dairy revenue
protection

Dairy Revenue Protection

Dairy Revenue Protection (DRP) provides protection against an unexpected decline in revenue (yield and/or price) on the milk produced from dairy cows. The policy covers the difference between your final revenue guarantee and actual milk revenue during each quarter of the year.

Quarterly Coverage Endorsements

Quarterly coverage endorsements can be a good way for producers to gain coverage without making a more-substantial commitment. These correspond to the eight quarterly insurance periods available for purchase during the crop year. Dairy farmers may purchase coverage for up to five quarters and have multiple endorsements for the same quarterly insurance period. Typically, producers choose their quarters based on seasonality and price risk concerns.

Pricing Options

This is one of the most important considerations whenever purchasing DRP. Producers have two pricing options:

The Class Pricing Option uses a combination of Class III and Class IV milk prices as a basis for determining coverage and indemnities.

The Component Pricing Option uses the component milk prices for butterfat, protein and other solids as a basis for determining coverage and indemnities. Under this option you may select the butterfat test percentage and protein test percentage to establish your insured milk price.

Choosing the right pricing option depends a great deal on how your milk is priced and marketed. In general, dairy producers paid primarily on Class III/IV pricing choose the Class Pricing Option, while those who choose the Component Pricing Option do so to gain more customization.

Indemnity

Indemnity payments are triggered when your actual revenue falls below your guaranteed coverage level. DRP provides insurance only for the difference between the final revenue guarantee and actual milk revenue multiplied by actual share and protection factor, caused by natural occurrences in market prices and yields in the pooled production region.

Applying for DRP

DRP is available in all counties within all 50 states and applications may be submitted at any time during the year. However, insurance does not attach until you buy a quarterly coverage endorsement. You may buy multiple quarterly coverage endorsements with one application. Your insurance coverage starts the day you buy a quarterly coverage endorsement. Timing is critical, which makes planning with an advisor before purchasing coverage especially important.

Why Dairy Revenue Protection Matters for Financial Stability

Having dairy revenue protection helps producers stabilize their quarterly revenue streams. This is important for protecting your ability to service loans during periods of price downturns as well as reducing volatility in your financial projections. With the expertise of Rabobank by your side, you can have the stability you need to support long-term investment planning. Unlike other risk management tools such as margin protection or futures hedging, DRP provides protection for actual revenue. This makes it an important tool when used in conjunction with hedging tools. Talk to one of our experts to learn more about how DRP can benefit you.

Partner with Rabobank for Dairy Revenue Insurance