The Revenue Protection program allows dairy farmers to purchase risk management protection against declines in quarterly revenue from milk sales. This includes an unexpected decline in milk prices, an unexpected decline in milk production, or an unexpected decline in both milk prices and milk production.
Farmers Simply Select:
1. How milk is priced –
a) classified milk price, or
b) a combination of milk components (milkfat, protein, and other milk solids)
2. Coverage level – 70% to 95% of expected (guaranteed) revenue
3. Quarterly time frame of coverage
4. Protection Factor
5. Amount of Milk Production to cover
The revenue guarantee will be based on future milk prices, expected production, and market-implied risk.
Purchasing a Policy
The policy will be sold on a daily basis and would insure a quarter of milk production. Policies can be purchased beginning October 9th, 2018 for an individual quarter, or a strip of quarters, up to five quarters out. The price of the policy varies daily based on the farmer-selected parameters on the expected risk in the market.
Once the monthly milk and component prices are announced for the quarter, and USDA’s milk production report identifies the actual milk production per cow for each state, the state-indexed actual revenue will be compared against the revenue guarantee. If the actual revenue is below the guarantee, the farmer is paid a policy indemnity based on the difference. If the state-indexed actual revenue is above the revenue guarantee, the farmer pays only the policy premium.
Subsidy Factors: This policy does include subsidies, if in compliance with Conservation requirements, as shown below:
|90 - 95%
|75 - 80%
Why Buy This?
This product was developed to help dairy farmers address some of the biggest risks they have in their operations – particularly those associated with the milk price basis and the variability in milk production. This product allows dairy producers to value milk based on the milk components or a mix of Class III and Class IV milk prices, therefore addressing the risk associated with milk prices, the variability in production, and the amount of revenue a cow generate each month. It’s a great alternative to the current Dairy Margin Protection Policy (MPP).