Explore and develop optimal hedging strategies that can be adopted by dairy producers

Principal Investigator: Jay Lillywhite, Agricultural Economics and Agricultural Business

Project summary:
Livestock is extremely important to New Mexico’s agricultural economy. Livestock, including dairy, accounts for 75% of the state’s agricultural revenue. Livestock owners and managers face numerous challenges, including volatile output and input prices. Volatile prices result in large cash flow and profitability swings. For example, in the dairy industry, if milk prices decrease by $1.00 per cwt. total producer income for the state falls by more than $78 million. This research will develop a hedging model that can be used by livestock producers, in conjunction with a comprehensive risk management program, to reduce cash flows volatility and improve profitability