Dairy Revenue Protection FAQs

Frequently Asked Questions:

Q: When are DRP payments (indemnities) distributed?

DRP payments (indemnities), should they occur, will be distributed approximately thirty (30) to ninety (90) days after the close of the relevant quarter. The USDA Risk Management Agency (RMA) will release final DRP settlement prices twenty (20) days after the end of each quarter. Premiums are billed twenty-five (25) days after the end of each quarter. Producers then have thirty (30) days following the billing date to pay their premium. Once all paperwork has been filed and approved, and all required premiums have been paid, the Approved Insurance Provider (AIP) then has a maximum of thirty (30) days to distribute the indemnity payment to the producer.

Example: For Quarter 1 (January – March), RMA would release settlement prices on April 20th, producers would be billed for premiums on April 25th, and those premiums would be due by May 25th. For this quarter, a producer could expect to see a payment between April 25th and June 24th, depending on how timely the required documents were provided.

March 31	April 20	April 25	April 30	May 25	June 24
Quarter Ending Date	Settlement Prices Announced by RMA	Premiums Billed	Notice of Probable Loss (Indemnity) Issued	Premiums Due	Payment Received
		Producer payment (indemnity) received within 30 days of successfully submitting all required paperwork and payment of premium

Q: When are DRP premiums due?

DRP premiums are not due up front, but are instead billed twenty-five (25) days after the end of the quarter for which the coverage (endorsement) is active. After billing, a producer then has thirty (30) days to submit payment.

Additional payment plan options (e.g., monthly payments) may be available to cover your premium. Contact your qualified crop insurance agent for details.

Q: How is actual production proven?

Milk check stubs can be used to prove production. Production will need to be proved to the insurance provider prior to any indemnity being paid. Contact your qualified crop insurance agent to discuss what specific records and documentation will be required in the event of a claim.

Q: Is it more expensive to insure a few quarters out or just for the upcoming quarter?

Coverage nearby is generally cheaper and further out is more expensive. However, investing in these further-out quarters may still be worthwhile, as the expected value is greater.

Q: Is there a minimum or maximum production requirement for purchasing Dairy RP insurance?

No, there are no size restrictions on DRP insurance. Dairies of all sizes may insure as much or as little of their expected production as they would like.

Q: Who would benefit from using component pricing? Class?

This decision varies depending on location and current market conditions. Work with a knowledgable insurance agent to discuss the best choice for your dairy.

Q: If component pricing is chosen, do actual component levels have to be proven as well?

Yes, the dairy’s actual percent butterfat and protein must be at least 90% of the declared levels, or else indemnity payments may be reduced. Milk checks will typically be used to prove production. Contact your qualified crop insurance agent to discuss what specific records and documentation will be required in the event of a claim.

Q: Does the price of an endorsement change throughout the quarter or month?

Once an endorsement has been purchased, it cannot be changed. However, additional coverage may be purchased until the 15th day of the month preceding the start of the quarter. 

Example: The last day to purchase coverage for the second quarter of the year (April through June) would be March 15th. For more distant quarters, endorsements may be purchased on most active trading days. Coverage is not available on days when significant USDA reports are released (Milk Production, Cold Storage, or Dairy Products), or when certain CME dairy futures contracts exhibit limit moves.

Q: Does that price change once a day or multiple times per day?

DRP prices are only updated once per day. These prices are published by the USDA Risk Management Agency between 2:30 p.m. and 4:30 p.m. central time, and are derived from CME market settlement prices for that day.

Q: If yesterday’s price was better, could you purchase insurance at that price?

Dairies may only buy endorsements from the time prices are published by RMA (2:30 p.m. – 4:30 p.m.) until 9 a.m. the next morning. If outside that time-frame, no insurance can be purchased at a previous day’s price. It is best to notify your agent as soon as possible to allow them adequate time to submit the endorsement by the 9 a.m. central time deadline.

Q: Can I use both Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP) at the same time?

A: Yes. With the new farm bill, dairies may utilize both DRP and DMC at the same time and on the same expected production. Dairies can also use LGM-Dairy and DRP in the same crop year, as long as coverage is not active in the same quarter.

Q: What happens if a dairy ends up selling all the cows?

The dairy will not eligible to receive any indemnities if insurance has been purchased for quarters where milk is not produced. Most likely, if an endorsement has been purchased, the premium will still be owed even though the dairy is not eligible for a payment.

Q: Is there any way a producer can end up paying more than the premium for the insurance coverage?

No, the maximum amount that will be owed is the premium. There are no additional hidden costs or fees.

Links:

• DairyRP Fact Sheet
• DRP Insurance Policy
• FAQs from RMA
• RMA Livestock Homepage