DRP keeps the glass full when unexpected revenue declines occur

Got milk revenue loss coverage? If not, perhaps a tall glass of DRP is what you need in times like these.

First launched by the U.S. Department of Agriculture (USDA) Risk Management Agency (RMA) in 2018, Dairy Revenue Protection is designed to insure dairy producers against unexpected declines in quarterly revenue from milk sales — relative to a guaranteed coverage level. It’s a flexible, easy-to-use policy that every dairy producer should consider given the volatility of the market today. With it still being a relatively new policy, however, some have questions of what it is and how it works.

Follow along as we outline 5 things to know about Dairy Revenue Protection.

1. DRP offers two revenue pricing options: Class Pricing and Component Pricing

The Class Pricing option uses Class III (milk for cheese/whey), Class IV milk (butter and milk powder) or a combination of both 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. The butterfat test percentage and protein test percentage may be selected to establish the insured milk price.

“The intent of class pricing is to allow producers the opportunity to get close to what their actual price would be. Most producers tend to purchase based on their break-evens versus what their price would be,” said ProAg Western Region Senior Underwriter, Jacqueline Da Rocha. “Usually, with component pricing, insureds are milking Jersey cows, producing higher component levels. Component pricing is geared more for those herds producing higher component levels, while class pricing is used more for producers who are producing as much fluid milk as they can.”

2. Dairy producers have flexibility in the amount of coverage

Producers may cover up to 100% of their expected milk production by choosing coverage levels between 80-95% of the expected quarterly revenue in 5% increments. At the end of the insurance period, if the actual milk revenue is below the final revenue guarantee, the producer may receive an indemnity payment for the difference between the final revenue guarantee and the actual milk revenue multiplied times the share and protection factor.

“It is a risk management tool in your toolbox. You’re covering your bases so you can continue to do business,” Da Rocha noted.

3. The calculations are simple and straightforward

The revenue loss is calculated as the difference between the final revenue guarantee and actual milk revenue, times your actual share and protection factor. The covered milk production is indexed to the state or region where the dairy producer is located (DRP is approved for sale in every county in all 50 states).

“The expected revenue is based on futures prices for milk and dairy commodities and the amount of covered milk production elected by the dairy producer, respectively,” said Da Rocha. “Therefore, an important thing to note about DRP coverage is that markets change daily, similar to interest rates, making it a fluid coverage policy.”

4. There are exceptions to what is covered

The revenue loss needs to be caused by natural occurrences in market prices and yields in your state-level or pooled production region. DRP does not cover events such as death of dairy cattle, other loss or destruction of your dairy cattle, or any other loss or damage of any kind whatsoever.

5. Some changes to come for the 2026 crop year

The following revisions are applicable for the 2026 and succeeding crop years for the DRP plan of insurance:

• Modified the termination date to January 31^st and the premium billing date to the first day of the third month after the end date.
• Added language that outlines what is considered subsidy capture and specifies subsidy capture is not allowable. The new Insured’s Certification Against Subsidy Capture statement that needs to be signed reads: “I certify that I will not offset any insurance provided under this quarterly coverage endorsement through dairy contracts traded on commodity exchanges or with other means for the purpose of subsidy capture, and I acknowledge that if I violate this certification, I may be subject to administrative, civil or criminal sanctions.”
• Modified the natural disaster language to include animal disease as an event that prevents you from marketing milk, provided you give us written notice within 72 hours of the disaster or reportable animal disease.
• Increased minimum declarable butterfat test to 4.00 pounds, increased maximum declarable butterfat test to 6.00 pounds and increased minimum declarable protein test to 3.20 pounds.

Get Dairy Revenue Protection today!

Insurance attaches the day a quarterly coverage endorsement is purchased, and multiple quarterly coverage endorsements may be purchased with one application. Talk to your ProAg insurance agent today and protect your dairy from the unexpected with Dairy Revenue Protection!