Dairy Revenue Protection (DRP)

Got Milk Coverage?

If not, we've got you covered! Talk to your NAU Country Marketing Rep about Dairy Revenue Protection today!

Overview

Dairy Revenue Protection is an area-based revenue product that is designed to insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level. The quarterly insurance periods cover a three-month period and can be sold up to five quarters, with the exception of the last sales period. There are two pricing options available for each endorsement. The 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.

Availability

DRP is approved for sale in all 50 states.

Farmer Decisions

There are five decisions that must be made by the farmer:

  1. The value of the milk protected
  2. The amount of milk production to cover
  3. The level of coverage (80-95%, in 5% increments)
  4. The quarterly contracts they want to purchase
  5. The Protection Factor (between 1.00-1.50, in .05 increments)

Application

  • May be submitted any time during the year
  • Must be received by the agent before the Sales Closing Date (SCD) of the coverage that is requested under a quarterly coverage endorsement
  • DRP is continuous and will remain in effect until it is cancelled
  • Only one application is needed per state. All the milk produced within a state is covered under this policy
    • A county must be elected. It should be the county where the milk storage tank of the dairy operation is physically located
    • If the dairy operation spans multiple counties, the farmer will pick one

Quarterly Coverage Endorsement

Farmers may purchase endorsements for up to five quarters.

  • Must be submitted within the chosen sales period for EACH quarterly insurance period the farmer elects for coverage
  • May submit multiple quarterly coverage endorsements for the same quarterly insurance period, but they cannot cover the same pounds of milk
  • Each endorsement needs to include:
    • Declared covered milk production
    • Coverage level
    • Pricing option (Type)
    • Insured quarters (Practice)
    • Declared share percent
    • Expected milk production per cow (lbs./cow)
  • Quarters can overlap into the next crop year
  • Coverage begins on the first day of the quarter and ends on the last day of quarter.

Pricing Options

Farmers have two pricing options.

  • Class Pricing Option – Uses a combination of Class III and Class IV prices based on the farmer’s declared class price weighting factor.
  • Component Pricing Option – Uses a combination of butterfat, protein, other solid, and non-fat solid values. Prices are based on the farmer’s declared butterfat and protein test. The other solids test is fixed at 5.7 lbs. to establish the milk price. Farmers should elect the butterfat and protein amounts that best match the values within their herd.

Final Revenue Guarantee

The final revenue guarantee is based on expected yield multiplied by expected price (also protection factor and share), along with the coverage level selected.

Expected milk yields are based on state-level National Agricultural Statistics Service (NASS) estimates of milk production per cow in the state or pooled production region.

Indemnity

At the end of the insured quarter, if actual milk revenue is below the revenue guarantee, the insured will receive an indemnity payment for the difference between the actual milk revenue multiplied times the share and protection factor. Since Dairy Revenue Protection is area-based (average for a state or region), an individual dairy producer may have a decrease in their milk production, but may not receive an indemnity. Or, they may not have a decrease in their milk production, but still receive an indemnity payment.

Training Requirements

RMA requires all agents receive three (3) hours of specific training for each of the Livestock products they wish to write. Livestock products include Livestock Gross Margin (LGM), Livestock Revenue Protection (LRP), and/or Dairy Revenue Protection (DRP). Agents must also pass a competency test for each of the Livestock products they wish to write, prior to selling any Livestock policies. Through NAU Country’s eLearning courses you can complete the required training whenever it is convenient for you. Simply email livestock.training@naucountry.com to register for the LGM, LRP, and/or DRP eLearning training and you will receive an email reply with a link for the class. You will have a one-week window (extensions can be granted) to complete the training, and can stop and start as often as you need! 

We look forward to hearing from you.

Changes for 2021

  • PM-20-021 - Dairy Revenue Protection (DRP) provisions
  • FCIC approved revisions to the Dairy Revenue Protection (DRP) plan of insurance, under section 508(h) of the Federal Crop Insurance act. The following revisions are applicable for the 2021 and succeeding crop years. 
    • Add a Weighting Factor Option and Nonfat Solids Price to the Component Pricing Option;
    • Modify the policy to allow Class B milk to be insured;
    • Modify the minimum declared protein from 4.00 to 4.50 making the range 2.75 - 4.50;
    • Modify declared Butterfat from 5.00 to 5.50 making the range 3.25 - 5.50 pounds;
    • Other minor editorial changes. 

Training Materials

The training ppt listed below is for reference only. It does NOT count towards the three (3) required training hours needed to write DRP.

Resources

DRP Technology Tools offered through NAU Country

NAU Country is ready to support your Dairy Revenue Protection (DRP) sales needs by offering a surplus of DRP tools, including an easy-to-use quoting system equipped with a valuable comparison and historical report, an efficient processing system, milk production logs, and daily price alerts! Plus, there is more to come in the future. Visit with an NAU Country Marketing Rep to find out more!