Dairy Revenue Protection Insurance (CRS Report for Congress)
| Release Date |
Sept. 20, 2018 |
| Report Number |
IF10985 |
| Report Type |
In Focus |
| Authors |
Joel L. Greene, Isabel Rosa |
| Source Agency |
Congressional Research Service |
Summary:
In recent years, dairy farmers have experienced low milk
prices. From 2015 to the present, milk prices received by
dairy farmers have averaged 20% lower than the relatively
high price period of 2011-2014. Many dairy producers
believe the 2014 farm bill’s dairy Margin Protection
Program (MPP), a commodity support program under Title
I of the 2014 farm bill, has been an ineffective safety net
and have been seeking alternatives.
On August 8, 2018, the U.S. Department of Agriculture
(USDA) Risk Management Agency (RMA) announced the
forthcoming Dairy Revenue Protection (Dairy-RP)
insurance policy. Dairy-RP is to be available starting
October 9, 2018, according to the American Farm Bureau
Federation (AFBF). The policy was developed by the
AFBF and the American Farm Bureau Insurances Services
through the Federal Crop Insurance Corporation’s (FCIC)
508(h) private submission process that is authorized by the
Federal Crop Insurance Act (7 U.S.C. 1501 et seq.).
Dairy-RP policies are to be sold by Approved Insurance
Providers (AIPs) who choose to offer the policies in the
states in which they operate. The policies will be available
every business day except on days when USDA releases
major dairy reports, when futures prices hit their daily limit,
or as unforeseen situations arise as determined by RMA.
RMA has offered a Livestock Gross Margin insurance
policy for dairy cattle (LGM-D) that insures the margin
between milk and feed prices. But few dairy producers have
purchased it. From 2015 to 2017, LGM-D covered about
2.9 billion pounds of milk annually. During those years,
total U.S. milk production averaged about 212 billion
pounds annually. Many considered its formula for
determining feed values overly complex. Participation was
also limited in part because of a previous $20 million cap
on expenditures on livestock insurance policies—since
removed by the Bipartisan Budget Act of 2018 (P.L. 115-
123)—and a 2014 farm bill provision that prohibited the
use of LGM-D and MPP concurrently.
Dairy-RP is to insure against unexpected declines in milk
revenue. Participation is voluntary and offered on a
quarterly basis for the dairy crop year (July-June) for up to
five quarters. If a producer’s actual milk revenue falls
below an expected revenue guarantee, the producer receives
an indemnity payment. A producer’s revenue guarantee is
based on a series of choices described below. In developing
the Dairy-RP policy, the AFBF sought to create a simpler
policy than the existing LGM-D federal crop insurance
policy. Dairy producers may participate in both Dairy-RP
and MPP.
