American Farm Bureau and American Farm Bureau Insurance Services, Inc. are seeking approval from the U.S. Department of Agriculture for a new type of insurance for dairy farmers.
Dairy-Revenue Protection (Dairy-RP) is a revenue-based insurance option for dairy farmers and is different from the current margin-based insurance options available through USDA. Dairy-RP fills a gap in risk coverage by addressing two key sources of dairy farm revenue risk: milk price basis and variability in milk production, which combined can lead to large changes in milk revenue from month to month and from farm to farm.
Farmers purchasing Dairy-RP would have the option to determine how the value of milk is determined in their policy. The first option would allow a farmer to choose a milk value based on a mix of Class III and Class IV milk futures prices. The second option would allow a farmer to choose a milk value based on desired butterfat and protein tests. The farmer would then choose how much milk to cover during a quarter and how much protection to buy, from 70 percent to 95 percent.
“We heard loud and clear from dairy producers that the farm programs are not working well and that it’s a very challenging time for the dairy industry,” said Jack Irvin, Ohio Farm Bureau senior director, state and national policy. “In response to our members’ concerns, Farm Bureau proposed the creation of this new initiative and incorporated input from members through a survey. Dairy-RP is another option in the risk management toolbox.”