaluate what they should do to be more effective and efficient managers.”
The workshop began with AgChoice staff leading discussions on how the milk price is determined as well as how to compute a farm’s cost of production. The presentation included a hands-on exercise that walked participants through calculating cost of production and explained key financial metrics. Ashley Hicks, AgChoice’s crop insurance specialist, also spoke to attendees about crop insurance and the dairy margin insurance program (LGM) as possible ways to manage risk on one’s farm.
Outside speaker Katie Krupa of Dairylea/DFA Northeast explained the many risk management tools that dairy cooperatives have in place to assist producers. “If you know what works on your farm, it’s not taking a risk, it’s protecting your farm,” said Krupa who further described tools such as minimum price forward contracts, fixed price forward contracts, upside riders and minimum/maximum forward contracts. Representatives from Land O’Lakes and Maryland & Virginia Milk Producers were also present to respond to questions about their cooperatives’ programs.
This workshop is the second of a series held for AgChoice’s dairy customer-owners. An earlier seminar was hosted by AgChoice’s Lewistown office which included speakers, a hands-on workshop, as well as a tour of Willow Behrer Farms in Spruce Creek, Pa. AgChoice Farm Credit remains committed to providing its customer-owners with valuable educational opportunities to enhance business management skills.
AgChoice Farm Credit’s Cumberland Valley branch office is located in Chambersburg, Pa. and services more than $215 million in total loan volume for agricultural and rural customers in Cumberland, Franklin, Fulton and Perry counties in Pennsylvania. To learn more about AgChoice Farm Credit and its financial programs, visit www.agchoice.com.
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