Risk management calendar: October-November 2021

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With the fall harvest dominating your days, keeping an eye on risk management can be secondary. To help you track price protection opportunities, Progressive dairy products provides monthly online updates of important dates and reports affecting risk management tools.

Market factors

Affecting supply, high temperatures and tight income margins held back milk production growth in the United States in August, as the number of cows fell and milk per cow reversed. (Read: Hot summer cools growth in milk production.)

Looking ahead, the September World Ag Supply and Demand Estimates (WASDE) report slightly lowered the milk production forecast for 2021 and 2022 due to expectations of lower cow counts and slower growth of milk production per cow. On the revenue side of the ledger, the WASDE report slightly raised the 2021-22 price projections for butter, cheese and skimmed milk powder, offering a slightly brighter outlook for Class III and IV prices than previous forecasts. On the production cost side, yield projections for corn and soybeans have been raised, putting pressure on these markets. (Read: USDA Outlook Reduces Milk Production Estimates And Provides For Better Margins.)

According to Raw Material and LLC Ingredient Coverage.

On the consumer side, strong exports have been a vital source of support for dairy markets. (Read: U.S. dairy exports are hard to contain.)

In Canada, sales of consumer dairy products fell again in July. Conversely, total cheese consumption estimated by the USDA since the start of 2021 is up more than 4% compared to January-July 2020, with butter consumption up 0.5 %. Concerns about the COVID-19 variant had an impact on how and where dairy products were purchased. Retail dairy sales in August exceeded levels seen in August 2020 (up 0.5%) and August 2019 (up 11%), according to a monthly update from the International Dairy Deli Bakery Association (IDDBA). A survey by Information Resources Inc. (IRI) showed that consumers increased meals prepared at home, remained stable on take-out and restaurant deliveries, but ate fewer meals on-site. (Read: Weekly Digest: Retail dairy sales reveal impact of COVID variant.)

Dairy Margin Coverage Program (DMC)

Little additional information has emerged regarding recent USDA announcements regarding the DMC program:

  • A change in the way feed costs are calculated each month, adjusting the monthly average prices of DMC hay to give greater recognition to the premium dairy grade Alfalfa fed by dairy farmers
  • An additional $ 580 million DMC program for small and medium farms

Dairy farmers should wait until these details are available before contacting their local USDA service center for more information.

The milk and feed price factors used to calculate the August 2021 DMC program margin and potential indemnity payments will be released by the USDA on September 30 and will be posted on the Progressive dairy products website. The September 2021 DMC program margin and potential indemnity payments will be released on October 29.

In addition, the registration period for the DMC 2022 program is expected soon, generally between October and December of the previous year.

Dairy-RP and LGM-Dairy

Dairy Revenue Protection (Dairy-RP) and Livestock Gross Margin for Dairy (LGM-Dairy) are two federally funded risk management programs administered by the USDA Risk Management Agency. Dairy-RP and LGM-Dairy are sold and delivered only through private crop insurance agents.

Availability of Dairy-RP and LGM-Dairy coverage will be affected by Veterans Day and Thanksgiving holidays in November (see Calendar).

Click here or on the calendar above to see it in full size in a new window.

Dairy-RP is available daily except holidays and USDA reporting days which may impact markets, including dairy production, cold storage, and dairy reports. Dairy-RP is also not available on days when applicable futures contracts increase or decrease the limit. Dairy-RP offers protection against an unexpected drop in income (yield and / or price) of milk. Dairy-RP coverage is generally available for milk produced four or five quarters in the future, so producers should be able to start protecting prices until the first quarter of 2023.

Sales periods for the LGM-Dairy program are open on a weekly basis, but unlike Dairy-RP, they are available even if a sales period falls on the day of a USDA report. LGM-Dairy factors are calculated using the average closing prices of Chicago Mercantile Exchange (CME) Class III milk, corn and soybean meal futures contracts Tuesday through Thursday. The policy sales period opens Thursday from 4:30 p.m., and sales end at 9:00 a.m. (both hours Central Time) on Friday. LGM-Dairy coverage is available over 12 months, excluding the first month. You must select coverage in two month increments to get a premium grant from the USDA.

Things to consider

A concern most often heard by Progressive dairy products concerns milk yield calculations under Dairy-RP. Estimates of total milk production are fairly accurate based on the levy dollars they generate, but the estimated number of cows is based on voluntary USDA surveys, which can confuse average milk yield calculations when milk production is divided by the number of cows. With genomics, sexed semen, and greater reproductive efficiency, dairy farmers are selecting and breeding cows that could exceed yield estimates. Due to the purchase of a lower expected yield Dairy-RP cover, the increase in income from a higher actual milk yield per cow may offset any drop in milk prices, which may render some producers ineligible. compensation payments. Discuss this with your Dairy-RP insurance provider.

Other resources

  • The Pennsylvania Center for Dairy Excellence hosts a monthly “Protecting Your Profits” webinar. Zach Myers, CDE Risk Education Manager, reviews current milk market data to guide decision-making and risk management strategies. A recording of the September 22 webinar is available here. The next webinars will take place on October 27 and November 24, starting at noon (Eastern Time). Prior registration is not necessary. To participate in the webinar, click here or by phone: (646) 558-8656. When prompted, enter Meeting ID 848 3416 1708 and Passcode 474057.
  • The administrators of the Federal Milk Marketing Ordinance (FMMO) will announce the September uniform prices, pooling data and producer price differentials at the start of the week starting October 11. Progressive dairy products website for updates. end mark
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