Dairy Revenue Protection Insurance is a USDA subsidized insurance product that protects against unexpected declines milk revenue. Milk prices can be volatile due to a variety of factors including global supply levels, demand, and feed costs, to name a few. DRP dairy insurance provides coverage against milk market price declines for Class III, Class IV and Components on a quarterly basis, making it an important tool for hedging volatile dairy markets.
Insure against declining milk futures prices
Offered daily to producers who can purchase coverage for up to 5 nearby quarters
Maintain flexibility to higher prices
44-55% subsidy based on coverage level
Premium costs are due at the end of the quarter insured
Producers may cover 80 – 95% of their expected quarterly revenue
Options to use Class (Class III or IV) or Component (butterfat, protein, other solids or nonfat solids) pricing as basis for revenue
Ability to elect the quarterly dairy insurance period, quantity of milk and protection factor (between 1.00 and 1.50) each for coverage endorsement
Settles to quarterly average of announced Class III, Class IV, or component prices, dependent on election
Indemnity is paid if actual revenue falls below insured revenue
DRP daily pricing calculator for Class and Component pricing
Weekly Newsletter with updates on dairy markets and DRP opportunities
Endorsement Tracker and Indemnity Projections with daily tracking of endorsed policies and potential indemnity projections
Margin Analysis Integration to model DRP alongside futures and options positions
The DRP program is a quarterly dairy revenue protection product subsidized by the USDA’s Risk Management Agency. This provides farmers with protections against declines in milk revenue. It offers dairy farms with a certain amount of flexibility in how the revenue is structured. For example, farmers can choose whether to go by Class III, Class IV or component-based pricing. Although this can be a valuable tool for farmers, it is important to note that DRP is not margin insurance and does not account for feed costs in its calculations.
Working with CIH means you can have an integrated solution for protecting your farm from price drops. We can integrate DRP with futures, options and feed hedging to maximize your full margin protection. We work closely with our clients to customize holistic dairy margin plans that balance insured revenue, hedged feed costs and market opportunities. In addition, our ongoing consultation services and tools ensure producers can adjust their strategies as prices change.
If you’re ready to learn more about what CIH’s dairy production insurance can do for you and your operations, reach out and connect with us today to start the conversation about your needs.
Sign up to our newsletter