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Dairy Options program ready

25 Minnesota counties involved in federal pilot effort

By Mychal Wilmes

wilmes@agrinews.com

ST. PAUL -- Dairy farmers in 25 Minnesota counties can participate in the Dairy Options Pilot Program, which is designed to educate producers about using the options market to reduce price risk.

The program uses put options as risk management tools. The puts allow farmers to purchase the right to sell milk at a given price. The farmer pays the premium to lock-in a price at a given date.

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If prices drop sharply after the option is purchased, the producer is protected and can still net the pre-set option price.

The program will be offered in Becker, Benton, Brown, Carver, Douglas, Fillmore, Goodhue, Houston, Kandiyohi, McLeod, Meeker, Mille Lacs, Morrison, Olmsted, Otter Tail, Pine, Pope, Rice, Scott, Sibley, Stearns, Todd, Wabasha, Winona and Wright counties.

The educational program run through the U.S. Department of Agriculture and the state ag department pays 80 percent of the premium for purchasing put options.

In addition, the program pays up to $30 in brokerage fees.

During the last year, about 2,700 options were purchased under the national DOPP program and more than 700 were bought in Minnesota resulting in more than $600,000 in payments to farmers in the state.

MDA ag risk management specialist David Bullock said dairy farmers have nothing to lose and plenty to gain by participating.

"DOPP helps farmers reduce their price risks, and it can make a big difference in the payoff they get for their hard work,'' he said. "This program is a great way for farmers to learn a technique that can help them improve their long-term financial standing.''

Producers are eligible if six months of production reaches a minimum of 100,000 pounds of milk, which is equal to the output of 20-30 cows.

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Maximum production that can be hedged is 600,000 pounds.

Dairy farmers in the 25 counties were sent information about DOPP in mid-June. Any producer in those counties who didn't get the DOPP information should contact Craig Rice at (651) 290-3304.

DOPP informational meetings are planned July 23 in the VFW, Zumbrota; July 24, Community Center, Lewiston; July 26, Kube's Supper Club, Norwood Young America; July 29, VFW, Perham; July 30, Diamond Point Restaurant, Sauk Centre; and July 31, Embers, Milaca.

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