Dairy producers might soon have another tool to protect against unexpected declines in milk prices or milk production.
Dairy Revenue Protection, an insurance plan developed by the American Farm Bureau Federation, has been approved by the Federal Crop Insurance Corp., John Newton, Farm Bureau director of market intelligence, said.
“It allows farmers to insure quarterly revenue based on several ways to price milk,” he said.
Farm Bureau looks forward to working with USDA to get a strong rollout to farmers soon, he said.
“It’s another tool in the toolbox,” he said.
In a report on how the insurance plan would work, Newton said current USDA risk programs for dairy focus on income over feed costs and don’t directly manage revenue risk, leaving a gap in risk coverage.
Dairy-RP is similar to crop revenue protection policies in that the revenue guarantee would be based on futures prices, expected production and market-implied risks.
The plan addresses 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.