Dairy Revenue Protection:
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:
- How milk is priced –
- Coverage level – 70% to 95% of expected (guaranteed) revenue
- Quarterly time frame of coverage
- Protection Factor
- 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 9, 2018 for an individual quarter, or several 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.
Claims Payments
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:
| Coverage Level |
Subsidy |
| 90 - 95% |
44% |
| 85% |
49% |
| 75 - 80% |
55% |
| 70% |
59% |
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).
Examples from the 2019 Dairy RP Policy
