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Farm Bureau develops dairy revenue protection insurance

The American Farm Bureau Federation (AFBF), in cooperation with American Farm Bureau Insurance Services, has developed a new risk-management insurance product—Dairy Revenue Protection insurance—for dairy farmers.

The insurance, which was approved by the Agriculture Department’s Federal Crop Insurance Corporation, 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,” AFBF President Zippy Duvall said. “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.”

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 Revenue Protection 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 Revenue Protection policies will be available in late summer 2018.

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