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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
Published online by Cambridge University Press: 26 January 2015
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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- Research Article
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- Copyright © Southern Agricultural Economics Association 2014
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