Evaluation of the Dairy Options Pilot Program

1
Evaluation of the Dairy Options Pilot Program

• Monte Vandeveer, ERS-USDA
• Dairy Policy Workshop
• September 25, 2002

2
DOPP background

• Authorized in FAIR Act of 1996
• Implemented by Risk Management Agency
• Goal help dairy producers learn how to use
  options to hedge price risk
• Approach educational programs for producers and
  subsidies for option premiums and brokers
  commissions

3
DOPP background

• 4 annual phases Jan 1999 - Dec 2002
• Phase IV 300 counties in 40 states
• Up to 100 producers per county, up to 3 years for
  each producer
• USDA pays 80 of premium cost, up to 30 per
  transaction for brokers fee
• Can hedge up to 600,000 lbs of milk during
  12-month period (35-40 cows)

4
Initiative for study

• DOPP evaluation after 4 years of activity
• RMA requested evaluation of program from ERS
• Report to RMA by September 30, 2003

5
Some issues for study

• Nature of price risk faced by dairy producers
• Effectiveness of milk options for hedging price
  risk
• Patterns of producer participation
• DOPP and other price risk management strategies

6
Project Personnel

• Leigh Maynard, University of Kentucky
• Richard Heifner, Adjunct professor at UK, former
  ERS economist
• Terry Crawford, Adjunct professor at New Mexico
  State U, formerly at ERS
• Don Blayney, ERS-USDA
• Monte Vandeveer, ERS-USDA

7
Your input

• Your experiences and reflections on DOPP
• Current and previous studies on price risk issues
  in dairy
• Data
• Review and feedback

8
Contact info

• Monte Vandeveer
• Economic Research Service
• 1800 M Street NW, Rm N5081
• Washington DC 20036
• Phone [phone]
• Email montev_at_ers.usda.gov