With feed prices escalating rapidly in recent years, many dairy producers have cut back on certain ingredients in order to minimize their ingredient costs. Of course, a cheaper and, more importantly, less energy-dense ration is often associated with reduced milk production.

Dairy and other agricultural producers confront a variety of risks in running their operations. This article will focus on price risk, specifically on the output side – that is the price of milk received. Over the past three decades, U.S. agricultural policy has begun to dismantle the myriad of support programs for basic farm commodities that have existed since the Great Depression.