USDA EXPANDS DAIRY OPTIONS PILOT PROGRAM Release No. 0308.99 Mary Rekas (202) 720-4877 Mary_Rekas@wdc.usda.gov USDA EXPANDS DAIRY OPTIONS PILOT PROGRAM WASHINGTON, July 29, 1999 Agriculture Secretary Dan Glickman today announced Round II of the Dairy Options Pilot Program (DOPP). Dairy producers who complete this hands-on risk management training learn to protect their market price by buying futures options. "With the current volatility in the milk market, dairy producers must find ways to protect their price," said Glickman. "Because the DOPP proved so effective for Round I participants, we will extend the training to an additional 61 counties in 25 states. Bringing diverse geographical areas into the pilot program will help us prepare for national implementation." Developed by the Risk Management Agency, the program has worked particularly well due to partnerships with the Cooperative State Research, Education, and Extension Service; dairy industry groups at the state and county levels; and the two futures exchanges the New York Board of Trade and the Chicago Mercantile Exchange. While program partners organize the training, USDA supports participants with a cost-share program that pays 80 percent of the option premium and allows a $30 brokerage fee per transaction. Producers are encouraged to buy up to 425,000 pounds of milk options in the 4 months following training. A unique aspect of the program is the continuing counseling and advice available during the 12-month duration of the program. The 425 producers in 37 counties in seven states that participated in the first round of the DOPP program purchased almost 1,700 put options. These options gave producers the right, but not the obligation, to sell a futures contract, thereby ensuring producers a price floor for their milk. This hedging alternative can protect a producer's income if the market price falls below the put option price. If market price exceeds the put option price, the options can expire unused. Round I included: California: Kings, Merced, San Joaquin, Stanislaus, and Tulare Minnesota: Goodhue, Morrison, Otter Tail, Stearns, Todd, and Winona New York: Chautauqua, Jefferson, Lewis, Oneida, St. Lawrence, and Steuben Pennsylvania: Berks, Bradford, Chester, Crawford, Franklin, and Lancaster Texas: Hopkins, Johnson, and Wood Vermont: Addison, Caledonia, Franklin, Orange, and Rutland Wisconsin: Chippewa, Clark, Dane, Grant, Marathon, and Vernon Round II will add these counties: Arizona: Maricopa California: Marin and Sonoma Colorado: Weld Florida: Okeechobee and Gilchrist Georgia: Putnam and Morgan Idaho: Jerome, Gooding, and Twin Falls Illinois: Clinton and Washington Indiana: Elkhart and Marshall Iowa: Clayton, Dubuque, and Winneshiek Kansas: Nemaha Kentucky: Barren and Adair Maryland: Frederick and Carroll Massachusetts: Franklin Michigan: Sanilac, Allegan, and Clinton Minnesota: Wabasha and Fillmore Missouri: Wright and Webster Nebraska: Gage New Mexico: Chaves, Roosevelt, and Lea New York: Wyoming and Madison North Carolina: Iredell Ohio: Wayne, Mercer, and Ashtabula Oklahoma: Adair and Mayes Oregon: Marion and Washington Pennsylvania: Lebanon and Tioga South Dakota: Deuel and Grant Tennessee: McMinn Texas: Archer Utah: Cache and Utah Vermont: Washington Virginia: Franklin and Rockingham Washington: Whatcom, Skagit, and Snohomish Wisconsin: Barron and Shawano If you would like more information about the expanded DOPP, contact Lon Burke at (202) 720-5265, or email: Lon_Burke@wdc.usda.gov. Program information is also available from the homepage of the Risk Management Agency: http://www.usda.gov/rma/rme/