Risk management advisor says DRP or LGM-Dairy choice may depend on geography
A risk management specialist says dairy producers need to know how Dairy Revenue Protection and Livestock Gross Margin-Dairy compare for their farms before choosing one over the other. Mike North with ever.ag says, “Neither tool is better than the other. They each have their place.”
North tells Brownfield both DRP and LGM-Dairy have benefits and some disadvantages, and he says the rules do not allow DRP and LGM Dairy coverage in place during the same quarter, so farmers and their risk management agents must figure out which program is the better fit while looking ahead about 15 months into the market. “What it boils down to, the bottom line is that your agent intimately understands and embraces the milk market, how milk pricing works, and the risks that we collectively face around the dairy looking forward quite a period into the future.”
North says the choice between Dairy Revenue Protection and LGM-Dairy is not dependent on the size of the farm, but he says the farmer’s home geography will be a very big determining factor when choosing programs. “If you are in an area that is heavy Class IV, you are not even going to look at LGM, you’re going to be looking exclusively at DRP. Whereas in Wisconsin in some of this more cheese-influenced environment of the upper Midwest, wherein this state there is 83% utilization on Class III, you are going to have the opportunity to look at either on fairly even scales.”
North says producers need to manage the risk that is truly there and not some hypothetical market opportunity. He also says when looking at the big picture of milk, corn, soybean, and other prices, the opportunities are out there now to ensure 2022 is a profitable year.
Mike North spoke to Brownfield during the 2022 Dairy Strong conference in Madison, Wisconsin.