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Livestock Gross Margin–Dairy: An Assessment of Its Effectiveness as a Risk Management Tool and Its Potential to Induce Supply Expansion

  • Kenneth H. Burdine (a1), Yoko Kusunose (a1), Leigh J. Maynard (a1), Don P. Blayney (a2) and Roberto Mosheim (a3)...

Abstract

An evaluation of the risk-reducing effectiveness of the Livestock Gross Margin–Dairy (LGM-Dairy) insurance program, using historical futures price data, predicts economically significant reductions in downside margin risk (24–41%) across multiple regions. Supply analysis based on the estimated risk reduction shows a small supply response, assuming minimal subsidization. A decomposition of the simulated indemnities into milk price and feed price components shows comovements in futures prices moderating the frequency and levels of indemnities.

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Keywords

Livestock Gross Margin–Dairy: An Assessment of Its Effectiveness as a Risk Management Tool and Its Potential to Induce Supply Expansion

  • Kenneth H. Burdine (a1), Yoko Kusunose (a1), Leigh J. Maynard (a1), Don P. Blayney (a2) and Roberto Mosheim (a3)...

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