1. Evaluation of the Dairy Options Pilot Program Monte Vandeveer, ERS-USDA Dairy Policy Workshop September 25, 2002

2. DOPP background n Authorized in FAIR Act of 1996 n Implemented by Risk Management Agency n Goal: help dairy producers learn how to use options to hedge price risk n Approach: educational programs for producers and subsidies for option premiums and broker’s commissions

3. DOPP background n 4 annual phases: Jan 1999 - Dec 2002 n Phase IV: 300 counties in 40 states n Up to 100 producers per county, up to 3 years for each producer n USDA pays 80% of premium cost, up to $30 per transaction for broker’s fee n Can hedge up to 600,000 lbs of milk during 12-month period (35-40 cows)

4. Initiative for study n DOPP: evaluation after 4 years of activity n RMA requested evaluation of program from ERS n Report to RMA by September 30, 2003

5. Some issues for study n Nature of price risk faced by dairy producers n Effectiveness of milk options for hedging price risk n Patterns of producer participation n DOPP and other price risk management strategies

6. Project Personnel n Leigh Maynard, University of Kentucky n Richard Heifner, Adjunct professor at UK, former ERS economist n Terry Crawford, Adjunct professor at New Mexico State U, formerly at ERS n Don Blayney, ERS-USDA n Monte Vandeveer, ERS-USDA

7. Your input n Your experiences and reflections on DOPP n Current and previous studies on price risk issues in dairy n Data n Review and feedback

8. Contact info Monte Vandeveer Economic Research Service 1800 M Street NW, Rm N5081 Washington DC 20036 Phone: 202-694-5158 Email: montev@ers.usda.gov