Dairy Revenue Protection (DRP) & Livestock Gross Margin – Dairy (LGM-Dairy), are two widely used programs by dairy farmers as a risk management tool to provide some cushion against declining prices. Both programs require dairy producers to market an amount of milk that is proportionate to the amount of milk they insure. If a producer fails to market the minimum amount of milk as required by the policy, coverage can be reduced and premiums are not refunded. “Marketed” through the eyes of the provisions, equals milk sold for which the dairy operation has proof of sale.

But what about milk that is dumped as a result of the COVID-19 pandemic? Will dumping milk hurt your milk insurance claim?

Here are the marketing requirements: DRP policyholders are required to market at least 85% of the milk they insure per quarter. Additionally, DRP policyholders who purchased the component pricing option, are required to produce at least 90% of their declared butterfat test and their declared protein test. LGM-Dairy policyholders are required to market at least 75% of their Target Marketings.

On April 10th, 2020, the Risk Management Agency (RMA) modified the milk marketing requirements for the 2020 calendar year. Dumped milk will now count towards the actual milk marketings for DRP and LGM-Dairy policies. Insureds should work with their milk plant to document all milk produced. Insureds will still need to provide supporting documentation from their milk plant showing total milk marketed including the amount of milk dumped.

Producers who insured milk through the DRP component option do not need to have dumped milk component levels tested. The average component levels of your sold milk tested will apply to dumped milk. These changes are in place for the 2020 calendar year only currently.

By Aaron Gransee, Agricultural Insurance Manager, Investors Community Bank

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