By Leah Call
There’s a new federal crop insurance product that helps protect dairy farms from unexpected declines in milk prices.
The Dairy Revenue Protection (DRP) insurance plan debuted Oct. 9. The new federal crop-insurance offering is the result of a two-year effort spearheaded by the American Farm Bureau Federation, in collaboration with the Risk Management Association of the USDA.
“The reason they brought this program about is that milk is a flow commodity. Farmers don’t have the ability to store it. They have to sell it for whatever the price is for that day,” said Mike Janicki, director of sales for Rural Mutual Insurance Company, which offers DRP in Wisconsin through Farm Bureau Insurance Services.
High milk-producing states, such as Wisconsin, are designated as stand-alone regions for the purpose of DRP. Lower-producing states are pooled with nearby states.
“With it being a revenue-based product, it is also an area-based product,” Janicki explained. “It is not based on the national milk price. It is based on the milk price in Wisconsin.”
The same would apply to the particular state or pooled region in which a participating dairy farm is located.
“You establish a floor for your milk price,” added Janicki. “Say for the next quarter you have a milk price of $15.50. If the milk price goes below $15.50, you are guaranteed that price.”
DRP is subsidized by the federal government. Subsidies vary depending on the level of coverage. (See chart above)
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Those interested in the DRP insurance plan should contact the appropriate agency in their state or pooled region. The application can be filled out anytime and an endorsement is completed once they are ready to proceed. That endorsement must take place by the 15th of the month preceeding the quarter.
Dairy producers can take the DRP coverage, along with the MPP (Margin Protection Program), but cannot carry DRP coverage in the same quarter in which they have milk in the Livestock Growth Margin, said Anita Schoepp, a DRP specialist with Rural Mutual.
The plan insures only Grade A milk. “Organic dairy farmers are eligible for this,” she said. “But they would have to insure at the conventional price – not at the organic price.”
DRP carriers anticipate more interest as farmers complete the busy harvest season. While interest in this plan is no surprise, the affordability may come as a surprise to some.
“I just quoted a small farmer who was struggling with cash flow, and he was thinking it was going to be far more expensive than what I quoted him,” Schoepp said. “He was very, very pleased…it is very manageable for every size farm.”