US farm programs have been moving towards using insurance to provide the farm safety net for many years but this policy transformation has not been realized for dairy farms. Historically, support for dairy farmers focused on milk price but has been declining in real terms for decades. Dairy policy in the US has been in flux because of the recent increases in feed price levels and increases in export markets that have made historic milk price supports essentially irrelevant. Recently a program of subsidized insurance for the margin between milk and feed price has met with limited success. We analyze the potential demand for margin insurance using estimates from a survey of US dairy farmers. Dairy farmers with larger herds and more education were willing to pay more for the insurance. In addition, those dairy farm operators who had used milk and feed price risk instruments in the past were willing to pay more for margin insurance than those who had not. However, the willingness-to-pay for these contracts by farmers who had not used risk management tools was low, calling into question the feasibility of using margin insurance as the foundation of policies intended to support all dairy farms.
Dairy farms Dairy policy Margin insurance Price support Willingness-to-pay