Assessing the Risk Reduction Impacts of the Dairy Producer Margin Protection Program

Grants and Contracts Details


The 2014 Farm Bill introduced a new program aimed at providing risk protection to dairy producers. The Dairy Producer Margin Protection Program (DPMPP) will be available to producers by fall of 2014. The DPMPP program offers dairy producers an opportunity to guarantee a margin of milk price minus a feed cost index. Interested producers must first choose between participation in the new DPMPP program or the previously established Livestock Gross Margin - Dairy (LGM-Dairy) program. At the time of this writing, it was not clear whether this decision would be made on an annual basis or for the life of the program. Regardless, producers who choose to participate in the DPMPP must then choose how much milk to cover as well as the margin coverage level. The objective of this report is to conduct a simulation analysis using historical data to evaluate the economic implications of DPMPP, specifically the extent to which it could reduce risk.. This analysis will be similar to that summarized in ERR No. 163, which examined the risk reduction effects of the Risk Management Agency's LGM-Dairy program had it been available in recent years. The objectives of this collaborative agreement are to evaluate the impact that the DPMPP would have had on historical margins by region had it been available since 2000 as well as examine its effectiveness as reducing the variance of those margins.
Effective start/end date7/29/146/30/15


  • Economic Research Service: $25,000.00


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