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August 8, 2018

Farm Bureau to Offer Dairy Revenue Protection Insurance

 |  By: Jim Dickrell

The American Farm Bureau Federation announced today that it is now offering Dairy Revenue Protection (RP) insurance for 2019, with sign-up expected to begin Oct. 9.

Dairy farmers will now be able to protect their milk price on a quarterly basis, with an indemnity paid when the actual milk price falls below their insured milk revenue guarantee. Premiums will be “actuarilly fair,” meaning they will be set on the day RP coverage is purchased based on expected prices and risk in the market.

The insurance, offered by Approved Insurance Providers nationwide,  was developed and approved through USDA’s Risk Management Agency, and as such, will be federally subsidized. The amount of premium subsidy will vary, depending on the percentage of the level of coverage. Those coverage levels range from 70 to 95% in 5% increments. Subsidies decrease as coverage level increases.

Farmers will be able to select one of two pricing options. The first option is a “component” option, with prices milk based on butterfat, protein and other solids. The second option is the “class” option which is a blend of Class III and IV prices. Farmers then will select how much milk to cover, the coverage level (70 to 95%), the quarter(s) of year they want coverage up to 5 quarters out, and an optional protection factor.

At first glance, RP may look quite daunting, but proponents say it is more straight forward than the Dairy Margin Protection Program (MPP), which pays indemnities when milk-feed margins falls below insured levels. RP is based on milk price only. Also note: Farmers who sign up for RP are also eligible for MPP coverage.

For more detail, go to AFBF’s page and USDA’s Risk Management Agency’s page on Dairy Revenue Protection. An agent locator is available online at: https://www.rma.usda.gov/tools/agent.html.