Dairy Revenue Protection Policy

Learn about the Basics of the Dairy Revenue Protection Insurance
 

On August 8, 2018, USDA’s Risk Management Agency approved the first revenue protection insurance policy for dairy producers. The Dairy Revenue Protection Policy, developed by the American Farm Bureau Federation and American Farm Bureau Insurance Services, will provide indemnities when milk prices fall and actual revenue is below a revenue guarantee. 

What you need to know:

  • Sign up is expected to begin October 9, 2018.
  • Producers will be able to buy coverage for the first quarter of 2019.
  • Producers can still participate in the farm bill’s Margin Protection Program for dairy, even if they purchase revenue protection coverage.
  • Premium subsidies will vary depending on the coverage level. If the premium for 95 percent coverage is 20 cents per hundredweight, the farmer would pay 11 cents per hundredweight for the policy, according to an AFBF summary. 
  • RP coverage levels will be available in 5-percent increments for 70 to 95 percent of revenue and linked to prices for various products, including fresh milk, cheese or butterfat.
  • A farmer’s actual revenue will be determined by the value of milk, based off Chicago Mercantile Exchange futures, times the covered production. The farm’s production will be adjusted according to actual yields for the state or region. 

For example, if the expected milk production during the quarter is 5,000 pounds per cow, and USDA reports that actual milk production for the state or region is 5,100 pounds – 2 percent more than expected – there will be a yield adjustment factor of 1.02, which could lower a farm's indemnity. Likewise, if actual milk yield is lower than expected, the indemnity could be higher because of the yield adjustment.

FarmFirst Dairy Cooperative has been supportive of public and private risk management tools and is pleased to see this new insurance option available.

“Having more tools available to producers will allow for the use of a diverse package of options to protect producers’ bottom line,” says Jeff Lyon. “I encourage producers to thoroughly review the Dairy Protection Policy to determine if it meets their needs to manage and mitigate risk.”

Learn more about the Dairy Revenue Protection Insurance by visiting the American Farm Bureau Federation's website. To understand more about the calculations used for the insurance coverage, click here.

Additional Resources:

Dairy Revenue provides protection against a decline in revenue (yield and/or price) on the milk produced from dairy cows on a quarterly basis.