Dairy Revenue Protection – Risk Management for Today’s Dairy Operations
Dairy Revenue Protection (DRP) is designed to insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level. The expected revenue is based on futures prices for milk and dairy commodities and the amount of covered milk production elected by the dairy producer. The covered milk production is indexed to the state or region where the dairy producer is located.
DRP is approved for sale in all counties in all 50 states.
Dairy Revenue Protection Policy Overview
DRP offers two revenue pricing options:
- The Class Pricing Option uses a combination of Class III and Class IV milk prices as a basis for determining coverage and indemnities.
- The Component Pricing Option uses the component milk prices for butterfat, protein and other solids as a basis for determining coverage and indemnities. Under this option you may select the butterfat test percentage and protein test percentage to establish your insured milk price.
DRP policies function similar to crop revenue protection policies in that the revenue guarantee would be based on futures prices, expected production and market-implied risk.
Dairy Revenue Protection policies allow coverage levels from 70 percent to 95 percent of your expected quarterly revenue in five percent increments.
The dairy producer has six basic decisions to make on the Dairy-RP policy:
- Select component or class pricing option
- Select a quarterly insurance period
- Declare milk production
- Select a coverage level (from 70 to 95 percent of the revenue guarantee)
- Declare the share percentage
- Select a protection factor (1.00 – 1.50)
The Dairy-RP policy provides insurance for the difference between the final revenue guarantee and actual milk revenue, times your actual share and protection factor. This loss needs to be caused by natural occurrences in market prices and yields in your state-level or pooled production region. This policy does not insure against the death or other loss or destruction of your dairy cattle.
Dairy Revenue Protection is an easy-to-use product which has few coverage declarations, minimal reporting requirements and eligibility for all dairy farmers. Premiums are established and offered daily using actuarially appropriate methods. Benefits to dairy producers of purchasing Dairy-RP include:
- The flexibility of producer options
- Revenue risk coverage (quantity and price)
- Addresses coverage gaps in existing products
- Addresses basis risk through pricing options and production factor
- Reduced complexity
- Timely and market-based risk management.
Contact Us for Complete Policy Details
Additional information regarding Dairy Revenue Protection is available on the RMA website’s Livestock page, located at www.rma.usda.gov/livestock/.
We invite you to learn more from your trusted ProAg agent today about the Dairy Revenue Protection insurance program. Come experience the ProAg difference today.
Click on the brochure thumbnail above to download our PDF brochure or click here.
Not all coverage or products may be available in all jurisdictions. The description of coverage in these pages is for informational purposes only. Actual coverage will vary based on the terms and conditions of the policy issued. The information described herein does not amend, or otherwise affect, the terms and conditions of any insurance policy issued by ProAg or any of its subsidiaries.