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Dairy farmers are usually subject to net income fluctuations due to volatility in both milk and feed prices. Risk management tools, such as hedging milk prices in the futures market, may be used to protect dairy farmers against milk price volatility. Alternatively, dairy farmers selling milk in Virginia can buy Virginia milk commission base (MCB) to obtain higher milk prices and, therefore, sustain or increase net cash flows. A decision- making spreadsheet (http://pubs.ext.vt.edu/DASC/DASC-30/milk-commission-base.xlsx) was developed to help farmers evaluate the decision whether or not to purchase a certain amount of MCB to increase their net cash flows.
Virginia Cooperative Extension materials are available for public use, reprint, or citation without further permission, provided the use includes credit to the author and to Virginia Cooperative Extension, Virginia Tech, and Virginia State University.
Issued in furtherance of Cooperative Extension work, Virginia Polytechnic Institute and State University, Virginia State University, and the U.S. Department of Agriculture cooperating. Edwin J. Jones, Director, Virginia Cooperative Extension, Virginia Tech, Blacksburg; M. Ray McKinnie, Interim Administrator, 1890 Extension Program, Virginia State University, Petersburg.
January 10, 2014