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USDA offering new insurance for dairy producers

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Thus far, 2009 has not been a good year for dairy producers and the dairy industry. The combination of low milk prices and higher-than-normal feeding costs has producers in a very precarious financial position, with little or no margins to work with.

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In previous years, when feeding costs remained relatively stable, the primary concern for dairy producers was the amount of income generated from their milk sales. But in more recent years, higher prices for corn and soybean meal have greatly increased a dairy producer's input costs, resulting in extremely tight profit margins.

Making matters even more difficult is the price volatility that has permeated the markets lately, affecting not only grain prices but even the price for milk and a variety of milk products.

So to survive in today's economic environment, dairy producers need to have some protection from the unstable and often unpredictable market forces that can impact both the income and expense side of their ledger sheets.

In response to the financial dilemmas that dairy producers currently face, the U.S. Department of Agriculture and the Federal Crop Insurance board of directors approved a new type of insurance program for dairy producers this spring.

The livestock gross margin insurance program for dairy cattle is being offered for the 2010 crop year. Policies can be purchased in 33 states, including Minnesota, starting July 31.

The livestock gross margin insurance program for dairy cattle provides producers with protection against the loss of "gross margin" on milk produced from dairy cows. For insurance purposes, gross margin is defined as the market value of milk minus feeding costs.

Producers can sign up as often as 12 times per year and insure all of the milk they expect to produce and market over a rolling 11-month insurance period.

The indemnity at the end of the 11-month insurance period is the difference between the gross margin guarantee and the actual gross margin.

The program uses futures prices for corn, soybean meal and milk to determine the expected gross and actual gross margins. The price the producer received at the local market is not used for indemnity calculation purposes.

The livestock gross margin insurance program for dairy cattle is different from traditional options in that it is a bundled option that covers both the price of milk and feed costs.

The mix of target milk receipts and target feed rations, on a per cow basis, are determined by the producer. This feature allows producers to select the feed rations and production levels that best reflect their production situation.

More information about the livestock gross margin insurance program for dairy cattle is available at: www.rma.usda.gov.

U.S. and Canada announce organic trade agreement

Agricultural officials from Canada and the U.S. Department of Agriculture have announced that an agreement has been reached that will expand opportunities for organic producers in both countries.

Following reviews of each other's organic certification programs, producers and processors that are certified to the National Organic Program standards by a USDA-accredited certifying agent do not have to become certified to the Canada Organic Production Regulation standards in order for their products to be represented as organic in Canada.

Likewise, products certified to Canada's organic standards may be sold or labeled in the United States as organically produced.

Both the USDA organic seal and the Canada organic logo may be used on certified products from both countries.

Canada is the largest U.S. trade partner and the largest estimated export market for U.S. organic products. According to USDA estimates, more than 80 percent of Canada's organic consumption comes from imports, and approximately 75 percent of those imports come from the United States.

Consumer demand for organic food has risen quickly over the past 10 years, triggered in part by the development and success of USDA's organic regulatory program and label.

Since the late 1990s, U.S. organic production has more than doubled, but the consumer market has grown even faster. Organic food sales have more than quintupled, increasing from $3.6 billion in 1997 to $24.6 billion in 2008.

According to the Organic Trade Association, more than two-thirds of U.S. consumers buy organic products at least occasionally and 28 percent buy organic products weekly.

Wes Nelson is executive director of the USDAFarm Service Agency in Kandiyohi County.

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