When the USDA Dairy Revenue Protection (DRP) program was launched in late 2018, it offered dairy farmers new revenue assurances in a volatile marketplace. As of the second half of last year, around 35% of milk production in the U.S. was enrolled in the program. With so much participation, is DRP limiting liquidity and volume away from CME Group futures and options contracts? While there is a correlation between futures and option open interest and seasonal factors and a number of other variables, there has been between 8% and 10.5% more activity in the Class III market. But any lost liquidity in the market will likely return as more farmers use DRP as part of larger hedging strategies. That means that any volume taken from CME Group markets will likely return in the future, meaning DRP will have little long-term effect on the liquidity of CME Group futures and options. See more on the DRP situation.
