Dairy Cooperatives’ Role in Managing Price Risks

Prices for milk and dairy products have become increasingly unstable as the Government support safety net has been lowered. Dairy cooperatives’ traditional pricing system is delineated and their role in the new market environment is discussed. Some of the risks involved in using emerging hedging mechanisms such as futures, options, and forward contracting for managing price risks are assessed. The traditional pricing system in regard to managing price risks is evaluated. Guidelines for developing a cooperative’s hedging strategy are suggested