Dairy Revenue Protection, DRP, is the latest tool for Dairy Producers to manage the increasingly volatile Milk Price received on the farm. This product was introduced on October 9, 2018 and tends to provide more options than other products. It is another product available to the dairyman along with Livestock Gross Margin-Dairy (LGM-Dairy) and the Margin Protection Program, (MPP), which is now replaced by the Dairy Revenue Coverage, (DRC).
LGM-Dairy
LGM-Dairy has been a tool available for a decade. It is designed to provide protection against both rising feed costs and declining milk prices. It was successful in some cases. But, the major pitfall was the fact that if milk prices fell it was often coupled with a decrease in feed costs as well.
Therefore, these two simultaneous movements would cancel each other out and it would negate any potential payout to the policyholder. It also was based strictly on Chicago Board, CME, and it did not accurately reflect the local markets very well. Also, it was only available to purchase once per month on the last business Friday of the month.
Dairy Revenue Coverage
The Dairy Revenue Coverage (DRC) program replaced the Margin Protection Program (MPP). It is a Government FSA program administered through the County FSA offices. The new DRC program is improved over the MPP program, but it continues to be geared more to a disaster-type scenario and is lacking in its ability for the dairy producer to customize the product for their individual operation.