Dairy Revenue Protection (DRP), a new federal crop insurance product recently approved by USDA’s Risk Management Agency, will be available to Michigan dairy producers beginning in October, with coverage options available beginning for the first quarter of next year (January – March 2019).
Janna Fritz, Crop Insurance Manager for Farm Bureau Insurance of Michigan, said DRP provides insurance for the difference between the revenue guarantee and actual milk revenue if prices or revenues decline and can be used simultaneously with USDA’s Margin Protection Program (MPP).
“DRP also provides a greater choice of price risk management features beyond MPP, providing the ability to protect the value of milk based on the component value of cheese to fresh milk, protein or butterfat,” Fritz said.
Michigan Farm Bureau Livestock Specialist Ernie Birchmeier said Michigan dairy producers will want to seriously consider the new DRP insurance option as a viable risk-management tool, with the annual average U.S. all-milk price falling by more than 30 percent since 2014.
“This year, it’s projected to be at the lowest level since 2009, at $16.10 per hundredweight, and it could get worse,” Birchmeier said. “Ongoing trade tensions in July compelled USDA to push its 2019 milk price projection down by 45 cents per hundredweight, representing nearly a $1 billion decline in projected milk revenue nationwide.”
Under the USDA-sponsored DRP, Fritz said interested dairy farmers will have five decisions to make:
To help dairy producers learn more about DRP and how to answer those five questions, Fritz said Farm Bureau crop insurance specialists will host a series of regional producer educational-sessions across the state. Interested dairy producers should contact Ali Cronin at (517) 679-5669 to reserve a seat and a meal at the location of their choice:
When will DRP be available and how much will it cost?
According to Fritz, DRP is expected to be available for purchase beginning Oct. 9 and will be sold daily to provide flexibility to protect revenue at varying times by offering five quarterly insurance periods.
“The price of the policy is actuarially fair, meaning it will vary daily based on the farmer-selected parameters and on the expected prices and risk in the market,” Fritz said. “In general, higher levels of liability and more deferred policies will be more expensive to purchase.”
Similar to traditional crop insurance products, the federal government will provide a premium discount to purchase DRP, which she hopes will motivate dairy producers to seriously consider DRP.
“The success of federal crop insurance programs is well documented,” Fritz said. “Nearly 90 percent of all corn, wheat, and soybean acres are protected by a revenue-based crop insurance policy.”