Dairy Revenue Protection

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• Basic Information:
  • DRP is a risk management tool that provides revenue protection similar to the current RP and Area products for crop insurance.
  • Insures dairy producers against quarterly revenue losses, indexed by state-level milk revenue, up to 95% coverage.
  • Expected prices published daily, final prices published quarterly.
  • Producer elects the following variables:
    • Pricing mechanism (Class price and/or Component price)
    • Milk production to cover
    • Coverage level
    • Protection Factor
    • The desired quarter to be covered (up to 5 quarters in the future).
  • Effective crop year is a 12 month period (July 1 –June 30) designated by the calendar year in which it ends.
  • SCD is each day during which coverage is available for purchase.
  • Sales Period begins when the coverage prices and rates are validated and published on RMA’s website by 5:30 p.m. EST.
  • Sale Period ends at 10:00 a.m. EST the following business day in which you can purchase quarterly endorsements.
  • Dairy-RP will not be sold on days when 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.
  • Producers can have multiple quarterly coverage endorsements for the same period however, they cannot cover the same pounds of milk.
  • A producer is allowed to have other livestock policies covering milk for the same crop year.
  • Only one policy can have endorsements in effect for the quarterly insurance period.
  • Producers can have Dairy-RP & LGM during the same crop year.
    • Coverage months can not overlap.
  • Producers can have Dairy-RP & MPP during the same crop year. No strings attached
  • Eight unique quarterly insurance periods during a crop year. (801 –808)
  • 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.
  • Two pricing options for DRP:
    • Class Pricing Option:
      • Combination of Class III and Class IV milk prices
      • Based on producer’s declared price weighting factor.
      • Producer declares Class III price weighting factor (up to 1.00).
      • Class IV defaults to the difference (1.00 -Class III weighting factor)
      • A producer can elect 1.00 for either Class III or Class IV. The other Class would then be 0.
    • Component Pricing Option:
      • Combination of butterfat, protein, other solids values, and/or nonfat solids;
      • Based on producer’s declared butterfat test and declared protein test.
      • Producer declares butterfat pounds, protein pounds, & weighting factor.
      • These elections allow the producer to establish coverage for prices to mirror the expected milk components.
      • The ‘Other Solids’ test is fixed at 5.7 pounds per 100 pounds of milk.
      • The ‘Nonfat Solids’ test is 5.7 pounds plus Protein lbs of milk.
      • Butterfat test –elect between 3.25 pounds and 5 pounds in 0.05 pound increments.
      • Protein test –elect between 2.75 pounds and 4 pounds in 0.05 pound increments.
  • Coverage Elections:
    • Declared covered milk production –pounds chosen by producer to establish coverage.
    • May choose different amounts of declared covered milk production for each type and practice on the quarterly coverage endorsement.
    • Can be multiple quarter coverage endorsements for the same quarterly insurance period.
    • However, can not cover the same milk.
    • Coverage level elections between 80% -95% in 5% increments.
    • Determines the dairy revenue protection expected and final revenue guarantee.
    • May elect different coverage level for each type/practice.
    • Coverage Levels are subsidized.
    • Protection factor elections between 1.00 and 1.50 in 0.05 increments.
    • No premium due with application or when electing quarterly coverage endorsement.
    • Will be billed 25 days after the last day of the interval period.
  •  Claims:
    • AIP will notify the producer of a probable loss ten days after DRP data is released by RMA for each quarterly insurance period.
    • The producer must submit a claim to the AIP:
      • On the AIP form.
      • Include the milk production worksheet and milk marketing records.
      • Within 60 days following the date of notice of probable loss is issued.
    • Verify if the milk marketings >to 85% of the declared milk production.
    • Determine if the actual butterfat test and the actual protein test are greater than 90% of the declared component values.