Glossary

Helpful Terms

Basis – a way to adjust milk and feed prices to more accurately reflect your actual farm values. This amount is unique to each farm but we estimate it to be between $1.15 to $2.90 per cwt

Call/Ceiling– Provides owners the right, but not the obligation, to buy futures contracts at a specific strike price. Producers can sell this right. It is the top line where you will pay us if ROF goes above it.

Hedge – taking equal and offsetting positions in future markets (buying a Floor and selling a Ceiling)

Margin– the difference between the selling price and the cost of production.

MPP – Margin Protection Program. A government offered program where producers can buy a floor to protect themselves against low dairy margins.

Option – the right to buy or sell a future contract

Option Premium – The cost to purchase an option

Put/Floor – Provides owners the right, but not the obligation, to sell futures contracts at predetermined strike price. Producers can buy this right. It is the bottom line where we will pay you if ROF drops below it.

ROF– Revenue Over Feed. A program offered by CSC where producers can buy efficiently and effectively manage their risk by selling a ceiling and buying a floor. ROF formula = milk-corn-soybean meal

ROFL – Revenue Over Feed Lite. A program offered by CSC where producers can efficiently and effectively manage their risk by selling a ceiling and buying a floor. ROF formula = milk-corn-soybean meal ROF formula = milk-soybean meal

ROF+ – Revenue Over Feed Plus. A program offered by CSC where a producer can buy a call that pairs with their MPP floor

ROFL+ – Revenue Over Feed Lite Plus. A program offered by CSC for producers who grow their own forages and silage where a producer can buy a ceiling that pairs with their MPP floor. ROF formula = milk-soybean meal

Settlement – the price where a future contract settles at the end of a trading period.

Strike – Price at which you may buy or sell the futures contract.

Window – the area between the floor and the ceiling