A new organization in the dairy industry is the National Dairy Producers Organization. Headquartered in Fresno, California, the NDPO was organized last September. The primary organizer is Tom Van Nortwick, editor of Agribusiness Dairyman magazine.
The NDPO seeks to represent dairy producers regardless of size or region. The mission of the NDPO is to influence dairy policy discussions—with the goal of improving profitability for producers. The organization has formed a board of directors, and is in the process of forming state delegations.
The board chair is Bill Rowell. Readers of this blog will recognize Mr. Rowell. Together with his brother Brian Rowell, Bill is involved in Green Mountain Dairy in Sheldon, VT, which was Vermont Farm of the Year in 2008. The Yankee board and staff toured Green Mountain Dairy last summer. Bill Rowell has been active in recent dairy policy discussions through Dairy Farmers Working Together.
Click here for more information (1 MB PDF file) about the National Dairy Producers Organization including a membership application.
News articles about the formation of the National Dairy Producers Organization:
The Evening Sun 10/11/10
The Country Today 11/10/10
Capital Press 11/19/10
UPDATE 1/04/11: Additional information about the National Dairy Producers Organization and more links can be found in the first comment.
UPDATE 1/13/11: The NDPO has approved a Contract with Producers which states its positions.
UPDATE 1/27/11: The NDPO will hold a conference call specifically for Vermont dairy producers on Thursday, Feb. 3 at 8:00 PM. The call in number is 424-203-8000, the participant code is 327974 #. For more information contact Bill Rowell.
UPDATE 1/27/11: The NDPO will hold its first annual meeting at the World Ag Expo in Tulare, California, on Feb. 8-10. All dairy producers are invited to attend. For more information contact Bill Rowell.
Friday, December 31, 2010
Thursday, December 30, 2010
Two Senior Management Positions Open
We have openings for two senior management positions on our staff: a Senior Vice President/Regional Manager and a Chief Financial Officer. Details on our web site here:
Career Opportunities
The SVP/Regional Manager position is for our Northern Region. This position is to replace Ken Buzzell who is retiring next March after nearly 30 years of service.
The CFO position is a new position. We have not had a senior manager with that title since 2003.
If you know of anyone who might be a good fit for either position, please feel free to refer them to the link above. Anyone with questions may contact either Ruchel or me.
Career Opportunities
The SVP/Regional Manager position is for our Northern Region. This position is to replace Ken Buzzell who is retiring next March after nearly 30 years of service.
The CFO position is a new position. We have not had a senior manager with that title since 2003.
If you know of anyone who might be a good fit for either position, please feel free to refer them to the link above. Anyone with questions may contact either Ruchel or me.
LGM-Dairy Update
Below is the second report from a dairy farmer using Livestock Gross Margin insurance (LGM-Dairy):
LGM-Dairy Blog Update
It has been awhile since I last wrote, but I thought I would write an update with our latest.
I think since I last wrote, LGM-Dairy has picked up a lot of interest and awareness. I know it was a topic of conversation with my husband’s family at Thanksgiving. His cousin was thinking of signing up for it and found out that there was only two contracts in the whole state that had been signed up till then – you guessed it, ours!
We shared our strategy with him – basically to maintain some sort of coverage at all times, or for however long we can. But really, we’re just testing it all out! We are using the default feed rations and trying out 100 cwts per month of coverage.
We should find out what happens for the December actual margin in the next few days. We first signed up in October, so December is our first month of coverage.
We also signed up in November for January margin coverage. We did the same thing that we did the previous month. However, we did change things up for the December sign-ups. A bunch of changes have been made and put into place for the program starting with applications completed in December.
I’m excited that the program is catching on. No doubt volatility is here to stay – even if we do reform milk pricing in the U.S. A paper that was put out by Mark Stephensen and Chuck Nicholson that analyzed the different policy proposals showed different levels of impact on a future projected price. One thing was true of all the proposals, however, while volatility may have been lessened, it was not eliminated.
There are tools out there already existing like LGM-Dairy and there are more to be created I’m sure to help alleviate this risk. I don’t want to wait for reform that may or may not happen. We’re taking whatever steps right now to try to manage the swings better. Someone once said, “If it is to be, it is up to me.”
************************************************************************
Many thanks to our anonymous farmer for sharing this experience with us!
See also:
Testing LGM-Dairy (the first report in this series)
LGM-Dairy Calculations (online LGM Analyzer)
Anyone with questions may post a comment on any of these blog posts. You may also directly e-mail our insurance agent Shantel Thomas or me.
UPDATE 1/03/11: Shantel had a baby boy this morning! Both mother and son are doing well. Until Shantel returns from maternity leave, Yankee's contact for crop insurance and LGM-Dairy insurance is Jeremy Forrett of Crop Growers. Anyone with questions can e-mail Jeremy or me.
LGM-Dairy Blog Update
It has been awhile since I last wrote, but I thought I would write an update with our latest.
I think since I last wrote, LGM-Dairy has picked up a lot of interest and awareness. I know it was a topic of conversation with my husband’s family at Thanksgiving. His cousin was thinking of signing up for it and found out that there was only two contracts in the whole state that had been signed up till then – you guessed it, ours!
We shared our strategy with him – basically to maintain some sort of coverage at all times, or for however long we can. But really, we’re just testing it all out! We are using the default feed rations and trying out 100 cwts per month of coverage.
We should find out what happens for the December actual margin in the next few days. We first signed up in October, so December is our first month of coverage.
We also signed up in November for January margin coverage. We did the same thing that we did the previous month. However, we did change things up for the December sign-ups. A bunch of changes have been made and put into place for the program starting with applications completed in December.
- You no longer pay the premium up front, but rather at the end of the premium. Boy, does that take a hurdle out of signing up! For our low level of coverage- 100 cwts - the premium was not too bad for one month. But if we wanted to consider signing up more than one month, ten for example, that means we would have had to pay ten times what we were!
- There is a subsidy to go against the premium now, but you have to sign up for a minimum of two months. So, we signed up 100 cwts for two months – February and March. In the future I think we may look to sign up for more consecutive months.
- There are also deductibles that you can take off the top to help with your premium if you are signing up a lot of margin coverage. With our 25 cows, 100 cwts actually ends up being 22% of our total monthly milk production. We may look to increase that somehow – whether its overlap coverage so at any given time 44% of our margin and/or to simply increase the cwts of coverage.>
I’m excited that the program is catching on. No doubt volatility is here to stay – even if we do reform milk pricing in the U.S. A paper that was put out by Mark Stephensen and Chuck Nicholson that analyzed the different policy proposals showed different levels of impact on a future projected price. One thing was true of all the proposals, however, while volatility may have been lessened, it was not eliminated.
There are tools out there already existing like LGM-Dairy and there are more to be created I’m sure to help alleviate this risk. I don’t want to wait for reform that may or may not happen. We’re taking whatever steps right now to try to manage the swings better. Someone once said, “If it is to be, it is up to me.”
************************************************************************
Many thanks to our anonymous farmer for sharing this experience with us!
See also:
Testing LGM-Dairy (the first report in this series)
LGM-Dairy Calculations (online LGM Analyzer)
Anyone with questions may post a comment on any of these blog posts. You may also directly e-mail our insurance agent Shantel Thomas or me.
UPDATE 1/03/11: Shantel had a baby boy this morning! Both mother and son are doing well. Until Shantel returns from maternity leave, Yankee's contact for crop insurance and LGM-Dairy insurance is Jeremy Forrett of Crop Growers. Anyone with questions can e-mail Jeremy or me.
Wednesday, December 29, 2010
AgEnhancement Grants
The Farm Credit Northeast AgEnhancement Program recently awarded grants totaling $32,360 to 16 organizations. The grants are intended to promote northeast agriculture. The recipients were:
New York Farm Bureau Young Farmers Program - $1,000 to support a leadership development conference to provide educational and motivational sessions for young farmers.
Down East Business Alliance - $1,000 to support workshops and speakers at the Maine Farmers’ Market Convention. The event provides direct marketing training for farmers and farmers’ market managers.
Vermont Holstein Association - $2,000 to support their Northeast Show Calf Summit in April. This event brings together over 150 youth from New England and New York to educate both farm and non-farm youth on animal agriculture and the selection and care of dairy heifers.
Harvest New England - $2,000 to support the 2011 Harvest New England Agricultural Marketing Conference & Trade Show. The funds will be used for speaker sponsorships. The focus and goal of the conference is to provide the participants with the tools and skills needed to increase markets for agricultural products and grow New England agriculture.
Northeast Organic Farming Association of Vermont (NOFA–VT) - $500 to support their Annual Winter Conference, which brings together nearly 1,500 organic farmers, to take part in a variety of workshops.
University of New Hampshire (UNH) Dairy Club - $3,500 to support the Northeast Student Affiliate Animal Agriculture Academic Triathlon. This event is expected to draw 160 animal science or agricultural college students from 13 colleges and universities in the Northeast.
New York Holstein Association - $1,000 to support their annual New York Spring Dairy Carousel which offers judging contests to develop leadership skills and increases knowledge of cattle.
Cornell Dairy Fellows Program - $5,000 to provide an in-depth understanding of the dairy industry for its current class of Fellows. Cornell Dairy Fellows is a comprehensive undergraduate program that is nationally recognized as one of the best training opportunities for students considering careers in the dairy industry.
Granite State Association of FFA - $1,000 to support a leadership training conference for high school students of agriculture. The weekend-long program will include sessions on goal setting, character development, teamwork, agricultural issues and leadership skills.
Northeast Organic Farming Association of New York (NOFA-NY) - $500 to support the NOFA-NY Winter Conference held in January. The conference will provide workshops on farm profitability and business planning, organic farming methods, marketing, and other topics.
Connecticut Agricultural Education Foundation - $3,000 to purchase selected books for educating about agriculture. This Ag Literacy program is in support of its mission of fostering awareness, understanding and a positive public perception of agriculture, and an appreciation of Connecticut’s agriculture and the food, fiber, flower and fuel system.
New York State Maple Producers Association - $1,500 for the Maple Producer’s Association Urban Youth Education project. This ongoing project brings local maple agriculture to the urban elementary/middle school students of New York City.
Massachusetts Agriculture in the Classroom - $2,860 to initiate a new effort for educators who are new to classroom teaching or who work in low-income urban communities. The new Agriculture in the Classroom scholarship initiative for teachers will promote an understanding of agriculture and develop connections from the farm to the classroom. The teachers will then educate children about modern day agriculture.
New Jersey Agricultural Society - $5,000 to support the New Jersey Agricultural Leadership Development Program which provides young farmers and agri-business professionals with the training and support to become leaders in the agricultural industry.
Northeast Livestock Exposition - $2,000 to support this group’s Youth Events segment of the Exposition which will focus on the variety of agricultural careers available to youth in the Northeast. Skill development, knowledge of the many facets of agri-business, leadership and teamwork skills are the focus of this three day event.
Northeast Organic Farming Association of New Hampshire (NOFA-NH) - $500 to support their one-day Winter Conference to provide training, mentoring and resources to new and beginner farmers and the next generation of farmers; children and youth and those educators who have successfully integrated agriculture into academic curricula.
The Farm Credit Northeast AgEnhancement Program is a shared effort of Farm Credit East, Yankee Farm Credit, Farm Credit of Maine and CoBank. Grants are awarded in April, August and December each year. For 2010 the program awarded 41 grants totaling $92,160. Since its inception in 1996 the program has awarded 448 grants totaling $1.2 million.
New York Farm Bureau Young Farmers Program - $1,000 to support a leadership development conference to provide educational and motivational sessions for young farmers.
Down East Business Alliance - $1,000 to support workshops and speakers at the Maine Farmers’ Market Convention. The event provides direct marketing training for farmers and farmers’ market managers.
Vermont Holstein Association - $2,000 to support their Northeast Show Calf Summit in April. This event brings together over 150 youth from New England and New York to educate both farm and non-farm youth on animal agriculture and the selection and care of dairy heifers.
Harvest New England - $2,000 to support the 2011 Harvest New England Agricultural Marketing Conference & Trade Show. The funds will be used for speaker sponsorships. The focus and goal of the conference is to provide the participants with the tools and skills needed to increase markets for agricultural products and grow New England agriculture.
Northeast Organic Farming Association of Vermont (NOFA–VT) - $500 to support their Annual Winter Conference, which brings together nearly 1,500 organic farmers, to take part in a variety of workshops.
University of New Hampshire (UNH) Dairy Club - $3,500 to support the Northeast Student Affiliate Animal Agriculture Academic Triathlon. This event is expected to draw 160 animal science or agricultural college students from 13 colleges and universities in the Northeast.
New York Holstein Association - $1,000 to support their annual New York Spring Dairy Carousel which offers judging contests to develop leadership skills and increases knowledge of cattle.
Cornell Dairy Fellows Program - $5,000 to provide an in-depth understanding of the dairy industry for its current class of Fellows. Cornell Dairy Fellows is a comprehensive undergraduate program that is nationally recognized as one of the best training opportunities for students considering careers in the dairy industry.
Granite State Association of FFA - $1,000 to support a leadership training conference for high school students of agriculture. The weekend-long program will include sessions on goal setting, character development, teamwork, agricultural issues and leadership skills.
Northeast Organic Farming Association of New York (NOFA-NY) - $500 to support the NOFA-NY Winter Conference held in January. The conference will provide workshops on farm profitability and business planning, organic farming methods, marketing, and other topics.
Connecticut Agricultural Education Foundation - $3,000 to purchase selected books for educating about agriculture. This Ag Literacy program is in support of its mission of fostering awareness, understanding and a positive public perception of agriculture, and an appreciation of Connecticut’s agriculture and the food, fiber, flower and fuel system.
New York State Maple Producers Association - $1,500 for the Maple Producer’s Association Urban Youth Education project. This ongoing project brings local maple agriculture to the urban elementary/middle school students of New York City.
Massachusetts Agriculture in the Classroom - $2,860 to initiate a new effort for educators who are new to classroom teaching or who work in low-income urban communities. The new Agriculture in the Classroom scholarship initiative for teachers will promote an understanding of agriculture and develop connections from the farm to the classroom. The teachers will then educate children about modern day agriculture.
New Jersey Agricultural Society - $5,000 to support the New Jersey Agricultural Leadership Development Program which provides young farmers and agri-business professionals with the training and support to become leaders in the agricultural industry.
Northeast Livestock Exposition - $2,000 to support this group’s Youth Events segment of the Exposition which will focus on the variety of agricultural careers available to youth in the Northeast. Skill development, knowledge of the many facets of agri-business, leadership and teamwork skills are the focus of this three day event.
Northeast Organic Farming Association of New Hampshire (NOFA-NH) - $500 to support their one-day Winter Conference to provide training, mentoring and resources to new and beginner farmers and the next generation of farmers; children and youth and those educators who have successfully integrated agriculture into academic curricula.
The Farm Credit Northeast AgEnhancement Program is a shared effort of Farm Credit East, Yankee Farm Credit, Farm Credit of Maine and CoBank. Grants are awarded in April, August and December each year. For 2010 the program awarded 41 grants totaling $92,160. Since its inception in 1996 the program has awarded 448 grants totaling $1.2 million.
Tuesday, December 28, 2010
Celebrating the Fruits of Local Agriculture
Each Christmas Yankee directors and employees celebrate the diversity of local agriculture with a selection of tasty food products from farmers in Yankee's territory. This year's selection included:
Sheep Sticks – from Tom Duclos & Lisa Thompson's operation on Sheep Farm Road in Weybridge, VT
Maple Cream – from James & Gayle Rowe, Mountainside Maple, Huntington, VT
Pickles/Beets – from Sandy Aylward, Fairfield ,VT
Gouda or Jack Cheese – from Taylor Brothers Creamery in Meriden, NH
Sparkling Cider – from Poverty Lane Orchards & Farnum Hill Ciders in Lebanon, NH
Maple Candy – from Couture’s Maple Shop in Westfield, VT
Horseradish – from Jed’s Maple in Westfield, VT
Pizzelles & Rolls - from "A Little Organic" by Susan Fournier of Swanton, VT
Once again we extend our sincere appreciation to all farmers in Yankee's territory for the wonderful bounty from their farms.
Sheep Sticks – from Tom Duclos & Lisa Thompson's operation on Sheep Farm Road in Weybridge, VT
Maple Cream – from James & Gayle Rowe, Mountainside Maple, Huntington, VT
Pickles/Beets – from Sandy Aylward, Fairfield ,VT
Gouda or Jack Cheese – from Taylor Brothers Creamery in Meriden, NH
Sparkling Cider – from Poverty Lane Orchards & Farnum Hill Ciders in Lebanon, NH
Maple Candy – from Couture’s Maple Shop in Westfield, VT
Horseradish – from Jed’s Maple in Westfield, VT
Pizzelles & Rolls - from "A Little Organic" by Susan Fournier of Swanton, VT
Once again we extend our sincere appreciation to all farmers in Yankee's territory for the wonderful bounty from their farms.
Monday, December 27, 2010
LGM-Dairy Calculations
We recently started following the experience of a dairy farmer using Livestock Gross Margin (LGM-Dairy) contracts. Click here for the first post in this series.
Let's see if we can duplicate these numbers from that post: "Our premium is $40 for the month and we are insuring $1,468 gross margin." Recall that the example in that post was to insure 100 cwt with no deductible. The contract was entered into in October 2010, and one month was insured - December 2010.
Prof. Brian W. Gould of the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison has helpfully created an online LGM Analyzer:
http://future.aae.wisc.edu/lgm_analyzer_new/
Open the LGM Analyzer at the link above in a new window and follow these steps:
Now scroll down and click the "Calculate LGM Premium" button. You will see that the premium is $0.40/cwt or $40 total. Voila!
Let's see if we can duplicate these numbers from that post: "Our premium is $40 for the month and we are insuring $1,468 gross margin." Recall that the example in that post was to insure 100 cwt with no deductible. The contract was entered into in October 2010, and one month was insured - December 2010.
Prof. Brian W. Gould of the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison has helpfully created an online LGM Analyzer:
http://future.aae.wisc.edu/lgm_analyzer_new/
Open the LGM Analyzer at the link above in a new window and follow these steps:
- Select "Premium Estimator" tab
- Change the insurance contract month to 2010 October
- Change the deductible to $0.0
- Select "Default" for feed values
- Uncheck the box in the header that says "Coverage Month"
- Check the box in that column for "Dec 2010"
- On the row for "Dec 2010" enter 100 for Milk Qty.
- On the same row, the column for "% covered" should autofill to 100
Now scroll down and click the "Calculate LGM Premium" button. You will see that the premium is $0.40/cwt or $40 total. Voila!
Monday, December 20, 2010
Director Nominations
It's that time of year again when Yankee's Nominating Committee begins selecting director candidates for the elections in April 2011. There will be three elections, one director in each of the three regions. Each position is for a three year term. If you would like to be considered for nomination, please contact a member of the Nominating Committee at the numbers below or call your local branch.
Region #1 (Chittenden, Franklin, Grand Isle counties, Vt.; Essex, Clinton counties, N.Y.)
Arnold Mercy 802-326-4200
Wynn Paradee 802-524-4202
Mark Wrisley 518-963-4039
Region #2 (Caledonia, Essex, Lamoille, Orange, Orleans, Washington counties in Vt.; Coos and Grafton counties, N.H.)
Richard Hall 802-229-6342
Richard Martin 802-328-4120
Patrick Waterbury 802-785-4753
Region #3 (Addison, Bennington, Rutland, Windham, Windsor counties, Vt.; Cheshire and Sullivan counties, N.H.)
David Ainsworth 802-763-8017
N. Kimber Harvey 802-483-6130
Bruce Bascom 603-835-6361
If you have any questions about the purpose or the procedures of the Nominating Committee, please contact John Peters, VP Operations at 800-639-3053.
You can find general information about the director nomination process and the role of directors on the Farm Credit Administration's web site.
Region #1 (Chittenden, Franklin, Grand Isle counties, Vt.; Essex, Clinton counties, N.Y.)
Arnold Mercy 802-326-4200
Wynn Paradee 802-524-4202
Mark Wrisley 518-963-4039
Region #2 (Caledonia, Essex, Lamoille, Orange, Orleans, Washington counties in Vt.; Coos and Grafton counties, N.H.)
Richard Hall 802-229-6342
Richard Martin 802-328-4120
Patrick Waterbury 802-785-4753
Region #3 (Addison, Bennington, Rutland, Windham, Windsor counties, Vt.; Cheshire and Sullivan counties, N.H.)
David Ainsworth 802-763-8017
N. Kimber Harvey 802-483-6130
Bruce Bascom 603-835-6361
If you have any questions about the purpose or the procedures of the Nominating Committee, please contact John Peters, VP Operations at 800-639-3053.
You can find general information about the director nomination process and the role of directors on the Farm Credit Administration's web site.
Sunday, December 5, 2010
Testing LGM-Dairy
Livestock Gross Margin insurance for dairy farmers (LGM-Dairy) has been available since 2008, but there has been little interest in it until recently. In October we worked with a dairy farmer who wanted to try a small contract—just to see how it worked, with real numbers. The farmer agreed to anonymously write about their experience and let us discuss it here on the blog.
We are pleased and excited to follow this farmer's experience. We hope this will be an educational experience for the dairy community. If you have questions as we go along, please feel free to post a comment. You may also directly e-mail our insurance agent Shantel Thomas or me.
Here is the farmer's first report:
Testing LGM-Dairy… Protecting Against the Squeeze
I’m a numbers person. My fiancé is not. However, we are both dairy farmers. As a numbers person who spends a lot of time analyzing businesses, I know that one of the biggest drivers of profitability is driving gross sales. What makes up gross sales? Volume of production and price. As dairy farmers, while we determine how much milk we sell simply by how many cows we milk and how productive we get them, we have little control over the price that we are paid. Unless you are retailing your own product, this is one of the most frustrating things about the dairy farming business.
Up until a year ago I just raised heifers so I have only been watching what has been happening with various price risk management tools, (wishing I could actually use them). There are several available now, compared to a few years back. These choices are important as it seemed like the first few options that were out there did not quite fit our farm – 25 cows milking. Many tools seem to fit various larger farms of different scale – 150, 500 and 1,000-cow plus.
I first learned about LGM-Dairy about two years ago and it was very confusing. Monitoring its progress though, I did hear of a few farms that used it and who had experienced good results – a sufficient payout. However, there were still many drawbacks. It seemed to me that this product needed more testing.
In a recent newsletter about LGM-Dairy that I received, the author threw out the idea to test the program yourself with 100 hundredweights. My immediate thought was: how much would that cost? I did a little digging and found that the premiums range of course, depending on what you choose for a deductible but generally from $0.65 per cwt. downward. Well, shoot, that makes it only about $65 to try it out.
I shared what I learned with my fiancé and we decided to dig a little deeper. Couldn’t hurt! LGM-Dairy uses corn and soybean meal prices along with Class III milk prices in its gross margin equation. Well, we don’t grow corn on our farm and feed grass-based silage. Nothing against corn, it just does not like to grow where we are, though we are hopeful to try again sometime in the future. I didn’t know how our grass-based ration would work with LGM-Dairy. That, combined with a few more questions including how to sign up, led me to find a crop insurance agent. We found Shantel Thomas who works for Crop Growers, LLP at the Yankee Farm Credit office.
Shantel was able to answer our questions and explain that we could either convert our own ration or use a default ration to determine the gross margin we would be insuring. We chose the default because quite frankly, it was the easiest. Essentially, we would be insuring a national gross margin, not necessarily what we have on our farm. I think the drawback to this is that if we achieve a better gross margin ourselves than the national average in a lower feed cost, then we are not insuring as much margin as we could. But, hey, it’s a place to start.
So, that’s what we are doing: testing out the program for one month – December 2010, insuring 100 hundredweights, no deductible, for $0.40 per cwt. and using the default feed ration. We faxed over our application and a copy of the check to Shantel and put originals in the mail during the short sign-up window which is the last business Friday and Saturday of October from 4:30 pm Friday to 9:00 pm Saturday. Our premium is $40 for the month and we are insuring $1,468 gross margin. Our expectations are not that we will get a higher price in the milk check, but rather that we are protecting ourselves against higher feed costs and a lower milk price that may actually occur in December.
We plan to do the same thing at the end of November to cover January margin. In the future, we would consider insuring more hundredweights and potentially for a longer period of time. That newsletter I mentioned earlier also explained some recent changes that are coming, namely subsidies and the timing of premium payment. Currently you have to pay the premium at the beginning of the policy and starting with contracts made in December, you’ll pay at the end. Seems to make more sense to me, matching closer to when you actually get paid for your milk.
We are happy to share our experience with other dairy farmers. It seems that as an industry, we may be on the cusp of some changes in the way we market and get paid for our milk in this country. However, if changes are made, it does not look like they will happen very quickly – the 2012 Farm Bill maybe, but there is no guarantee the bill would actually pass in 2012 or even 2013 and then any new program would need funding to be worked out anyway. We would rather try something that has the potential to help now than wait on anyone else any longer.
We are pleased and excited to follow this farmer's experience. We hope this will be an educational experience for the dairy community. If you have questions as we go along, please feel free to post a comment. You may also directly e-mail our insurance agent Shantel Thomas or me.
Here is the farmer's first report:
Testing LGM-Dairy… Protecting Against the Squeeze
I’m a numbers person. My fiancé is not. However, we are both dairy farmers. As a numbers person who spends a lot of time analyzing businesses, I know that one of the biggest drivers of profitability is driving gross sales. What makes up gross sales? Volume of production and price. As dairy farmers, while we determine how much milk we sell simply by how many cows we milk and how productive we get them, we have little control over the price that we are paid. Unless you are retailing your own product, this is one of the most frustrating things about the dairy farming business.
Up until a year ago I just raised heifers so I have only been watching what has been happening with various price risk management tools, (wishing I could actually use them). There are several available now, compared to a few years back. These choices are important as it seemed like the first few options that were out there did not quite fit our farm – 25 cows milking. Many tools seem to fit various larger farms of different scale – 150, 500 and 1,000-cow plus.
I first learned about LGM-Dairy about two years ago and it was very confusing. Monitoring its progress though, I did hear of a few farms that used it and who had experienced good results – a sufficient payout. However, there were still many drawbacks. It seemed to me that this product needed more testing.
In a recent newsletter about LGM-Dairy that I received, the author threw out the idea to test the program yourself with 100 hundredweights. My immediate thought was: how much would that cost? I did a little digging and found that the premiums range of course, depending on what you choose for a deductible but generally from $0.65 per cwt. downward. Well, shoot, that makes it only about $65 to try it out.
I shared what I learned with my fiancé and we decided to dig a little deeper. Couldn’t hurt! LGM-Dairy uses corn and soybean meal prices along with Class III milk prices in its gross margin equation. Well, we don’t grow corn on our farm and feed grass-based silage. Nothing against corn, it just does not like to grow where we are, though we are hopeful to try again sometime in the future. I didn’t know how our grass-based ration would work with LGM-Dairy. That, combined with a few more questions including how to sign up, led me to find a crop insurance agent. We found Shantel Thomas who works for Crop Growers, LLP at the Yankee Farm Credit office.
Shantel was able to answer our questions and explain that we could either convert our own ration or use a default ration to determine the gross margin we would be insuring. We chose the default because quite frankly, it was the easiest. Essentially, we would be insuring a national gross margin, not necessarily what we have on our farm. I think the drawback to this is that if we achieve a better gross margin ourselves than the national average in a lower feed cost, then we are not insuring as much margin as we could. But, hey, it’s a place to start.
So, that’s what we are doing: testing out the program for one month – December 2010, insuring 100 hundredweights, no deductible, for $0.40 per cwt. and using the default feed ration. We faxed over our application and a copy of the check to Shantel and put originals in the mail during the short sign-up window which is the last business Friday and Saturday of October from 4:30 pm Friday to 9:00 pm Saturday. Our premium is $40 for the month and we are insuring $1,468 gross margin. Our expectations are not that we will get a higher price in the milk check, but rather that we are protecting ourselves against higher feed costs and a lower milk price that may actually occur in December.
We plan to do the same thing at the end of November to cover January margin. In the future, we would consider insuring more hundredweights and potentially for a longer period of time. That newsletter I mentioned earlier also explained some recent changes that are coming, namely subsidies and the timing of premium payment. Currently you have to pay the premium at the beginning of the policy and starting with contracts made in December, you’ll pay at the end. Seems to make more sense to me, matching closer to when you actually get paid for your milk.
We are happy to share our experience with other dairy farmers. It seems that as an industry, we may be on the cusp of some changes in the way we market and get paid for our milk in this country. However, if changes are made, it does not look like they will happen very quickly – the 2012 Farm Bill maybe, but there is no guarantee the bill would actually pass in 2012 or even 2013 and then any new program would need funding to be worked out anyway. We would rather try something that has the potential to help now than wait on anyone else any longer.
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