Dairy Revenue Protection – Risk Management for Today’s Dairy Operations
Dairy Revenue Protection (DRP) is a risk management tool that protects dairy farmers against quarterly revenue losses caused by declines in the value of milk or milk components, or unexpected declines in milk production. This is an area-based revenue insurance product backed by the Federal Crop Insurance Corporation and is indexed using the state-level milk prices.
To accurately capture the farm-level revenue risk, dairy farmers will determine how their milk is priced under the policy by selecting to use a classified milk price or a combination of the milk components in their milk (milkfat, protein, and other milk solids). Dairy-RP 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-RP 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.
Dairy-RP 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.
The dairy producer has six basic decisions to make on the DRP 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 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 More Information
If you are interested in having your local, trusted ProAg agent contact you about this risk management program, please fill out the short contact form below. We will have a ProAg crop insurance agent contact you soon. Come experience the ProAg difference today.
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.