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USDA Launches Dairy Revenue Insurance Plan For Dairy Farmers

Plan Aims To Ensure Against Unexpected Drops In Quarterly Revenue; Sign-Up Begins On Oct. 9 For First Quarter Of 2019

Washington—USDA’s Risk Management Agency (RMA) on Wednesday announced a new Dairy Revenue Protection (Dairy-RP) plan that’s intended to provide protection against an unexpected decline in the quarterly revenue from milk sales relative to a guaranteed coverage level.

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.

Sign-up for Dairy-RP begins on Tuesday, Oct. 9, 2018, with the first available coverage starting the first quarter of 2019.

Dairy-RP was developed by American Farm Bureau Federation (AFBF) chief economist John Newton, in partnership with American Farm Bureau Insurance Services (AFBIS) and economists from the University of Minnesota and Cornell University. The insurance product was approved earlier this year by USDA’s Federal Crop Insurance Corporation (FCIC) (for more details, please see New Dairy Revenue Protection Insurance Developed By Farm Bureau Expected To Be Available Later This Year, on page 1 of our May 11th issue).

Producers participating in Dairy-RP are not precluded from participating in USDA’s Margin Protection Program (MPP).

Under Dairy-RP, which is approved for sale in all counties in all 50 states, dairy producers may cover 70 percent to 95 percent of their expected quarterly revenue in 5 percent increments. A premium subsidy is available and is based on the coverage level selected.

Dairy-RP offers two revenue pricing options:
• The Class Pricing Option uses a combination of Class III and Class IV milk prices as a basis for determining coverage and indemnities.
• The Component Pricing Option uses the component milk prices for butterfat, protein and other solids as a basis for determining coverage and indemnities.
Under this option, dairy producers may select the butterfat test percentage and protein test percentage to establish their insured milk price.

The other solids test is fixed at 5.7 percent to establish the milk price.
Producers may choose either pricing option on separate quarterly coverage endorsement provided it is not covering the same milk.

Coverage is established by adding quarterly coverage endorsements to the policy.

The sales period begins each day when the coverage prices and rates are validated and published on RMA’s website by 4:00 p.m. Central and ends at 9:00 a.m. Central time on the following business day in which quarterly endorsements may be purchased.

The quarterly coverage endorsements correspond to the eight
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