Risk Management - Revenue Insurance

hay blaes in a field

In 2015, whole-Farm Revenue Protection (WFRP) replaces the Adjusted Gross Revenue and Adjusted Gross Revenue-Lite programs as a means of providing revenue coverage for diversified farms. WFRP provides protection against loss of insured revenue due to unavoidable natural causes. This protection covers losses from commodities produced or purchased for resale during the insurance period. All farm commodities including animals and animal products are covered except timber, forest and forest products, and animals for sport, show or pets. Insured revenue is based on the coverage level selected times the lower of the expected revenue on Farm Operations Report or your whole-farm historic average revenue.

Coverage levels available range from 50 to 85% in 5% increments. For the 80 and 85% coverage levels, a farm must produce a minimum of three commodities. Losses occur when Allowable Revenue reported to the IRS from production of commodities during the insured year falls below Insured Revenue.

The LGM – Dairy program provides dairy producers with protection against declining gross margin on milk production. Gross margin is defined as the market value of milk produced minus feed costs. Futures prices on CME for a specific time period on milk, and CBOT for corn and soybean meal are used to compute the gross margin. The program covers the difference between the computed (guaranteed or expected) gross margin and the actual gross margin. If the actual gross margin is smaller than the expected gross margin, the LGM-Dairy program makes a payment at the end of the period.The LGM-Dairy insurance program can be purchased any of the 12 months of the year for as short as one month or for the whole insurance period of 10 months. (The first few months after purchasing the insurance are not eligible for coverage.)

The Margin Protection Program for Dairy (MPP-Dairy) is a voluntary risk management program for dairy producers authorized by the 2014 Farm Bill and administered by the USDA Farm Service Agency. A producer enrolled in LGM-Dairy is not eligible for coverage under MPP-Dairy.

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