Dairy Revenue Protection

Dairy Revenue Protection (DRP) is an insurance plan approved by the Federal Crop Insurance Corporation to allow dairy farmers to purchase risk management protection against declines in quarterly revenue from milk sales as a result of a decline in milk prices, a decline in milk production, or both.

Revenue will be determined by a producer selecting to base their coverage on a mix of Class III and Class IV milk prices or milk components (milkfat, protein, and other milk solids). Coverage will be based on quarterly revenue.

DRP expected revenue is based on futures prices for milk and dairy commodities and the amount of covered milk production elected by the dairy producer. The covered milk production is indexed to the state or region where the dairy producer is located.

Recent Updates

• Added a Class Price Weighting Factor Restricted Value, which in the event that the Class 3 or Class 4 milk price is not published, the Class Price Weighting Factor Restricted Value will allow producers to still purchase the Class Pricing Option by defaulting to the milk price of the published class.
• Provided more precise state level production and milk yields for Georgia by no longer grouping it with nearby states.
• Relaxed records requirements by allowing monthly (instead of daily) total pounds of milk and milk components (butterfat and protein) to be acceptable records.
• Maximum declared butterfat range changed from 5.00 to 5.50 to 3.25 – 5.50 pounds
• Maximum declared protein range changed from 4.00 to 4.50 to 2.75 – 4.50 pounds
• Added a Weighting Factor Option and Nonfat Solids Price to the Component Pricing Option
• 9:00 AM Central Sunday close of sales period for Friday offerings.
• Modified the policy to allow Grade B milk to be insured (along with Grade A).

Availability

DRP is approved for sale in all counties in all 50 states.

Determining Coverage

The dairy producer has five basic decisions to make on the DRP policy:

1.  The value of milk protected
2.  The amount of milk production to cover
3.  The level of coverage (from 80 to 95 percent of the revenue guarantee)
4.  Which quarterly contracts to purchase
5.  Protection factor

Click here to quote DRP in the eHarvest™ Processing System without having to setup a policy first! Hudson Crop agents can also access the DRP quoter via the myHudson agent platform.

The policy will be sold on a daily basis and would insure a quarter of milk production. Policies would be offered by USDA-approved insurance providers and could be purchased voluntarily for an individual quarter, or a strip of quarters, up to five quarters out. For each Sales Closing Date, the Dairy farmer selects how milk is priced by either choosing the milk class price option and/or milk component price option, the coverage level (80-95% of the expected revenue) and the quarterly time frame. The revenue guarantee is based on future milk prices and declared covered milk production. The price of the policy varies daily based on the farmer-selected parameters on the expected risk in the market.

Premium Subsidy

Claims

After RMA releases the monthly milk and component prices 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 an indemnity based on the difference.

If you have questions or would like more information on this program, please contact info@hudsoncrop.com.

The information contained in this publication is for general purposes only and shall not modify the terms of any insurance policy.