The American Farm Bureau Federation, in cooperation with American Farm Bureau Insurance Services, has developed a new risk-management insurance product for dairy farmers. Approved by the Agriculture Department’s Federal Crop Insurance Corporation, “Dairy Revenue Protection” insurance will provide dairy farmers the opportunity to manage risk by focusing on revenue from milk sales.
“We know that the level of risk protection available to dairy farmers was inadequate and we saw a clear opportunity to help by specifically addressing the impact of milk price volatility on a dairy farmer’s revenue,” said AFBF President Zippy Duvall. “This coverage will help shield dairy farmers from unexpected declines in milk prices as well as unexpected declines in milk production by addressing overall revenue. We are excited about teaming up with American Farm Bureau Insurance Services to offer this new risk management tool to dairy farmers.”
As designed, Dairy Revenue Protection will provide several levels of insurance coverage based on the value of the farmer’s milk. One option will use manufacturing milk futures prices, and the other option would be based on the value of milk components, such as milkfat, protein and other milk solids. A majority of dairy farmers selling milk in the U.S. are paid based on the amount of milkfat and protein in their milk.
Other than those dairy pricing options, Dairy-RP coverage otherwise functions similarly to area-based crop revenue protection insurance policies. The coverage would offer revenue guarantees based on futures prices, expected production and market-implied risk. The premiums for coverage will be subsidized.
It is expected that Dairy-RP policies will be available in late summer 2018.
Source: Southeast Ag Net