Forward contracts are often presented as the silver bullet against milk price fluctuations, but a senior US analyst told a conference on dairy volatility this Wednesday that they do not boost income.
Speaking at the event organised by the IFA and FCStone in Portlaoise, Charlie Hyland, senior analyst with FCStone, showed that US dairy farmers supplying Dairy Farmers of America over a 14-year period are not better off when they use forward-selling and future markets.
Charlie Hyland FC Stone "US hedging delivers more stable returns but when managing risk you do give up opportunity." pic.twitter.com/krdl2Fail7
However, these farmers that take up the opportunity to forward sell have a much more stable weighted average milk price and avoid the real lows in milk price – as well as the real highs. Hyland said: “When you are managaing risk you are always giving up opportunity.”
Private broker
US dairy farmer Joe Thome from Wisconsin outlined that he started forward-selling milk in 2002 when he expanded his dairy herd. He has been using it since to manage milk price through the global downturns and upturns.
John explained that he likes to control the options himself with his private broker rather than get tied into state-subsidised schemes such as livestock gross margin (LGM) insurance and the Margin Protection Programme (MPP), which farmers can avail of.
Stay tuned to www.farmersjournal.ie and to the Irish Farmers Journal news app for more from the conference
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Speaking at the event organised by the IFA and FCStone in Portlaoise, Charlie Hyland, senior analyst with FCStone, showed that US dairy farmers supplying Dairy Farmers of America over a 14-year period are not better off when they use forward-selling and future markets.
Charlie Hyland FC Stone "US hedging delivers more stable returns but when managing risk you do give up opportunity." pic.twitter.com/krdl2Fail7
However, these farmers that take up the opportunity to forward sell have a much more stable weighted average milk price and avoid the real lows in milk price – as well as the real highs. Hyland said: “When you are managaing risk you are always giving up opportunity.”
Private broker
US dairy farmer Joe Thome from Wisconsin outlined that he started forward-selling milk in 2002 when he expanded his dairy herd. He has been using it since to manage milk price through the global downturns and upturns.
John explained that he likes to control the options himself with his private broker rather than get tied into state-subsidised schemes such as livestock gross margin (LGM) insurance and the Margin Protection Programme (MPP), which farmers can avail of.
Stay tuned to www.farmersjournal.ie and to the Irish Farmers Journal news app for more from the conference
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