November 25, 2009

Low milk prices coupled with high input costs have created economic struggles for many Kentucky dairy farmers in 2009. Kentucky Cooperative Extension agriculture and natural resource agents from Adair, Taylor and Green counties recently hosted a three-day Dairy Futures Short Course to present information on ways dairy producers can hedge future economic losses.

According to the most recent statistics from the U.S. Department of Agriculture, Adair County is the second-largest dairy producing county in the state. Taylor and Green counties also have a substantial number of dairies. Typically, the three counties present an annual short course on dairy basics, but due to the economic climate of the dairy industry, they decided to present an additional course on marketing options this year.

"This program is an example of how extension is assisting dairy farmers in tough times," said Nick Roy, Adair County extension agent for agriculture and natural resources.

During the program, specialists from the University of Kentucky and a consultant with the Kentucky Dairy Development Council presented options for managing risks including the basics of the futures market, contract specifications, hedging, basis and the USDA's Livestock Gross Margin program. A milk broker presented additional information about the futures market in the last session.

Brian Newman, Green County extension agent, said the futures market is like an insurance policy that could help producers limit economic hardships in the future.

"With futures, you may not always get the highest price, but at least you know you're making a profit," he said

UK agricultural economist Kenny Burdine said producers can incorporate these strategies into their future marketing plans and cautioned against relying on only one form of marketing for an entire operation.

"Through this program, producers will gain enough information about the futures market to make an educated decision on whether it fits their operation," said Pat Hardesty, agriculture and natural resources extension agent in Taylor County.

David Hutchison, an Adair County dairy producer, said the information he received in the program would help him make future marketing decisions.

"The futures market is something I've been thinking about and will probably be something I'll apply to my operation when the time comes," he said.

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