Our Risk-Cutting Approach

Travis Larson
 

Okeechobee, Fla.

Larson is a third-generation dairy producer in southern Florida, milking 4,200 cows.

Larson Dairy is no different than many other dairies in the sense that we are dealing with feed prices at a record high and milk prices that are marginal compared to the increases in feed prices.

Even though 2013 projections look favorable, how many of us can weather the storm through the fall of 2012 and winter 2013? Currently, Larson Dairy does not do any hedging on milk; however, we do some forward pricing on feed.

When we look at risk management, we always think about forward contracting feed and milk. However, we manage our risk by increasing and protecting the largest part of our ration, which is our forages.

Larson Dairy uses the warm weather and long growing season to harvest a carryover crop of haylage and corn silage every year. This allows us to protect the price and availability of our largest feed item.

Larson Dairy also participates in a drought insurance program. We insure acres of grazing pasture as well as acres of hay production. In the last couple years, this drought insurance has been very beneficial compared to the cost of the premium.

At Larson Dairy, we realize the need for additional risk management tools as our industry continues to change. We are learning about different options and will continue to strive to expand our use of forward pricing in the feed and milk markets. We realize that producing a quality product efficiently is no longer enough to survive in the dairy industry.