Let's manage dairy price risk

Dr Declan O’Connor, a statistics lecturer in MTU, looks at risk management tools that could help give farmers greater control over their finances — with the support of dairy processors and EU authorities

Janusz Wojciechowski, European Commissioner for Agriculture, has warned that the EU's agricultural reserve of €450 “is not sufficient in a situation of deep and widespread crises”; he is pictured here with Julia Klockner, German Federal Minister for Food and Agriculture.

The sudden and huge drop in the farm gate milk price in recent months is a stark reminder that price volatility is now a permanent feature of EU dairy markets.

This drop, coupled with the fact that input costs have not dropped to the same degree as the milk price, has led to a margin squeeze and serious cashflow problems on some farms.