Following the completion of a pilot project for milk price hedging, Germany’s largest dairy cooperative DMK are now introducing a milk price hedging model. From November, farmers will be able to hedge part of their milk volume at fixed prices, thus providing additional planning security.
DMK launched a pilot project with 26 farms in mid-2019 to put the price hedging model through its paces in real-life use. During the test phase the farmers concluded hedging transactions in real operations. From the end of September DMK farmers will now be able to register for “Fixed Price”.
The DMK model “Fixed Price” can be explained in five steps: First, the DMK Group calculate fixed prices for 12 months on the basis of the stock exchange milk value. The farmer can then decide whether and what quantities to offer at the respective fixed price. A maximum of 30 percent of the average monthly milk volume can be hedged. DMK then hedges the fixed-price offer as far as possible by selling commodity futures. The farmer delivers his milk and receives the fixed price for his confirmed quantity with the milk money settlement. DMK simultaneously terminates the hedging transactions.
