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 (QCE)

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

The Livestock Risk Protection, Livestock Gross Margin, and Dairy Risk Protection training modules and exams have been updated for the 2023 crop year. Agents wishing to sell any of these products are required to complete three (3) hours of training annually and pass a competency exam every three (3) years. Through NAU Country’s eLearning courses, you can complete the required training whenever it is convenient for you.

If you were assigned a module in the 2022 livestock reinsurance year, you will receive an automated course registration email from QBELearn. If you are not yet registered, simply email livestock.training@naucountry.com requesting to be registered for livestock eLearning training, and you will receive an email reply with a link to the learning page for all three (3) classes. You may take any of the classes from that same page. There is a minimum 24-hour waiting period from the time we process your request until you can begin your training, so please plan accordingly. 

The 2023 Crop Year begins on July 1, 2022. The Risk Management Agency (RMA) made changes to each of these programs for 2022, of which you were notified in early May. Please contact your underwriter or marketing representative if you have questions on any of these livestock products for 2023.

 

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.

Changes for 2022

  • PM-21-021 - Dairy Revenue Protection (DRP) revisions
  • 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 2022 and succeeding crop years. 
  • 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.
  • Incorporated Manager Bulletin MGR-20-017 into the policy and handbook to cutoff the weekend sales period on Sunday at 9:00 a.m. Central Time.
  • Clarified when the policy will terminate for unpaid premium or other amounts due.
  • Clarified when the producer may seek arbitration.

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, daily price alerts, and mobile DRP QCE submissions with eSign. Visit with an NAU Country Marketing Rep to find out more!