The dairy sector has been battered by losses over the past four years. Starting in October, dairy producers will have a new dairy insurance service to offer an extra level of support to help weather volatility in the marketplace.

The U.S. Department of Agriculture’s Risk Management Agency (RMA) announced the new insurance plan for dairy producers that insures against unexpected declines in quarterly milk sales. Signup for the new product begins Oct. 9, 2018, with the first available coverage starting the first quarter of 2019.

The new plan, called Dairy Revenue Protection, provides insurance for the difference between the final revenue guarantee and actual milk revenue if prices fall. It also provides a greater choice of prices, from those that focus on cheese to fresh milk, protein or butterfat. Coverage levels are available from 70% to 95% of revenue, in 5% increments. Dairy Revenue Protection is available in all counties in all 50 states.

The insurance product was developed by American Farm Bureau Federation chief economist John Newton, in partnership with AFBIS and economists from the University of Minnesota and Cornell University. It fills a demand not met by previous products.

“Expanding the federal crop insurance program to markets that need it is key to an effective farm safety net. Because of cooperation with partners like the American Farm Bureau Federation, we are able to offer this new product in a way that it can be flexible based on the needs of dairy producers,” USDA undersecretary for farm production and conservation Bill Northey said.

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“Farmers have been suffering, and dairy farmers especially,” American Farm Bureau Federation president Zippy Duvall said. “The number of dairies that have had to close or sell to larger operations is shocking. We have always known revenue protection insurance could help farmers weather this storm, but no one offered it. That’s why AFBIS is stepping up and rolling out this insurance now, when the need is so great. We appreciate the support from the Agriculture Department and look forward to the rollout by Oct. 9.”

Dairy farmers will have the option to select between class or component pricing options. The class pricing option uses an average of Class III and Class IV milk prices based on the insured’s declared class price weighting factor. The component pricing option uses butterfat, protein and other solids prices as well as the declared butterfat and protein test to determine an insured component value of milk. Pricing options allow farmers to customize their price elections more accurately according to individual price risk.

Participating producers are not precluded from participation in the USDA Farm Service Agency’s Margin Protection Plan.

Those interested in purchasing Dairy Revenue Protection must do so through an agent selling on behalf of an approved insurance provider. A list of crop insurance agents is available at all USDA service centers and online via the RMA Agent Locator at www.rma.usda.gov/tools/agent.html. 

Dairy Revenue Protection was developed and approved through the Federal Crop Insurance Act’s 508(h) process, which allows private parties to develop insurance products that are in the best interests of producers, follow sound insurance principles and are actuarially appropriate.

Dairy Revenue Protection is another risk management tool in the toolbox available to dairy producers. Federal crop insurance helps producers and owners manage risks and strengthens the rural economy. Additional information regarding Dairy Revenue Protection is available on the RMA website’s Livestock page, located at www.rma.usda.gov/livestock. For more information about crop insurance and the modern farm safety net, visit www.rma.usda.gov.