Dairy Revenue Protection (DRP)

Check out some of our dairy revenue protection options below!

Check out some of our options below!

Ending Milk Prices and Yield

The actual ending milk or component values are based upon the monthly average prices announced by USDA’s Agricultural Marketing Service. Actual ending values are posted on RMA’s website at the end of the insurance period. The milk yields are based on USDA’s National Agricultural Statistics Service Milk Production report.

Causes of Loss

Dairy-RP provides insurance only for the difference between the final revenue guarantee and actual milk revenue, times actual share, and protection factor, caused by natural occurrences in market prices and yields in the pooled production region. DRP does not insure against:

• Death of dairy cattle
• Other loss or destruction of your dairy cattle
• Any other loss or damage of any kind whatsoever

Quarterly Insurance Period

The quarterly insurance period contains the three-month periods corresponding to one of eight quarters for which coverage is available under the quarterly coverage endorsement. For example, the insurance period for the January 10 sales closing date contains the quarters of April through June, July through September, October through December, January through March, and April through June.

FAQ

How much does dairy insurance cost? 

It always depends on what plan you go with and what your needs are. We encourage farmers to buy their policy at the highest net revenue possible. The main thing dairy insurance price boils down to is whether you use class pricing or component pricing. If you choose component pricing, it depends on how the dairy processor measures the butter-fat and the protein in milk (the higher the butter fat and protein numbers are, the more the farmers get paid). Class pricing is offered as Class III pricing (mostly cheese) and Class IV pricing (mostly butter and powder). 

If I already have Dairy Margin Coverage, can I have both and Dairy 

The Farm Service Agency (FSA) offers Dairy Margin Coverage (DMC). The program we offer is called Dairy Revenue Protection (DRP). And yes, you can purchase both insurances, but you cannot insure the same milk twice. How does that work? Let’s say you have 100,000 pounds of milk; you can insure half with DMC and half with DRP. Let us get to know you and figure out what you need in your dairy margin coverage program. We’ll affordably tailor your coverage to your needs. 

How does the DRP differ from LGM? 

The DRP basically protects against a drop in the milk price. Livestock Gross Margin (LGM) is not based on the price of milk. LGM works more like the Dairy Margin Coverage in that it takes the value of the milk minus the feed costs (generally corn and soybean meal). It covers the margin, not just the price of milk. 

Is the Producer Price Differential (PPD) insuranced?

The short answer is no, but concerns about it are warranted and currently being heard by the Risk Management Agency (RMA), which oversees crop insurance. They are trying to find ways to ensure against negative PPD. We agree with farmers that take it seriously. Two years ago PPD would often go between a positive $1 to a negative $1, which was fairly common. But when COVID hit, the PPD went up to $6 – $8.  Farmers had to sell their milk for a loss, meaning a lot of hard-working farmers did everything right and still got a much smaller paycheck. Farmers deserve a lot of empathy for what they went through in 2020.

Availability

Dairy Revenue Protection is available in all counties in all 50 states.

Pricing Options

Dairy-RP 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.

Establishing Coverage

Coverage is established by adding quarterly coverage endorsements to the policy. The sales period begins each day when the coverage prices and rates are validated and published on RMA’s website by 4:30 PM Central time and ends at 9:00 AM Central time of the following business day in which you can purchase quarterly endorsements.

If expected milk and dairy commodity prices are not available on the RMA website by 4:30 PM, then Dairy-RP will not be offered for sale for the insurance period.

Dairy-RP will not be sold on days where the monthly USDA Milk Production, Dairy Products, and Cold Storage reports are released. Milk or dairy commodity prices that experience a limit up or down move in the futures markets will not be available for determining the quarterly expected revenue.

Quarterly Coverage Endorsements

The Quarterly Coverage Endorsements correspond to the eight quarterly insurance periods available for purchase during the crop year. Producers may purchase coverage up to five nearby quarters and have multiple endorsements for the same quarterly insurance period.

Ending Milk Prices and Yield

The actual ending milk or component values are based upon the monthly average prices announced by USDA’s Agricultural Marketing Service. Actual ending values are posted on RMA’s website at the end of the insurance period. The milk yields are based upon USDA’s National Agricultural Statistics Service Milk Production report.

Causes of Loss

Dairy Revenue Protection provides insurance only for the difference between the final revenue guarantee and actual milk revenue, times actual share and protection factor, caused by natural occurrences in market prices and yields in the pooled production region. Dairy Revenue Protection does not insure against:

• Death of dairy cattle
• Other loss or destruction of your dairy cattle
• Any other loss or damage of any kind whatsoever

Quarterly Insurance Period

The quarterly insurance period contains the three-month periods corresponding to one of eight quarters for which coverage is available under the quarterly coverage endorsement. For example, the insurance period for the January 10 sales closing date contains the quarters of April through June, July through September, October through December, January through March, and April through June.

< Our Specialties

Livestock Gross Margin (LGM)

LGM Dairy
The Livestock Gross Margin for Dairy Cattle Insurance Policy provides protection against the loss of gross margin (market value of milk minus feed costs) on the milk produced from dairy cows

LGM for Cattle
LGM provides protection against loss of gross margin (market value of cattle minus feeder cattle and feed costs) on cattle. LGM covers a decline in cattle prices and/or an increase in feed costs and/or an increase in feeder cattle prices.

LGM for Hogs
LGM provides protection for the gross margin between the value of insured hogs and the cost of corn and soybean meal. It covers a decline in hog prices and/or an increase in feed costs.

Livestock Risk Protection (LRP)

LRP covers a decline in livestock prices. Coverage prices range from 70-100% of daily livestock prices for swine, fed cattle, and feeder cattle; and 80-95% in 5% increments for lamb. LRP is priced and available for sale continuously throughout the year.

What are the benefits of LRP?

• Guaranteed Price.
• No Bid / Ask spread.
• Limited Basis Risk Coverage.
• Aggregate cash price used better reflects actual price received.
• Any number of head can be covered (up to limits).
• Producer selects the period that fits their risk management plan.
• Wider range of Target Weights than CME.
• May be viewed more favorably by lenders than hedging or speculating (derivative products).
• Subsidized by government

< Our Specialties

FAQ

How much does dairy insurance cost? 

It always depends on what plan you go with and what your needs are. We encourage farmers to buy their policy at the highest net revenue possible. The main thing dairy insurance price boils down to is whether you use class pricing or component pricing. If you choose component pricing, it depends on how the dairy processor measures the butter-fat and the protein in milk (the higher the butter fat and protein numbers are, the more the farmers get paid). Class pricing is offered as Class III pricing (mostly cheese) and Class IV pricing (mostly butter and powder). 

If I already have Dairy Margin Coverage, can I have both and Dairy 

The Farm Service Agency (FSA) offers Dairy Margin Coverage (DMC). The program we offer is called Dairy Revenue Protection (DRP). And yes, you can purchase both insurances, but you cannot insure the same milk twice. How does that work? Let’s say you have 100,000 pounds of milk; you can insure half with DMC and half with DRP. Let us get to know you and figure out what you need in your dairy margin coverage program. We’ll affordably tailor your coverage to your needs. 

How does the DRP differ from LGM? 

The DRP basically protects against a drop in the milk price. Livestock Gross Margin (LGM) is not based on the price of milk. LGM works more like the Dairy Margin Coverage in that it takes the value of the milk minus the feed costs (generally corn and soybean meal). It covers the margin, not just the price of milk. 

Is the Producer Price Differential (PPD) insuranced?

The short answer is no, but concerns about it are warranted and currently being heard by the Risk Management Agency (RMA), which oversees crop insurance. They are trying to find ways to ensure against negative PPD. We agree with farmers that take it seriously. Two years ago PPD would often go between a positive $1 to a negative $1, which was fairly common. But when COVID hit, the PPD went up to $6 – $8.  Farmers had to sell their milk for a loss, meaning a lot of hard-working farmers did everything right and still got a much smaller paycheck. Farmers deserve a lot of empathy for what they went through in 2020.

What’s Keeping You Up at Night?

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