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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.
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March 23, 2018