A new dairy insurance service from American Farm Bureau Insurance Services will bring an extra level of support to dairy farmers, who have been battered by losses over the past four years.
“It’s a huge, huge risk management tool,” said Dean Payne, director of property and casualty markets for Indiana Farm Bureau Insurance, which has begun offering the product.
AFBIS’ Dairy Revenue Protection insurance policy became available in early October, and it covers potential revenue loss over five quarterly insurance periods. The first one runs from January through March 2019.
The insurance product was developed by John Newton, American Farm Bureau Federation chief economist, in partnership with AFBIS and economists from the University of Minnesota and Cornell University. It fills a demand not met by previous products.
“There is such volatility in the market prices that it’s made it almost impossible for the dairy producers to have any kind of revenue stream from their dairies,” Payne said.
“Farmers have been suffering, and dairy farmers especially,” AFBF President Zippy Duvall said. “The number of dairies that have had to close or sell to larger operations is shocking.
“We have always known revenue protection insurance could help farmers weather this storm, but no one offered it,” Duvall added. “That’s why AFBIS is stepping up and rolling out this insurance now, when the need is so great.”
Dairy farmers will have the option to select between class or component pricing options. The class pricing option uses an average of Class III and Class IV milk prices based on the client’s declared class price weighting factor. The component pricing option uses butterfat, protein and other solids prices, as well as the declared butterfat and protein test to determine an insured component value of milk.
Pricing options allow farmers to customize their price elections more accurately according to individual price risk. Coverage options start at 70 percent and are available up to 95 percent.
Payne said that in many ways, the dairy revenue insurance program resembles crop insurance in that farmers can select the floor revenue level they can live with and then choose the coverage level that will provide that.
“We’re convinced that the big commercial places may have other ways to hedge their cash flow, but the small to average dairies (50 to 500 cows) probably don’t have those opportunities,” he said.
More details, including an informational video and specifics on how the program works, are available on the American Farm Bureau Insurance Services page.
About 300 of Indiana’s 1,000 dairies are insured through IFBI, Payne said. All 300 of those dairies were mailed a postcard that provides a brief intro to the program.
Because special training was required for an agent to be certified for this program, most IFBI agents haven’t been certified, Payne explained. Instead, the company focused on training approximately 20 specialists who already had some farm-policy experience. Therefore, farmers who are interested in the program should contact their own agents, but they should also expect their agent to refer them to one of the specialists.