U.S. Department of Agriculture Risk Management Agency logo

The U.S. Department of Agriculture’s Risk Management Agency recently created several enhancements to insurance programs that will provide a more efficient level of coverage for livestock and dairy producers. The program improvements to the Dairy Revenue Protection, and the Livestock Gross Margin and the Livestock Risk Protection programs take effect July 1.

The Livestock Gross Margin program provides protection against loss of gross margin or the market value of livestock minus feed costs. The Bipartisan Budget Act of 2018 removed the livestock-capacity limitation, which allowed the program to remove the individual-capacity limitation under the cattle, dairy and swine program. Prior to the revised legislation, the Federal Crop Insurance Act limited the amount of funds available to support livestock plans of insurance offered by the Risk Management Agency to $20 million per fiscal year.

The Livestock Risk Protection program protects livestock producers from the impact of declining market prices. The Risk Management Agency offers insurance plans for fed cattle, feeder cattle and swine. Beef producers electing the Livestock Risk Protection insurance plan for fed cattle may choose from a variety of coverage levels and insurance periods that correspond with the time the market-weight cattle would normally be sold. Likewise the program plan for feeder cattle allows beef producers to choose from a variety of coverage levels and insurance periods that match the time feeder cattle would normally be marketed — ownership may be retained. The program insurance for swine gives pork producers the opportunity to choose from a variety of coverage levels and insurance periods that match the time hogs would normally be marketed.

There are several improvements to the Livestock Risk Protection program.

  • expanded coverage for swine, fed and feeder cattle to all states
  • increased subsidy from the current 13 percent for all coverage levels to a range from 20 percent to 35 percent based on the coverage level selected
  • updated the Chicago Mercantile Exchange-trading requirements to allow for more insurance endorsement lengths to be offered for producers to purchase
  • increased per-head and annual head limits — fed cattle and feeder cattle are 3,000 head per endorsement and 6,000 head annually; swine are 20,000 per endorsement and 75,000 annually
  • modified the Price Adjustment Factor for Predominately Dairy cattle to 50 percent for both weight ranges, which allows dairy cattle to reflect market prices more accurately

The Dairy Revenue Protection program is designed to insure for unexpected declines in the quarterly revenue from milk sales compared with a guaranteed coverage level. 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. The covered milk production is indexed to the state or region where the dairy producer is located.

There are several improvements to the Dairy Revenue Protection program.

  • modified the minimum declared butterfat from 3.5 to 3.25 pounds, making the range 3.25 to 5 pounds
  • minimum declared protein range is expanded from 3 to 2.75 pounds, to 2.75 to 4 pounds, affording greater coverage flexibility for dairy producers
  • removed the ratio of declared butterfat test to declared protein test to simplify the process for dairy producers
  • adjusted the coverage levels — removal of the 70 percent and 75 percent coverage levels

Additionally the Agriculture Improvement Act of 2018 allows producers to enroll in the Livestock Gross Margin-Dairy program or the Dairy Revenue Protection program, and simultaneously participate in the Dairy Margin Coverage program, which is a program administered by the USDA Farm Service Agency. Visit www.rma.usda.gov for more information.