SUMMARY OF CHANGES FOR THE
DAIRY REVENUE PROTECTION INSURANCE POLICY (23-DRP)
(Released June 2022)
The following is a brief description of the changes to the Dairy Revenue Protection insurance policy that are
effective for the 2023 and succeeding crop years.
• Corrected the summary of changes
(Released April 2022)
• Section 1 – Revised the definitions of “assignment of indemnity” and “veteran farmer or rancher” to be
consistent with other crop insurance policies.
• Section 2 –
o Clarified section 2(g) that the cancellation date is June 30. Cancellation during a crop year to
submit an application for another DRP policy with a different insurance provider within the same
crop year is not allowed;
o Added references in 2(h) to administrative fees and prevented planting provisions because even
though these are not included under DRP, they may be owed under another policy and can be
offset from premium or indemnity owed under this policy; and
o Clarified section 2(h)(3) for when premium will be deducted from indemnity payments.
• Section 3 –
o Revised section 3(d) so if there is a disaster, the insured can use the milk marketing records as
of the date of the disaster to determine the milk produced for the rest of the insurance period or
use prior milk marketing records if the disaster occurs prior to the start of the insurance period.
The producer must give notice within 72 hours of the disaster and any indemnity is limited to the
amount of the premium;
o Added a new section 3(j) to clarify that producers cannot have other livestock insurance on the
same class of livestock to be marketed during any month of the quarterly insurance period; and
o Added a new section 3(k) to authorize the Secretary of Agriculture, Manager of the Risk
Management Agency, or other designated staff of the Risk Management Agency to suspend DRP
sales if there has been a news report, announcement, or other event that occurs during or after
trading hours and results in market conditions which significantly differ than those used to rate
the DRP.
• Section 15 – Revised section 15(b) to be consistent with the notice provisions in other crop insurance
policies.
• Section 17 –
o Clarified that the insured cannot have other livestock insurance on the same milk in the same
quarterly insurance period; and
o Clarified that if there is a duplicate policy and it is intentional, the insured could be subject to
sanctions to be consistent with other crop insurance policies.
• Section 20 – Specified that changes to the policy are available upon request from the insured’s agent.
(1 of 17)
23-DRP
(Released June 2022)
DAIRY REVENUE PROTECTION INSURANCE POLICY
Throughout the policy, “you” and “your” refer to the named insured shown on the Summary of coverage and “we,” “us,” and “our”
refer to the insurance company providing insurance. Unless the context indicates otherwise, use of the plural form of a word
includes the singular and use of the singular form of the word includes the plural.
This policy is reinsured by the Federal Crop Insurance Corporation (FCIC) under the provisions of the Federal Crop Insurance Act
(FCIA) (7 U.S.C. 1501-1524). All provisions of the policy and rights and responsibilities of the parties are specifically subject to the
FCIA. The provisions of the policy may not be waived or varied in any way by any crop insurance agent of the Company. Neither
we, our employees, contractor, FCIC nor the Risk Management Agency has the authority to revise, amend, or otherwise alter this
policy. We will use FCIC procedures (handbooks, manuals, memoranda, and bulletins), published on RMA’s website
www.rma.usda.gov
or a successor website, in the administration of this policy, including any loss or claim submitted under this
policy. In the event we cannot pay your loss, FCIC will become your insurer and your claim will be settled and paid by FCIC in
accordance with the provisions of this policy. No state insurance guarantee fund will be liable to pay your loss.
AGREEMENT TO INSURE: In return for the payment of the premium, and subject to all the provisions of this policy, we agree to
provide the insurance as stated in this policy. If a conflict exists among the policy provisions, the order of priority is as follows: (1)
the Special Provisions; (2) the actuarial documents; (3) the Dairy Revenue Protection- Commodity Exchange Endorsement (DRP-
CEE); and (4) these Basic Provisions, with (1) controlling (2), etc.
BASIC PROVISIONS
TERMS AND CONDITIONS
1. Definitions
Act - The Federal Crop Insurance Act (7 U.S.C. 1501 et
seq.).
Actual butterfat price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Actual butterfat test - The amount of butterfat
determined in accordance with section 7(e).
Actual class III milk price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Actual class IV milk price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Actual class pricing milk revenue - The value
determined by summing the actual class III milk price, P
III
,
multiplied by the declared class price weighting factor, W,
and the actual class IV milk price, P
IV
, multiplied by one
minus the declared class price weighting factor, 1-W; then
multiplying that sum by the covered milk production, Q,
times the yield adjustment factor, Y, divided by 100. That
is, (P
III
× W + P
IV
x (1 - W)) × Q × Y ÷ 100.
Actual component pricing milk revenue - The value
determined by summing the actual butterfat price, P
B
,
multiplied by the final butterfat test, Q
B
, the actual
protein price, P
P
, multiplied by the final protein test, Q
P
, the
actual other solids price, P
OS
, multiplied by the other solids
test, Q
OS
, multiplied by the declared component price
weighting factor, W, plus the actual butterfat price, P
B
,
multiplied by the final butterfat test, Q
B
, plus the actual
nonfat solids price, P
N
, multiplied by the final protein test,
Q
P
, plus 5.7, multiplied by one minus the declared
component price weighting factor, 1-W; then multiplying
that sum by the covered milk production, Q; times the yield
adjustment factor, Y, divided by 100. That is, [(P
B
× Q
B
+
P
P
× Q
P
+ P
OS
× Q
OS
) x W + (P
B
× Q
B
+ P
N
x (Q
P
+ 5.7)) x
(1 - W)] × Q x Y ÷ 100.
Actual milk production per cow - The pounds
determined in accordance with the DRP-CEE as shown in
the actuarial documents.
Actual milk revenue - The milk revenue calculated for the
quarterly insurance period used for determining
indemnities under this policy.
(a)
If you elect the class pricing option for the pricing
method election, then actual milk revenue equals the
actual class pricing milk revenue.
(b)
If you elect the component pricing option for the
pricing method election, then actual milk revenue
equals the actual component pricing milk revenue.
Actual nonfat solids price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Actual other solids price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Actual protein price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Actual protein test - The amount of protein determined
in accordance with section 7(e).
Actual share - The percentage interest in the insured milk
at the time of sale unless the actual share is greater than
the declared share, then your actual share will equal to
your declared share.
Actuarial documents - The information for the crop year
which is available for public inspection in your agent’s
office and published on RMA’s website which shows
available crop insurance policies, coverage levels,
information needed to determine amounts of insurance,
prices, premium adjustment percentages, practices,
particular types of the insurable crop, and other related
information regarding crop insurance in the state.
AMS - Agricultural Marketing Service of the USDA or a
successor agency.
Application - The form required to be completed by you,
containing all the information required in section 2, and
accepted by us before insurance coverage will
commence. Only one application is required per state and
all the milk produced within a state is covered under this
(2 of 17)
policy. A separate application is required to insure milk
produced in another state.
Assignment of indemnity - A transfer of policy rights,
made on our form, and effective when approved in writing,
whereby you assign your right to an indemnity payment
only to creditors or other persons to whom you have a
financial debt or other pecuniary obligation.
Beginning farmer or rancher - An individual who has not
actively operated and managed a farm or ranch in any
state, with an insurable interest in a crop or livestock as
an owner-operator, landlord, tenant, or sharecropper for
more than five crop years, as determined in accordance
with FCIC procedures. Any crop year’s insurable interest
may, at your election, be excluded if earned while under
the age of 18, while in full-time military service of the
United States, or while in post-secondary education, in
accordance with FCIC procedures. A person other than an
individual may be eligible for beginning farmer or rancher
benefits if there is at least one individual substantial
beneficial interest holder and all individual substantial
beneficial interest holders qualify as a beginning farmer or
rancher.
Business day - Monday through Friday unless the CME
Dairy markets are closed for a scheduled holiday. In the
case the CME Dairy markets are closed for a scheduled
holiday the next business day will be based on the next
day the CME Dairy markets reopens for trades.
Cancellation date - The calendar date specified in the
actuarial documents on which coverage will automatically
renew unless canceled in writing by either you or us or
terminated in accordance with the policy terms.
Class price weighting factor restricted value - A
limitation determined in accordance with Section
3(c)(1)(i)(A).
Class pricing option - A pricing method election made by
you. If you elect this pricing option, your coverage and
indemnities will be determined using the class III and class
IV milk prices.
CME group - The Chicago Mercantile Exchange Group.
Component pricing option - A pricing method election
made by you. If you elect this option, your coverage and
indemnities will be determined using component milk
prices for butterfat, protein, other solids and nonfat solids.
Component price weighting factor restricted value
- A limitation determined in accordance with Section
3(c)(1)(ii)(D).
Contract change date - The calendar date contained in
the actuarial documents, by which changes to the policy,
if any, will be made available in accordance with section
20 of these Basic Provisions.
County - Any county, parish, or other political subdivision
of a state shown on your accepted application where the
milk storage tank of your dairy operation is physically
located. If your dairy operation spans multiple counties
within the state, then the application county will be the
county elected by the insured as indicated on the
application.
Coverage - The insurance provided by this policy against
insured loss of revenue as shown on the summary of
coverage.
Coverage level - The coverage level percentage chosen
by you, used to determine the revenue guarantee.
Covered milk production - The amount of milk
production determined in accordance with section 7(d).
Crop year - The twelve-month period, beginning July 1
and ending the following June 30, which is designated by
the calendar year in which it ends.
Dairy operation - A business commercially producing and
marketing milk, produced from cows, as a single unit
located in the United States. The dairy operation to be
insured must be contained within one pooled production
region.
Days - Calendar days.
Declared butterfat test - The pounds of milkfat contained
in 100 pounds of your milk, as declared by you in
accordance with section 3(c)(1)(ii)(A).
Declared class price weighting factor
- A percentage
value, chosen by you in accordance with Section
3(c)(1)(i), to be used for determining the actual and
expected class pricing milk revenue. The declared class
price weighting factor is your percentage of the Class III
price used to determine your liability and is subtracted
from 100% to arrive at the percentage of the Class IV price
used to determine your liability. This value may be
restricted in accordance with Section 3(c)(1)(i)(A).
Declared component price weighting factor - A
percentage value, chosen by you in accordance with
Section 3(c)(1)(ii)(C) and (D), to be used for determining
the actual and expected component pricing milk revenue.
The declared component price weighting factor is your
percentage of protein and other solids price used to
determine your liability. The difference between 100% and
component price weighting factor is your percentage of
the nonfat solids price used to determine your liability. This
value may be restricted in accordance with Section
3(c)(1)(ii)(D).
Declared covered milk production - The pounds of milk
production chosen by you to insure for that quarter under
each quarterly coverage endorsement.
Declared protein test - The pounds of milk protein
contained in 100 pounds of your milk, as declared by you
in accordance with section 3(c)(1)(ii)(B).
Declared share - The percentage interest in the insured
milk as an owner at the time insurance attaches and
indicated on the quarterly coverage endorsement.
Delinquent debt - Has the same meaning as the term
defined in 7 CFR part 400, subpart U.
DRP-CEE - The Dairy Revenue Protection Commodity
Exchange Endorsement applicable for the crop year.
Effective date - The date coverage begins, as shown in
the quarterly coverage endorsement. The effective date
will always be the date the prices were published on the
RMA website corresponding to your purchase date.
End of quarterly insurance period, date of - The date
the insurance coverage provided by the quarterly
coverage endorsement ceases.
Expected butterfat price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Expected class III milk price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Expected class IV milk price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Expected class pricing milk revenue - The value
determined by summing the expected class III milk price,
E(P
III
), multiplied by the declared class price weighting
factor, W, the expected class IV milk price, E(P
IV
),
multiplied by one minus the declared class price weighting
(3 of 17)
factor, 1-W; then multiplying that sum by the declared
covered milk production, Q; divided by 100.
That is, ((E(P
III
)
x W) + E(P
IV
) x (1 - W))) × Q ÷ 100.
Expected component pricing milk revenue - The value
determined by summing the expected butterfat price,
E(P
B
), multiplied by the declared butterfat test, Q
B
, the
expected protein price, E(P
P
), multiplied by the declared
protein test, Q
P
, and the expected other solids price,
E(P
OS
), multiplied by the other solids test, Q
OS
, multiplied
by the declared component price weighting factor, W, plus
the expected butterfat price, E(P
B
), multiplied by the
declared butterfat test, Q
B
, plus the expected nonfat solids
price, E(P
N
), multiplied by the declared protein test, Q
P
,
plus 5.7, multiplied by one minus the declared component
price weighting factor, 1-W; then multiplying that sum by
the declared covered milk production, Q; divided by 100.
That is, [(E(P
B
) × Q
B
+ E(P
P
) × Q
P
+ E(P
OS
) × Q
OS
) x W +
(E(P
B
) × Q
B
+ E(P
N
) x (Q
P
+ 5.7)) x (1 - W)] × Q ÷ 100.
Expected milk production per cow - The pounds
determined in accordance with the DRP-CEE as shown in
the actuarial documents.
Expected nonfat solids price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Expected other solids price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Expected protein price - The price determined in
accordance with the DRP-CEE as shown in the actuarial
documents.
Expected revenue guarantee - The milk revenue
calculated for the quarterly insurance period used for
determining coverage under this policy, calculated as:
(a)
If you elect the class pricing option, then expected
revenue guarantee equals the expected class pricing
milk revenue times your coverage level.
(b)
If you elect the component pricing option, then
expected revenue guarantee equals the expected
component pricing milk revenue times your coverage
level.
FCIC - The Federal Crop Insurance Corporation, a wholly
owned government corporation and agency within USDA.
Final butterfat test - The amount of butterfat determined
in accordance with section 7(e).
Final class pricing milk revenue - The value determined
by summing the expected class III milk price, E(P
III
),
multiplied by the declared class price weighting factor, W,
the expected class IV milk price, E(P
IV
), multiplied by one
minus the declared class price weighting factor, 1-W; then
multiplying that sum by the covered milk production, Q;
divided by 100. That is, (E(P
III
) x W + E(P
IV
) x (1 - W)) × Q
÷ 100.
Final component pricing milk revenue - The value
determined by summing the expected butterfat price,
E(P
B
), multiplied by the final butterfat test, Q
B
, the
expected protein price, E(P
P
), multiplied by the final
protein test, Q
P
, and the expected other solids price,
E(P
OS
), multiplied by the other solids test, Q
OS
, multiplied
by the declared component price weighting factor, W, plus
the expected butterfat price, P
B
, multiplied by the final
butterfat test, Q
B
, plus the expected nonfat solids price,
P
N
, multiplied by the final protein test, Q
P
, plus 5.7,
multiplied by one minus the declared component price
weighting factor, 1-W; then multiplying that sum by the
covered milk production, Q; divided by 100. That is, [(P
B
×
Q
B
+ P
P
× Q
P
+ P
OS
× Q
OS
) x W + (P
B
× Q
B
+ P
N
x (Q
P
+
5.7)) x (1 - W)] × Q ÷ 100.
Final protein test - The amount of protein determined in
accordance with section 7(e).
Final revenue guarantee - The milk revenue calculated
for the quarterly insurance period used for determining
indemnities under this policy, calculated as:
(a)
If you elect the class pricing option, then the final
revenue guarantee equals the final class pricing milk
revenue times your coverage level.
(b)
If you elect the component pricing option, then the
final revenue guarantee equals the final component
pricing milk revenue times your coverage level.
Insured - The named person as shown on the application
accepted by us. This term does not extend to any other
person having a share or interest in the animals, such as
a partnership, landlord, or any other person unless also
specifically indicated on the application as the insured.
Liability - The maximum amount payable under this policy
for any given quarterly coverage endorsement. The
liability equals the expected revenue guarantee x declared
share x protection factor.
Limit movement - The maximum price change based on
the CME group current daily price limit for milk or dairy
commodity futures.
Limited resource farmer or rancher - Has the same
meaning as the term defined by USDA at
https://lrftool.sc.egov.usda.gov/LRP_Definition.aspx
or
successor website.
Milk - Grade A or Grade B milk produced from any species
of domesticated mammal of the family Bovidae commonly
grown for production of dairy products, also referred to as
dairy cows.
Milk marketings - The total amount of milk sold by the
insured dairy operation during the quarterly insurance
period and for which the dairy operation has proof of sale.
Milk marketing records - The supporting documents that
provide the information required in section 3(d).
Milk production worksheet - A report submitted by you
on our form showing for each month your milk marketings
and, if applicable, the butterfat test and protein test during
the months insured under this policy for the applicable
quarterly coverage endorsements in accordance with
section 3(d).
NASS - National Agricultural Statistics Service of the
USDA.
Notice of probable loss - Our notice to you of a probable
loss on your insured milk.
Offset - The act of deducting one amount from another
amount.
Other solids test - The pounds of other milk solids
contained in 100 pounds of your milk, fixed at 5.7 pounds.
Person - An individual, partnership, association,
corporation, estate, trust, or other legal entity, and
wherever applicable, a State or a political subdivision or
agency of a State. “Person” does not include the United
States Government or any agency thereof.
Policy - The agreement between you and us to insure an
agricultural commodity consisting of the accepted
application, these provisions, the Special Provisions, the
DRP-CEE, the quarterly coverage endorsement, the
actuarial documents for the insured commodity and the
applicable regulations published in 7 CFR chapter IV.
Pooled production region(s) - The states within a
region, as specified in the DRP-CEE.
(4 of 17)
Premium
- The amount you owe us for coverage based
on
the liability during the quarter in accordance with section
5.
Premium billing date - The earliest date upon which you
will be billed for the quarterly insurance period selected on
your quarterly coverage endorsement. The premium
billing date is contained in the actuarial documents.
Protection factor - A numeric value chosen by you for
each type and practice in accordance with section 3(c)(6).
Quarter - A three-month time period designated in the
actuarial documents.
Quarterly coverage endorsement - An endorsement to
the policy necessary to provide coverage that includes
information about the quarterly insurance period and
coverage options.
Quarterly insurance period - The three-month period,
corresponding to up to five of the eight quarters for which
coverage is available under the quarterly coverage
endorsement, designated in the summary of coverage to
which this policy is applicable. For example: from July 1 to
September 15 the practices 801 - 805 are available, from
September 16 - December 16 the practices 802 - 806 are
available and June 16 - June 30 the practices 805 - 808
are available. See the actuarial documents for additional
detail on insurable quarterly insurance periods.
RMA - Risk Management Agency, an agency within
USDA.
RMA’s website - A website hosted by RMA and located
at https://www.rma.usda.gov/
or a successor
website.
Sales closing date - The sales closing date is each day,
in the specified sales timeframe, during which coverage is
available for purchase.
Sales period - The period of time that begins when a daily
set of coverage prices and rates are posted on the RMA
website and ends at 9:00 AM Central Time the earlier of
Sunday or the following business day in which you can
purchase quarterly endorsements.
Sales period begin date - A date contained in the
actuarial documents citing the first date coverage for a
specific quarterly insurance period becomes available to
be offered for the crop year.
Sales period end date - A date contained in the actuarial
documents citing the last date coverage for a specified
quarterly insurance period will be available to be offered
for the crop year.
Share - The lesser of your percentage interest in the
insured milk as an owner at the time insurance attaches
or at the time of sale. Persons who lease or hold some
other interest in the milk other than as an owner are not
considered to have a share in the milk.
Special Provisions - The part of the policy that contains
specific provisions of insurance for each insured crop that
may vary by geographic area.
State - The state shown on your accepted application.
Substantial beneficial interest - An interest held by any
person of at least ten percent in you (e.g., there are two
partnerships that each have a 50 percent interest in you
and each partnership is made up of two individuals, each
with a 50 percent share in the partnership. In this case,
each individual would be considered to have a 25 percent
interest in you, and both the partnerships and the
individuals would have a substantial beneficial interest in
you. The spouses of the individuals would not be
considered to have a substantial beneficial interest unless
the spouse was one of the individuals that made up the
partnership. However, if each partnership is made up of
six individuals with equal interests, then each would only
have an 8.33 percent interest in you and although the
partnership would still have a substantial beneficial
interest in you, the individuals would not for the purposes
of reporting in section 2). The spouse of any individual
applicant or individual insured will be presumed to have a
substantial beneficial interest in the applicant or insured
unless the spouses can prove they are legally separated
or otherwise legally separate under the applicable State
dissolution of marriage laws. Any child of an individual
applicant or individual insured will not be considered to
have a substantial beneficial interest in the applicant or
insured unless the child has a separate legal interest in
such person.
Summary of coverage - Our statement to you, based
upon your quarterly coverage endorsement, specifying the
quarterly insurance period, coverage options, liability and
the premium.
Termination date - The calendar date contained in the
actuarial documents upon which your insurance ceases to
be in effect because of nonpayment of any amount due us
under the policy, including premium.
USDA - United States Department of Agriculture.
Veteran farmer or rancher -
(1) An individual who has served active duty in the United
States Army, Navy, Marine Corps, Air Force, or Coast
Guard, including the reserve components; was
discharged or released under conditions other than
dishonorable; and:
(i) Has not operated a farm or ranch;
(ii) Has operated a farm or ranch for not more than 5
years; or
(iii) First obtained status as a veteran during the most
recent 5-year period.
(2) A person, other than an individual, may be eligible for
veteran farmer or rancher benefits if all substantial
beneficial interest holders qualify as a veteran farmer
or rancher in accordance with paragraph (1) of this
definition; except in cases in which there is only a
married couple, then a veteran and non-veteran
spouse are considered a veteran farmer or rancher.
Void - When the Policy is considered not to have existed
for a crop year.
Yield adjustment factor - The factor determined by
dividing actual milk production per cow by expected milk
production per cow.
2. Life of Policy, Cancellation, and Termination
(a) The application must be completed by you and
received by us not later than the sales closing date. If
cancellation or termination of insurance coverage
occurs for any reason, including but not limited to
indebtedness, suspension, debarment,
disqualification, cancellation by you or us or violation
of the controlled substance provisions of the Food
Security Act of 1985, a new application must be filed
for the crop.
(b) Coverage will not be provided if you are ineligible
under the policy or under any Federal statute or
regulation.
(c) Coverage will not be provided if your dairy operation
is not contained within a pooled production region, or
if you do not have a share in the milk to be insured.
(d) This is a continuous policy and will remain in effect for
each crop year following the acceptance of the
(5 of 17)
original application until canceled by you in
accordance with the terms of the policy or terminated
by operation of the terms of the policy or by us. In
accordance with section 20, FCIC may change the
coverage provided from year to year.
(e) With respect to your application for insurance:
(1) You must include your social security number
(SSN) if you are an individual (if you are an
individual applicant operating as a business, you
may provide an employer identification number
(EIN) but you must also provide your SSN); or
(2) You must include your EIN if you are a person
other than an individual;
(3) In addition to the requirements of section 2(e)(1)
or (2), you must include the following for all
persons who have a substantial beneficial
interest in you:
(i) The SSN for individuals; or
(ii) The EIN for persons other than individuals
and the SSNs for all individuals that comprise
the person with the EIN if such individuals
have a substantial beneficial interest in you;
(4) You must include:
(i) Your election of plan of insurance; state;
county; the crop ‘milk’; and any other material
information required on the application to
insure your milk; and
(ii) All information required in section 2(e)(4)(i) or
your application will not be accepted and no
coverage will be provided;
(5) Your application will not be accepted and no
insurance will be provided for the year of
application if the application does not contain
your SSN or EIN. If your application contains an
incorrect SSN or EIN for you, your application will
be considered not to have been accepted, no
insurance will be provided for the year of
application and for any subsequent crop years, as
applicable, and such policies will be void if:
(i) Such number is not corrected by you; or
(ii) You correct the SSN or EIN but:
(A) You cannot prove that any error was
inadvertent (Simply stating the error was
inadvertent is not sufficient to prove the
error was inadvertent); or
(B) It is determined that the incorrect
number would have allowed you to
obtain disproportionate benefits under
the crop insurance program, you are
determined to be ineligible for insurance
or you could avoid an obligation or
requirement under any State or Federal
law;
(6) With respect to persons with a substantial
beneficial interest in you:
(i) The coverage for all expected revenue
included on your application will be reduced
proportionately by the percentage interest in
you of persons with a substantial beneficial
interest in you (presumed to be 50 percent
for spouses of individuals) if the SSNs or
EINs of such persons are included on your
application, the SSNs or EINs are correct,
and the persons with a substantial beneficial
interest in you are ineligible for insurance;
(ii) Your policies for all commodities included on
your application, and for all applicable crop
years, will be void if the SSN or EIN of any
person with a substantial beneficial interest
in you is incorrect or is not included on your
application and;
(A) Such number is not corrected or
provided by you, as applicable;
(B) You cannot prove that any error or
omission was inadvertent (Simply stating
the error or omission was inadvertent is
not sufficient to prove the error or
omission was inadvertent); or
(C) Even after the correct SSN or EIN is
provided by you, it is determined that the
incorrect or omitted SSN or EIN would
have allowed you to obtain
disproportionate benefits under the crop
insurance program, the person with a
substantial beneficial interest in you is
determined to be ineligible for insurance,
or you or the person with a substantial
beneficial interest in you could avoid an
obligation or requirement under any
State or Federal law; or
(iii) Except as provided in sections 2(e)(6)(ii)(B)
and (C), your policies will not be voided if you
subsequently provide the correct SSN or EIN
for persons with a substantial beneficial
interest in you and the persons are eligible
for insurance;
(7) When any of your policies are void under sections
2(e)(5) or (6):
(i) You must repay any indemnity that may have
been paid for all applicable commodities and
any crop years determined by us;
(ii) Even though the policies are void, you will
still be required to pay an amount equal to 20
percent of the premium that you would
otherwise be required to pay; and
(iii) If you previously paid premium or
administrative fees, any amount in excess of
the amount required in section 2(e)(7)(ii) will
be returned to you;
(8) Notwithstanding any of the provisions in this
section, if you certify to an incorrect SSN or EIN,
or receive an indemnity and the SSN or EIN was
not correct, you may be subject to civil, criminal
or administrative sanctions;
(9) If any of the information regarding persons with a
substantial beneficial interest in you changes
after the cancellation date for the previous crop
year, you must revise your application by the
cancellation date for the current crop year to
reflect the correct information. However, if such
information changed less than 30 days before the
cancellation date for the current crop year, you
must revise your application by the cancellation
date for the next crop year. If you fail to provide
the required revisions, the provisions in section
2(e)(6) will apply; and
(10) If you are, or a person with a substantial
beneficial interest in you is, not eligible to obtain
a SSN or EIN, whichever is required, you must
request an assigned number for the purposes of
(6 of 17)
this policy from us:
(i) A number will be provided only if you can
demonstrate you are, or a person with a
substantial beneficial interest in you is,
eligible to receive Federal benefits;
(ii) If a number cannot be provided for you in
accordance with section 2(e)(10)(i), your
application will not be accepted; or
(iii) If a number cannot be provided for any
person with a substantial beneficial interest
in you in accordance with section 2(e)(10)(i),
the amount of coverage for all crops on the
application will be reduced proportionately by
the percentage interest of such person in
you.
(f) After acceptance of the application, you may not
cancel this policy for the initial crop year. Thereafter,
the policy will continue in force for each succeeding
crop year unless canceled or terminated as provided
below.
(g) Either you or we may cancel this policy after the initial
crop year by providing written notice to the other on or
before June 30. Cancellation during a crop year is not
allowed.
(h) Any amount owed to us for any policy authorized
under the Act will be offset from any indemnity or
prevented planting payment due you for this or any
other crop insured with us under the authority of the
Act.
(1) Even if your claim has not yet been paid, you
must still pay the premium and administrative
fees on or before the termination date for you to
remain eligible for insurance.
(2) If we offset any amount due us from an indemnity
or prevented planting payment owed to you, the
date of payment for the purpose of determining
whether you have a delinquent debt will be the
date that you submit the claim for indemnity in
accordance with section 7 (Determining
Indemnities).
(3) For this agricultural commodity policy and any
other agricultural commodity policy insured with
us and it is:
(i) Prior to the premium billing date or for any
endorsement that has not ended, you may
request your premium and administrative
fees to be offset from any indemnity or
prevented planting payment due you; or
(ii) On or after the premium billing date, or for
any endorsement that has ended your
premium and administrative fees will be
offset from any indemnity or prevented
planting payment due to you.
(i) A delinquent debt for any policy will make you
ineligible to obtain crop insurance authorized under
the Act for any subsequent crop year and result in
termination of all policies in accordance with section
2(i)(2).
(1) With respect to ineligibility:
(i) Ineligibility for crop insurance will be effective
on:
(A) The date that a policy was terminated in
accordance with section 2(i)(2) for the
crop for which you failed to pay premium,
an administrative fee, or any related
interest owed, as applicable;
(B) The payment due date contained in any
notification of indebtedness for any
overpaid indemnity if you fail to pay the
amount owed, including any related
interest owed, as applicable, by such
due date; or
(C) The termination date for the crop year
prior to the crop year in which a
scheduled payment is due under a
written payment agreement if you fail to
pay the amount owed by any payment
date in any agreement to pay the debt;
(ii) If you are ineligible and a policy has been
terminated in accordance with section 2(i)(2),
you will not receive any indemnity and such
ineligibility and termination of the policy may
affect your eligibility for benefits under other
USDA programs. Any indemnity payment
that may be owed for the policy before it has
been terminated will remain owed to you, but
may be offset in accordance with section
2(h), unless your policy was terminated in
accordance with sections 2(i)(2)(i)(A), (B), or
(D).
(2) With respect to termination:
(i) Termination will be effective on:
(A) For a policy with unpaid premiums for
which the sales closing dates are prior to
the termination date, such policy will
terminate for the current crop year even
if insurance attached prior to the
termination date. Such termination will
be considered effective as of the prior
crop year’s cancellation date and no
insurance will be considered to have
attached for the current crop year and no
indemnity will be owed;
(B) For a policy with other amounts due for
which the sales closing dates are prior to
the termination date, such policy will
terminate for the current crop year even
if insurance attached prior to the
termination date. Such termination will
be considered effective as of the prior
crop year’s cancellation date and no
insurance will be considered to have
attached for the current crop year and no
indemnity will be owed;
(C) For all other policies that are issued by
us under the authority of the Act, the
termination date that coincides with the
termination date for the policy with the
delinquent debt or, if there is no
coincidental termination date, the
termination date immediately following
the date you become ineligible; or
(D) For execution of a written payment
agreement and failure to make any
scheduled payment, the termination date
for the crop year prior to the crop year in
which you failed to make the scheduled
payment (for this purpose only, the crop
year will start the day after the
termination date and end on the next
(7 of 17)
termination date, e.g., if the termination
date is November 30 and you fail to
make a payment on November 15, 2019,
your policy will terminate on November
30, 2018, for the 2019 crop year);
(ii) For all policies terminated under sections
2(i)(2)(i)(A), (B), or (D), any indemnities paid
subsequent to the termination date must be
repaid.
(iii) Once the policy is terminated, it cannot be
reinstated for the current crop year unless:
(A) The termination was in error;
(B) The Administrator of the Risk
Management Agency, at his or her sole
discretion, determines that the following
are met:
(1) In accordance with 7 CFR part 400,
subpart U, and FCIC issued
procedures, you provide
documentation that your failure to
pay your debt is due to an
unforeseen or unavoidable event or
an extraordinary weather event that
created an impossible situation for
you to make timely payment;
(2) You remit full payment of the
delinquent debt owed to us or FCIC
with your request submitted in
accordance with section
2(i)(2)(iii)(B)(3); and
(3) You submit a written request for
reinstatement of your policy to us no
later than 60 days after the
termination date or the missed
payment date of a previously
executed written payment
agreement, or in the case of
overpaid indemnity or any amount
that became due after the
termination date, the due date
specified in the notice to you of the
amount due, if applicable.
(i) If authorization for
reinstatement, as defined in 7
CFR part 400, subpart U, is
granted, your policies will be
reinstated effective at the
beginning of the crop year for
which you were determined
ineligible, and you will be
entitled to all applicable benefits
under such policies, provided
you meet all eligibility
requirements and comply with
the terms of the policy; and
(ii) There is no evidence of fraud or
misrepresentation; or
(C) We determine that, in accordance with 7
CFR part 400, subpart U, and FCIC
issued procedures, the following are
met:
(1) You can demonstrate:
(i) You made timely payment for
the amount of premium owed
but you inadvertently omitted
some small amount, such as the
most recent month’s interest or
a small administrative fee;
(ii) The amount of the payment was
clearly transposed from
the
amount that was otherwise
due
(For example, you owed $892
but you paid $829); or
(iii) You timely made the full
payment of the amount owed
but the delivery of that payment
was delayed, and was
postmarked no more than
seven calendar days after the
termination date or the missed
payment date of a previously
executed written payment
agreement, or in the case of
overpaid indemnity or any
amount that became due after
the termination date, the due
date specified in a notice to you
of an amount due, as
applicable.
(2) You remit full payment of the
delinquent debt owed to us; and
(3) You submit a written request for
reinstatement of your policy to us in
accordance with 7 CFR part 400,
subpart U, and applicable
procedures no later than 30 days
after the termination date or the
missed payment date of a previously
executed written payment
agreement, or in the case of
overpaid indemnity or any amount
that became due after the
termination date, the due date
specified in the notice to you of the
amount due, if applicable; and
(4) If authorization for reinstatement, as
defined in 7 CFR part 400, subpart
U, is granted, your policies will be
reinstated effective at the beginning
of the crop year for which you were
determined ineligible, and you will
be entitled to all applicable benefits
under such policies, provided you
meet all eligibility requirements and
comply with the terms of the policy;
and
(5) There is no evidence of fraud or
misrepresentation.
(iv) A determination made under:
(A) Section 2(i)(2)(iii)(B) may only be
appealed to the National Appeals
Division in accordance with 7 CFR part
11; and
(B) Section 2(i)(2)(iii)(C) may only be
appealed in accordance with section 19.
(3) To regain eligibility, you must:
(i) Repay the delinquent debt in full;
(ii) Execute a written payment agreement, in
accordance with 7 CFR part 400, subpart U,
and make payments in accordance with the
(8 of 17)
agreement; or
(iii) Have your debts discharged in bankruptcy.
(4) After you become eligible for crop or livestock
insurance, if you want to obtain coverage for your
crops or livestock, you must submit a new
application on or before the sales closing date for
the crop (Since applications for crop insurance
cannot be accepted after the sales closing date,
if you make any payment after the sales closing
date, you cannot apply for insurance until the next
available sales closing date).
(5) For example, for the 2022 crop year, if you
purchase Dairy Revenue Protection (DRP), with
a termination date of December 31, 2023 and you
do not pay the premium or other amounts due for
DRP by the termination date, your DRP policies
will terminate for the current crop year (2024)
retroactive to the cancellation date of the prior
crop year (2023) which is June 30, 2023 even if
insurance has already attached to the current
crop year (2024). The ineligibility date would be
December 31, 2023. In accordance with section
2(i)(2)(i)(C), for any other policy issued under the
authority of the Federal Crop Insurance Act that
does not have the same termination date of
December 31, the termination for such other
policy will be effective on the termination date
following when a policyholder becomes ineligible.
For example, a producer purchased a Dairy
Revenue Protection quarterly coverage
endorsement on December 3, 2021, and did not
pay
the premium by the termination date of December
31, 2023, and subsequently purchased a
Federally reinsured corn policy on March 15,
2022. The Dairy Revenue Protection policy is
terminated December 31, 2023, and the producer
is ineligible for Dairy Revenue Protection as of
cancellation date of the prior crop year (2023)
which is June 30, 2023. However, the Federally
reinsured corn policy would remain in effect for
2023 and would be terminated as of March 15,
2024, if the Dairy Revenue Protection premium
remained delinquent. No indemnity will be due for
that crop year for either crop. You will not be
eligible to apply for crop insurance for any crop
until after the amounts owed are paid in full or you
file a petition to discharge the debt in bankruptcy.
(6) If you are determined to be ineligible under
section 2(i), persons with a substantial beneficial
interest in you may also be ineligible until you
become eligible again.
(j) In cases where there has been a death,
disappearance, judicially declared incompetence, or
dissolution of any insured person:
(1) If any married individual insured dies, disappears,
or is judicially declared incompetent, the named
insured on the policy will automatically convert to
the name of the spouse if:
(i) The spouse was included on the policy as
having a substantial beneficial interest in the
named insured; and
(ii) The spouse has a share of the crop.
(2) The provisions in section 2(j)(3) will be applicable
if:
(i) Any partner, member, shareholder, etc., of
an insured entity dies, disappears, or is
judicially declared incompetent, and such
event automatically dissolves the entity; or
(ii) An individual, whose estate is left to a
beneficiary other than a spouse or left to the
spouse and the criteria in section 2(j)(1) are
not met, dies, disappears, or is judicially
declared incompetent.
(3) If section 2(j)(2) applies and the death,
disappearance, or judicially declared
incompetence occurred:
(i) More than 30 days before the cancellation
date, the policy is automatically canceled as
of the cancellation date and a new
application must be submitted; or
(ii) Thirty days or less before the cancellation
date, or after the cancellation date, the policy
will continue in effect through the crop year
immediately following the cancellation date
and be automatically canceled as of the
cancellation date immediately following the
end of the insurance period for the crop year,
unless canceled by the cancellation date
prior to the start of the insurance period:
(A) A new application for insurance must be
submitted prior to the sales closing date
for coverage for the subsequent crop
year; and
(B) Any indemnity will be paid to the person
or persons determined to be beneficially
entitled to the payment and such person
or persons must comply with all policy
provisions and pay the premium.
(4) If any insured entity is dissolved for reasons other
than death, disappearance, or judicially declared
incompetence:
(i) Before the cancellation date, the policy is
automatically canceled as of the cancellation
date and a new application must be
submitted; or
(ii) On or after the cancellation date, the policy
will continue in effect through the crop year
immediately following the cancellation date
and be automatically canceled as of the
cancellation date immediately following the
end of the insurance period for the crop year,
unless canceled by the cancellation date
prior to the start of the insurance period:
(A) A new application for insurance must be
submitted prior to the sales closing date
for coverage for the subsequent crop
year; and
(B) Any indemnity will be paid to the person
or persons determined to be beneficially
entitled to the payment and such person
or persons must comply with all policy
provisions and pay the premium.
(5) If section 2(j)(2) or (4) applies, a remaining
member of the insured person or the beneficiary
is required to report to us the death,
disappearance, judicial incompetence, or other
event that causes dissolution not later than the
next cancellation date, except if section 2(j)(3)(ii)
applies, notice must be provided by the
cancellation date for the next crop year. If notice
(9 of 17)
is not provided timely, the provisions of section
2(j)(2) or (4) will apply retroactive to the date such
notice should have been provided and any
payments made after the date the policy should
have been canceled must be returned.
(k) We may cancel your policy if no premium is earned
for three consecutive years.
(l) The cancellation date for the policy is June 30 and the
termination date for the policy is December 31 of the
year following the cancellation date as stated in the
actuarial documents. For example, a policy with a
cancellation date of June 30, 2023, would have a
termination date of December 31, 2024.
(m) Any person may sign any document relative to crop
insurance coverage on behalf of any other person
covered by such a policy, provided that the person
has a properly executed power of attorney or such
other legally sufficient document authorizing such
person to sign. You are still responsible for the
accuracy of all information provided on your behalf
and may be subject to any applicable consequences,
if any information has been misreported.
3.
Insurance Coverage
(a) Insurance coverage consists of your liability and
premium for the quarterly insurance period, as shown
on your summary of coverage.
(b) A quarterly coverage endorsement must be submitted
on our form within the sales period for each quarterly
insurance period in which you desire coverage. There
can be multiple quarterly coverage endorsements for
the same quarterly insurance period but they cannot
cover the same milk.
(c) The quarterly coverage endorsement must include
the following information, as applicable:
(1) You must choose either the class pricing option
or the component pricing option.
(i) If you choose the class pricing option:
(A) You must include the declared class
price weighting factor between 0 percent
and 100 percent, in 5 percentage point
increments.
(B) In the event the class III price is not
published but the class IV price is
published, the declared class price
weighting factor must equal 0 percent.
Likewise, if the class III price is published
but the class IV price is not published,
the declared class price weighting factor
must equal 100 percent.
(ii) If you choose the component pricing option,
you must include the following information:
(A) The declared butterfat test elected by
you can be no less than 3.25 pounds and
no more than 5.5 pounds, in 0.05 pound
increments;
(B) The declared protein test elected by you
can be no less than 2.75 pounds and no
more than 4.5 pounds, in 0.05 pound
increments;
(C) Declared component price weighting
factor between 0 percent and 100
percent, in 5 percentage point
increments; and
(D) In the event a protein price or other
solids price is not published but a nonfat
solids price is published, the declared
component price weighting factor must
equal 0 percent. Likewise, if the nonfat
solids price is not published but the
protein price and other solids price are
published, the declared component price
weighting factor must equal 100 percent.
(2) Your selected quarterly insurance period;
(3) Your declared covered milk production;
(4) Your coverage level (You must choose a
coverage level between 80 and 95 percent, in
increments of five percentage points, and you
may choose a different coverage level for each
type and practice indicated on the quarterly
coverage endorsement);
(5) Your declared share at time coverage begins
(You must provide the name(s) of other persons
sharing in the insured milk if applicable); and
(6) Your selected protection factor (You must choose
a protection factor between 1.00 and 1.5 in 0.05
increments and you may choose a different
protection factor for each type and practice
indicated on the quarterly coverage
endorsement).
(d) Your milk production worksheet is due in the event of
loss in accordance with section 7(b).
(1) The milk production worksheet must be
accompanied by milk marketing records
corresponding to the quarter insured from the
insured dairy operation’s milk cooperative or milk
handler that provides records of the actual milk
deliveries and, if applicable, the component levels
in the milk sold.
(i) In the event of a natural disaster that
prevents you from marketing milk, you may
use the milk marketing records as of the date
of the disaster to estimate the milk
marketings for the insurance period,
provided you give us written notice within 72
hours of the disaster. If the event occurred
prior to the start of the insurance period, you
may use milk marketing records from
previous insurance periods to estimate the
milk marketings for the affected insurance
period.
(ii) Any indemnity paid using the estimated milk
marketings in subparagraph (i) will be limited
to the amount of your premium owed for the
insurance period.
(2) The milk marketing records shall show:
(i) The name, address, and payroll number or
similar identifier of the producer;
(ii) The monthly or daily aggregated to monthly
total pounds, received from that producer;
and
(iii) If the component price option elected, the
total pounds of butterfat and protein
contained in the producer’s milk.
(e) No indemnity will be due you, but you will still be
responsible for any premiums owed, if we find that
your milk production worksheet:
(1) Is not supported by written verifiable records to
support the information provided in section 3(d);
or
(2) Fails to accurately report milk marketings or other
(10 of 17)
material information.
(f) Coverage can be purchased at any time during the
sales period.
(g) Sales of Dairy Revenue Protection will be suspended
if unforeseen and extraordinary events occur that
interfere with the effective functioning of the milk
commodity markets or milk production reports, as
determined by RMA.
(h) In the event of a limit movement of any milk futures
expiring during the insured period, sales of Dairy
Revenue Protection will be suspended.
(i) Sales of Dairy Revenue Protection will be suspended
on the calendar days on which USDA releases the
Milk Production report, the Cold Storage report, or the
Dairy Products report, as well as any other days that
for any reason Dairy Revenue Protection offer prices
are not published in the actuarial documents.
(j) In accordance with section 17, you may not have any
other FCIC reinsured livestock price policy covering
the same class of livestock to be marketed during any
month of the quarterly insurance period.
(k) Coverage may not be available in instances of a news
report, announcement, or other event that occurs
during or after trading hours that is determined by the
Secretary of Agriculture, Manager of the Risk
Management Agency, or other designated staff of the
Risk Management Agency, to result in market
conditions significantly different than those used to
rate the Dairy Revenue Protection program. In these
cases, coverage will no longer be offered for sale on
the RMA’s website. Dairy Revenue Protection sales
will resume when coverage prices and rates again
become available on the website.
4.
Causes of Loss
This policy provides insurance only for the difference
between the final revenue guarantee and actual milk
revenue, times your actual share and protection factor,
caused by natural occurrences in market prices and yields
in your pooled production region. This policy does not
insure against the death or other loss or destruction of
your dairy cattle, or against any other loss or damage of
any kind whatsoever.
5.
Premium
(a) The premium is earned and payable at the time
coverage begins. You will be billed for the premium
not earlier than the premium billing date specified in
the actuarial documents.
(b) The premium is shown on your summary of coverage.
(c) The premium will be based on the information you
provide on your application and quarterly coverage
endorsement.
(d) The premium will be based on your declared share.
Premium will not be reduced if your declared share is
greater than your actual share.
(e) If you qualify as a beginning farmer or rancher; or
veteran farmer or rancher, your premium subsidy will
be ten percentage points greater than the premium
subsidy that you would otherwise receive, unless
otherwise specified in the Special Provisions;
(f) You will be ineligible for any premium subsidy paid on
your behalf by FCIC for any policy issued by us if:
(1) USDA determines you have committed a violation
of the highly erodible land conservation or
wetland conservation provisions of 7 CFR part 12
as amended by the Agricultural Act of 2014; or
(2) You have not filed form AD-1026 with FSA for the
reinsurance year by the premium billing date.
(i) Notwithstanding section 5(f)(2), you may be
eligible for premium subsidy without having a
timely filed form AD–1026:
(A) For the initial reinsurance year if you
certify by the premium billing date for
your policy that you meet the
qualifications as outlined in FCIC
approved procedures for producers who
are new to farming, new to crop
insurance, a new entity, or have not
previously been required to file form AD-
1026; or
(B) If FSA approves relief for failure to timely
file due to circumstances beyond your
control or failure to timely provide
adequate information to complete the
form AD-1026 in accordance with the
provisions contained in 7 CFR part 12.
(ii) To be eligible for premium subsidy paid on
your behalf by FCIC, it is your responsibility
to assure you meet all the requirements for:
(A) Compliance with the conservation
provisions specified in section 5(e)(1) of
this section; and
(B) Filing form AD-1026, to be properly
identified as in compliance with the
conservation provisions specified in
section 5(e)(1) of this section.
(g) Premium owed by you will be offset from an
indemnity due you. The date of payment for the
purpose of determining whether you have a
delinquent debt will be the date that you submit the
claim for indemnity.
6.
Quarterly Insurance Period
(a) Coverage begins on your declared covered milk
production on the effective date of the insured quarter
as shown on your summary of coverage.
(b) Coverage ends on your declared covered milk
production on the end of insurance date for the
quarterly insurance period as shown in the actuarial
documents.
7.
Determining Indemnities
(a) In the case of a payable loss on insured milk, we will
send you a notice of probable loss approximately ten
days after all Dairy Revenue Protection data
applicable for the quarterly insurance period are
released.
(b) In order to receive an indemnity, you must submit a
claim to us on our form and include all required
documents, including the milk production worksheet,
within sixty days (60) days following the date the
notice of probable loss is issued.
(c) In the event of loss covered by this policy, we will
settle your claim by subtracting the actual milk
revenue from the final revenue guarantee, and then
multiplying by the protection factor multiplied by your
actual share. If the result is greater than zero, an
indemnity will be paid to you in this amount.
(d) Your covered milk production is the amount of milk
marketings you declare on your quarterly coverage
endorsements but if you do not actually produce the
covered milk production declared:
(1) If your milk marketings for the quarterly insurance
(11 of 17)
period are at or above 85 percent of the declared
covered milk production summed over all
quarterly coverage endorsements for the
quarterly insurance period, then your covered
milk production equals your declared covered
milk production, even if your milk marketings are
lower than the declared covered milk production;
or
(2) If your milk marketings during the quarterly
insurance period are less than 85 percent of the
declared covered milk production summed over
all quarterly coverage endorsements for the
quarterly insurance period, then your total
covered milk production for this quarterly
insurance period shall equal your milk marketings
divided by 85 percent.
(i) For example, two separate quarterly
coverage endorsements are purchased at
different points in time for a single quarterly
insurance period, endorsement A has
1,500,000 pounds of declared covered milk
production and endorsement B has 500,000
pounds of declared covered milk production
for a total of 2,000,000 pounds. The milk
marketings are 1,200,000 pounds of milk for
the quarter. The total covered milk production
for all quarterly coverage endorsements shall
be 1,200,000 pounds divided by .85 which
equals 1,411,765 pounds.
(ii) The covered milk production for each
quarterly coverage endorsement will be
determined by total covered milk production
multiplied by declared covered milk
production divided by total declared covered
milk production.
(iii) For example, endorsement A, 1,411,765
pounds total covered milk production
multiplied by (1,500,000 divided by
2,000,000) equals 1,058,824 pounds
covered milk production for this
endorsement.
(iv) Endorsement B, 1,411,765 pounds total
covered milk production multiplied by
(500,000 divided by 2,000,000) equals
352,941 pounds covered milk production for
this endorsement.
(v) Premium will be due in accordance with
section 5, which uses your declared covered
milk production, and your premium will not be
reduced as a result of any recalculations in
the covered milk production calculations of
section 7(d).
(e) If you elected the component pricing option, your
coverage is based on your declared butterfat test and
protein tests. However, to receive your full coverage
your average actual butterfat test and average actual
protein test component levels for milk sold during the
quarterly insurance period as indicated on your milk
production worksheet must not be less than 90
percent of the declared butterfat test or declared
protein test. The final butterfat test and final protein
test used to calculate the final component pricing milk
revenue and the actual component pricing milk
revenue for indemnity calculation purposes is
determined as follows;
(1) If either actual component test is less than 90
percent, then, as applicable, the final butterfat
test and/or final protein test will be the actual
determined test value percent divided by .90. For
example, if the declared butterfat test is 5.00
pounds, the policy holder’s average butterfat test
during the quarter must equal or exceed 4.50
pounds. If the actual butterfat test is 3.80 pounds,
the final butterfat test will be 4.22 pounds.
(2) For either actual component test that is at least
90 percent of the declared, then, as applicable,
the final butterfat test and/or final protein test will
equal the declared butterfat test or declared
protein test. For example, if the declared protein
test is 4.00 pounds, and the policy holder’s
average actual protein test during the quarter is
3.80 pounds, the final protein test will be 4.00
pounds.
(3) Premium will be due in accordance with section 5
and the component calculations of section 7(e)
will not result in a premium refund.
(f) If you qualify for an indemnity under the terms and
conditions of this policy, the indemnity payment shall
be made within thirty (30) days following receipt by us
of the properly executed claim form.
(g) In the event that NASS does not publish information
needed to determine state milk per cow or other
information needed in your pooled production region,
then the values for the actual milk production per cow
will be set equal to the expected milk production per
cow.
(h) Indemnities will be calculated using the same USDA
pricing methodologies, yield formulas and factors in
effect at the time the coverage was established.
8.
Conformity to Food Security Act
Although your violation of a number of federal statutes,
including the Act, may cause cancellation or termination of
the policy or may cause the policy to become void, you
should be specifically aware that your policy will be
canceled if you are determined to be ineligible to receive
benefits under the Act due to violation of the controlled
substance provisions (title XVII) of the Food Security Act
of 1985 (Pub. L. 99-198) and the regulations promulgated
under the Act by USDA. We will recover any and all
monies paid to you or received by you during your period
of ineligibility, and your premium will be refunded, less a
reasonable amount for expenses and handling not to
exceed 20 percent of the total premium.
9.
Amounts Due Us
(a) Interest will accrue at the rate of 1.25 percent simple
interest per calendar month on any unpaid amount
owed to us or on any unpaid administrative fees owed
to FCIC.
(1) For the purpose of premium amounts owed to
us
or administrative fees owed to FCIC,
interest will
start to accrue on the first day of the month
following the issuance of the notice by us,
provided that a minimum of 30 days have
passed from the premium billing date specified
in the actuarial documents.
(2) We will collect any unpaid amounts owed to us
and any interest owed thereon, and, prior to the
termination date, we will collect any
administrative fees and interest owed thereon to
FCIC.
(12 of 17)
(3) After the termination date, FCIC will collect any
unpaid administrative fees and any interest
owed thereon for any catastrophic risk protection
policy and we will collect any unpaid
administrative fees and any interest owed
thereon for additional coverage policies.
(b) For the purpose of any other amounts due us, such
as repayment of indemnities found not to have been
earned, interest will start to accrue on the date that
notice is issued to you for the collection of the
unearned amount.
(1) Amounts found due under this paragraph will not
be charged interest if payment is made within 30
days of issuance of the notice by us.
(2)
The amount will be considered delinquent
if
not paid
within 30 days of the date the notice is issued by
us.
(c) All amounts paid will be applied first to expenses of
collection (see subsection (d) of this section), if any,
second to the reduction of accrued interest, and then
to the reduction of the principal balance.
(d)
If we determine that it is necessary to contract with
a
collection agency or to employ an attorney to assist in
collection, you agree to pay all of the expenses of
collection.
(e) The portion of the amounts owed by you for a policy
authorized under the Act that are owed to FCIC may
be collected in part through administrative offset from
payments you receive from United States government
agencies in accordance with 31 U.S.C. chapter 37.
Such amounts include all administrative fees, and the
share of the overpaid indemnities and premiums
retained by FCIC plus any interest owed thereon.
10.
Payment and Interest Limitations
We will pay simple interest computed on the net indemnity
ultimately found to be due by us or by a final judgment of
a court of competent jurisdiction, from and including the
61st day after the date you sign, date, and submit to us
the properly completed claim on our form. Interest will be
paid only if the reason for our failure to timely pay is NOT
due to your failure to provide information or other material
necessary for the computation or payment of the
indemnity. The interest rate will be that established by the
Secretary of the Treasury under section 12 of the Contract
Disputes Act of 1978 (41 U.S.C. 611) and published in the
Federal Register semiannually on or about January 1 and
July 1 of each year, and may vary with each publication.
11.
Concealment, Misrepresentation or Fraud
(a) If you have falsely or fraudulently concealed the fact
that you are ineligible to receive benefits under the Act
or if you or anyone assisting you has intentionally
concealed or misrepresented any material fact
relating to this policy:
(1) This policy will be voided; and
(2) You may be subject to remedial sanctions in
accordance with 7 CFR part 400, subpart R.
(b) Even though the policy is void, you will still be required
to pay 20 percent of the premium that you would
otherwise be required to pay to offset costs incurred
by us in the service of this policy. If previously paid,
the balance of the premium will be returned.
(c) Voidance of this policy will result in you having to
reimburse all indemnities paid for the crop year in
which the voidance was effective.
(d) Voidance will be effective on the first day of the
quarterly insurance period for the crop year in which
the act occurred and will not affect the policy for
subsequent crop years unless a violation of this
section also occurred in such crop years.
(e) If you willfully and intentionally provide false or
inaccurate information to us or FCIC or you fail to
comply with a requirement of FCIC, in accordance
with 7 CFR part 400, subpart R, FCIC may impose on
you:
(1) A civil fine for each violation in an amount not to
exceed the greater of:
(i) The amount of the pecuniary gain obtained
as a result of the false or inaccurate
information provided or the noncompliance
with a requirement of FCIC; or
(ii) $10,000; and
(2) A disqualification for a period of up to 5 years from
receiving any monetary or non-monetary benefit
provided under each of the following:
(i) Any crop insurance policy offered under the
Act;
(ii) The Farm Security and Rural Investment
Act of 2002 (7 U.S.C. 7333 et seq.);
(iii)
The Agricultural Act of 1949 (7 U.S.C. 1421
et
seq.);
(iv) The Commodity Credit Corporation Charter
Act (15 U.S.C. 714 et seq.);
(v) The Agricultural Adjustment Act of 1938 (7
U.S.C. 1281 et seq.);
(vi)
Title XII of the Food Security Act of 1985 (16
U.S.C. 3801 et seq.);
(vii) The Consolidated Farm and Rural
Development Act (7 U.S.C. 1921 et seq.);
and
(viii) Any federal law that provides assistance to a
producer of an agricultural commodity
affected by a crop loss or a decline in the
prices of agricultural commodities.
12.
Transfer of Coverage and Right to Indemnity
If you transfer any of the ownership interest in your milk
during the crop year, you may transfer your coverage
rights, if the transferee is eligible for crop or livestock
insurance.
(a) We will not be liable for any more than the liability
determined in accordance with your policy that
existed before the transfer occurred.
(b) The transfer of coverage rights must be on our form
and will not be effective until approved by us in writing.
(c) Both you and the transferee are jointly and severally
liable for the payment of the premium.
(d) The transferee has all rights and responsibilities
under this policy consistent with the transferee’s
interest.
(e) If the transferee is not eligible for insurance under this
policy for any reason, and the transfer occurs before
the final 30 days of the quarterly insurance period,
then the transferred portion of the coverage will be
terminated and you will still be responsible for any
premiums owed.
13.
Assignment of Indemnity
(a) You may assign your right to an indemnity for the crop
year only to creditors or other persons to whom you
have a financial debt or other pecuniary obligation.
You may be required to provide proof of the debt or
other pecuniary obligation before we will accept the
assignment of indemnity.
(b) All assignments must be on our form and must be
(13 of 17)
provided to us. Each assignment form may contain
more than one creditor or other person to whom you
have a financial debt or other pecuniary obligation.
(c) Unless you have provided us with a properly executed
assignment of indemnity, we will not make any
payment to a lienholder or other person to whom you
have a financial debt or other pecuniary obligation
even if you may have a lien or other assignment
recorded elsewhere. Under no circumstances will we
be liable:
(1) To any lienholder or other person to whom you
have a financial debt or other pecuniary obligation
where you have failed to include such lienholder
or person on a properly executed assignment of
indemnity provided to us; or
(2) To pay to all lienholders or other persons to whom
you have a financial debt or other pecuniary
obligation any amount greater than the total
amount of indemnity owed under the policy.
(d) If we have received the properly executed assignment
of indemnity form:
(1) Only one payment will be issued jointly in the
names of all assignees and you; and
(2) Any assignee will have the right to submit all loss
notices and forms as required by the policy.
(e) If you have suffered a loss from an insurable cause
and fail to file a claim for indemnity within the period
specified in section 7(b), the assignee may submit the
claim for indemnity not later than 15 days after the
period for filing a claim has expired. We will honor the
terms of the assignment only if we can accurately
determine the amount of the claim. However, no
action will lie against us for failure to do so.
14.
Descriptive Headings
The descriptive headings of the various policy provisions
are formulated for convenience only and are not intended
to affect the construction or meaning of any of the policy
provisions.
15.
Notices
(a) All notices required to be given by you must be in
writing and received by the insurance agent identified
in your application within the designated time unless
otherwise provided by the notice requirement.
(1) Notices required to be given immediately may be
by telephone or in person and confirmed in
writing.
(2) Time of the notice will be determined by the time
of our receipt of the written notice. If the date by
which you are required to submit a report or
notice falls on Saturday, Sunday, or a federal
holiday, or if your agent's office is, for any reason,
not open for business on the date you are
required to submit such notice or report, such
notice or report must be submitted on the next
business day.
(b) All policy provisions, notices and communications that
we send to you will be:
(1) Provided by electronic means, unless:
(i) We do not have the ability to transmit such
information to you by electronic means; or
(ii) You elect to receive a paper copy of such
information;
(2) Sent to the location specified in your records with
your crop insurance agent; and
(3) Conclusively presumed to have been received by
you.
16.
Applicability of State and Local Statutes
If the provisions of this policy conflict with statutes of the
state or locality in which this policy is issued, the policy
provisions will prevail. State and local laws and
regulations in conflict with federal statutes, this policy, and
the applicable regulations do not apply to this policy.
17.
Other Insurance
Nothing in this section prevents you from obtaining other
insurance not authorized under the Act. However, unless
specifically required by policy provisions, you must not
obtain any other livestock insurance issued under the
authority of the Act on the insured milk to be marketed
during any month of the quarterly insurance period. If you
cannot demonstrate that you did not intend to have more
than one policy or endorsement in effect, you may be
subject to the consequences authorized under this policy,
the Act, or any other applicable statute. If you can
demonstrate that you did not intend to have more than one
policy in effect (For example, an application to transfer
your policy or written notification to an insurance provider
that states you want to purchase, or transfer, insurance
and you want any other policies for the crop canceled
would demonstrate you did not intend to have duplicate
policies), and:
(1)
Both are for Dairy Revenue Protection policies, the
policy with the earliest date of application will be in
force and the other policy will be void, unless both
policies are with:
(i)
The same insurance provider and the insurance
provider agrees otherwise; or
(ii)
Different insurance providers and both insurance
providers agree otherwise.
(2)
One policy is Dairy Revenue Protection and the other
is a livestock policy insuring the same milk for the
quarterly insurance period, the policy with the earliest
date of endorsement for the quarterly insurance
period will be in force and the other endorsement will
be void.
(3)
If you do and if the duplication was intentional,
you
may be subject to the sanctions
authorized under
this policy, the Act, 7 CFR
part 400, subpart R, or
any other applicable
statute.
18.
Access to Insured Milk and Records, and Record
Retention
(a) We, and any employee of USDA, reserve the right to
examine your dairy herd, and all records relating to
sale of the milk as often as we reasonably require
during the record retention period.
(b) For three years after the end of the quarterly
insurance period, you must retain, and provide upon
our request, or the request of any USDA employee,
complete records of the purchase, feeding (used to
determine capacity only), shipment, sale, or other
disposition of all the insured milk.
(1) You must also provide upon our request, or the
request of any USDA employee, separate
records showing the same information from any
milk not insured.
(2) We may extend the record retention period
beyond three years by notifying you of such
extension in writing.
(3) Your failure to keep and maintain such records
will result in no indemnity being due and since the
denial of indemnity is based on a breach of the
(14 of 17)
policy for the quarterly insurance period, you will
still be required to pay all premiums owed.
(c) Any person designated by us, and any employee of
USDA, will, at any time during the record retention
period, have access:
(1) To any records relating to this insurance at any
location where such records may be found or
maintained; and
(2) To the farm.
(d) By applying for insurance under the authority of the
Act or by continuing insurance for which you
previously applied, you authorize us, or any person
acting for us, to obtain records relating to the insured
milk from any person who may have custody of those
records including, but not limited to, packers, banks,
shippers, sale barns, terminals, cooperatives,
associations, and accountants. You must assist us in
obtaining all records that we request from third
parties.
19.
Mediation, Arbitration, Appeal, Reconsideration, and
Administrative and Judicial Review.
(a) If you do not agree with any determination made by
us, the disagreement may be resolved through
mediation in accordance with section 19(f). If the
disagreement cannot be resolved through mediation,
or you and we do not agree to mediation, you must
timely seek resolution through arbitration in
accordance with the rules of the American Arbitration
Association (AAA), except as provided in sections
19(c) and (e), and unless rules are established by
FCIC for this purpose. Any mediator or arbitrator with
a familial, financial or other business relationship to
you or us, or our agent or loss adjuster, is disqualified
from hearing the dispute.
(1) All disputes involving determinations made by us
are subject to mediation or arbitration. However,
if the dispute in any way involves a policy or
procedure interpretation, regarding whether a
specific policy provision or procedure is
applicable to the situation, how it is applicable, or
the meaning of any policy provision or procedure,
either you or we must obtain an interpretation
from FCIC in accordance with 7 CFR part 400,
subpart X or such other procedures as
established by FCIC.
(i) Any interpretation by FCIC will be binding in
any mediation or arbitration.
(ii) Failure to obtain any required interpretation
from FCIC will result in the nullification of any
agreement or award.
(iii) An interpretation by FCIC of a procedure may
be appealed to the National Appeals Division
in accordance with 7 CFR part 11.
(2) Unless the dispute is resolved through mediation,
the arbitrator must provide to you and us a written
statement describing the issues in dispute, the
factual findings, the determinations and the
amount and basis for any award and breakdown
by claim for any award. The statement must also
include any amounts awarded for interest.
(i) Failure of the arbitrator to provide such
written statement will result in the nullification
of all determinations of the arbitrator.
(ii) All agreements reached through settlement,
including those resulting from mediation,
must be in writing and contain at a minimum
a statement of the issues in dispute and the
amount of the settlement.
(b) Regardless of whether mediation is elected:
(1) The initiation of arbitration proceedings must
occur within one year of the date we denied your
claim or rendered the determination with which
you disagree, whichever is later;
(2) If you fail to initiate arbitration in accordance with
section 19(b)(1) and complete the process, you
will not be able to resolve the dispute through
judicial review;
(3) If arbitration has been initiated in accordance with
section 19(b)(1) and completed, and judicial
review is sought, suit must be filed not later than
one year after the date the arbitration decision
was rendered; and
(4) In any suit, if the dispute in any way involves a
policy or procedure interpretation, regarding
whether a specific policy provision or procedure
is applicable to the situation, how it is applicable,
or the meaning of any policy provision or
procedure, an interpretation must be obtained
from FCIC in accordance with 7 CFR part 400,
subpart X or such other procedures as
established by FCIC. Such interpretation will be
binding.
(c) Any decision rendered in arbitration is binding on you
and us unless judicial review is sought in accordance
with section 19(b)(3). Notwithstanding any provision
in the rules of the AAA, you and we have the right to
judicial review of any decision rendered in arbitration.
(d) If you disagree with any determination made by FCIC
or any claim where FCIC is directly involved in the
claims process or directs us in the resolution of the
claim, you may obtain an administrative review in
accordance with 7 CFR part 400, subpart J
(administrative review) or appeal in accordance with
7 CFR part 11 (appeal).
(1) If you elect to bring suit after completion of any
appeal, such suit must be filed against FCIC not
later than one year after the date of the decision
rendered in such appeal.
(2) Such suit must be brought in the United States
district court for the district in which the insured
milk is located.
(3) Under no circumstances can you recover any
attorney fees or other expenses, or any punitive,
compensatory or any other damages from FCIC.
(e) In any mediation, arbitration, appeal, administrative
review, reconsideration or judicial process, the terms
of this policy, the Act, and the regulations published
at 7 CFR chapter IV, including the provisions of 7 CFR
part 400, subpart P, are binding. Conflicts between
this policy and any state or local laws will be resolved
in accordance with section 16. If there are conflicts
between any rules of the AAA and the provisions of
your policy, the provisions of your policy will control.
(f) To resolve any dispute through mediation, you and
we must both:
(1) Agree to mediate the dispute;
(2) Agree on a mediator; and
(3) Be present, or have a designated representative
who has authority to settle the case present, at
the mediation.
(15 of 17)
(g) Except as provided in section 19(h), no award or
settlement in mediation, arbitration, appeal,
administrative review or reconsideration process or
judicial review can exceed the amount of liability
established or which should have been established
under the policy, except for interest awarded in
accordance with section 10.
(h) In a judicial review only, you may recover attorney’s
fees or other expenses, or any punitive,
compensatory or any other damages from us only if
you obtain a determination from FCIC that we, our
agent or loss adjuster failed to comply with the terms
of this policy or procedures issued by FCIC and such
failure resulted in you receiving a payment in an
amount that is less than the amount to which you were
entitled. Requests for such a determination should be
addressed to the following: USDA/RMA/Deputy
Administrator of Compliance/ Stop 0806, 1400
Independence Avenue, SW., Washington, D.C.
20250-0806.
(i) If FCIC elects to participate in the adjustment of your
claim, or modifies, revises or corrects your claim, prior
to payment, you may not bring an arbitration,
mediation or litigation action against us. You must
request administrative review or appeal in accordance
with section 19(d).
(j) Any determination made by FCIC that is a matter of
general applicability is not subject to administrative
review under 7 CFR part 400, subpart J or appeal
under 7 CFR part 11. If you want to seek judicial
review of any FCIC determination that is a matter of
general applicability, you must request a
determination of non-appealability from the Director of
the National Appeals Division in accordance with 7
CFR 11.6 before seeking judicial review.
20.
Contract Changes
(a) We may change the terms of your coverage under this
policy from year to year.
(b) Any changes in policy provisions, amounts of
insurance, program dates or DRP-CEE, if applicable,
can be viewed on RMA’s website not later than the
contract change date contained in these Provisions
(except as allowed herein or as specified in section 3).
We may only revise this information after the contract
change date to correct clear errors.
(c) After the contract change date, all changes specified
in section 20(b) will also be available upon request
from your crop insurance agent.
(d) You will be notified, in writing, of any changes to the
Basic Provisions and Special Provisions not later than
30 days prior to the cancellation date.
(e) Acceptance of changes will be conclusively presumed
in the absence of notice from you to change or cancel
your insurance coverage.
(f) The contract change date is April 30 preceding the
cancellation date.
21.
Multiple Government Benefits
If you are eligible to receive an indemnity under this policy
and are also eligible to receive benefits for the same loss
under any other USDA program, you may receive benefits
under both programs, unless specifically limited by the
policy or by law.
22.
Correction of Errors
(a) In addition to any other corrections allowed in your
policy subject to section 22(b), we may correct:
(1) Within 60 days after the sales closing date, any
incorrect information on your application or
provided by the sales closing date, including
identification numbers for you and any person
with a substantial beneficial interest in you, to
ensure that the eligibility information is correct
and consistent with information reported by you
to any USDA agency;
(2) Within 30 days after the effective date of a
quarterly coverage endorsement, information
reported to reconcile errors in the information with
correct information that has been determined by
any USDA agency;
(3) Within 30 days of any subsequent correction of
data by FSA, erroneous information corrected as
a result of verification of information; and
(4) At any time, any incorrect information if the
incorrect information was caused by electronic
transmission errors by us or errors made by any
agency within USDA in transmitting the
information provided by you for purposes of other
USDA programs.
(b) Corrections may be made but will not take effect for
the current crop year if the correction would allow you
to:
(1) Avoid ineligibility requirements for insurance or
obtain a disproportionate benefit under the crop
insurance program or any related program
administered by the Secretary;
(2) Obtain, enhance, or increase an insurance
guarantee or indemnity if a cause of loss exists
or
has occurred before any correction has been
made, or avoid premium owed if no loss is likely
to occur; or
(3) Avoid an obligation or requirement under any
Federal or State law.
23.
Examples
The following are examples of the calculation of the
liability, premium, and indemnity for each of the two
options under Dairy Revenue Protection. Your information
will likely be different and you should consult the actuarial
documents and the policy information. The following facts
are for illustration purposes only and apply to each of the
examples.
Producer Declarations:
Declared covered milk
Production
1,000,000 pounds
State
Wisconsin
Declared share
100%
Expected milk production
per cow
6,000 pounds per cow
per quarter
Coverage level
95%
Protection factor
1.10
Subsidy rate
44%
Example 1: Class pricing option:
Producers Elections/Expected
Declared class price
weighting factor
50%
Expected class III milk
price
$18 per hundredweight
Expected class IV milk price
$17 per hundredweight
Actuals
(16 of 17)
Actual class III milk price
$15 per hundredweight
Actual class IV milk price
$16 per hundredweight
Actual milk production per
cow
6,120 pounds per cow per
quarter
Milk marketings
900,000 pounds
Premium calculation
Step 1. Determine the liability used to calculate the premium
The liability used to calculate the premium is based on the
information provided on your application and quarterly
coverage endorsement.
Formula: ((expected class III price x declared class price
weighting factor) + (expected class IV price x (1- declared
class price weighting factor))) x declared covered milk
production ÷ 100 x coverage level x declared share x
protection factor.
$182,875 = (($18 x 0.5) + ($17 x (1-0.5))) x 1,000,000
÷ 100 x 0.95 x 1.0000 x 1.10
Step 2. Determine the premium
The premium rate is based on the simulated losses under the
class pricing option. For this example, the premium rate is
$0.024 per dollar of liability.
Gross Premium $4,389 = $182,875 x $0.024 Subsidy $1,931
= $4,389 x .44
Producer premium $2,458 = $4,389 - $1,931
Indemnity calculation
Step 1. Determine covered milk production
Determine if total milk marketings are greater than 85% of the
declared covered milk production summed over all quarterly
coverage endorsements for the applicable quarter. 1,000,000
times 0.85 equals 850,000. 900,000 is greater than 850,000.
Covered milk production equals 1,000,000.
Step 2. Calculate the final class pricing milk revenue
Formula: ((expected class III price x declared class price
weighting factor) + (expected class IV price x (1- declared
class price weighting factor))) x covered milk production ÷
100.
$175,000 = (($18 x 0.5) + ($17 x (1-0.5))) x 1,000,000
÷ 100
Step 3. Calculate final revenue guarantee for the class
pricing option
Formula: final class pricing milk revenue x your coverage
level.
$166,250 = $175,000 x 0.95
Step 4. Calculate the yield adjustment factor Formula:
Actual milk production per cow ÷ expected milk production
per cow.
1.0200 = 6,120 ÷ 6,000
Step 5. Calculate the class pricing actual milk revenue
Formula: ((actual class III price x declared class price
weighting factor) + (actual class IV price x (1-declared class
price weighting factor))) x covered milk production x yield
adjustment factor ÷ 100.
$158,100 = (($15 x 0.5) + ($16 x (1-0.5))) x 1,000,000 x
1.0200 ÷ 100
Step 6. Calculate the indemnity on class pricing policy.
If the final revenue guarantee is less than the actual milk
revenue, then no indemnity is due. If the final revenue
guarantee is greater than the actual milk revenue an
indemnity is due. In this example - (final revenue guarantee -
actual milk revenue) x actual share x protection factor.
$8,965 = ($166,250 - $158,100) x 1.0000 x 1.10
Example 2: Component pricing option:
Producers Elections/Expected
Declared component price
weighting factor
50%
Declared butterfat test
3.85
Expected butterfat price
$2.70
Declared protein test
3.15
Expected protein price
$1.90
Other solids test
5.70
Expected other solids price
$0.15
Expected nonfat solids price
$0.85
Actuals
Premium calculation
Step 1. Determine the liability used to calculate the premium
The liability used to calculate the premium is based on the
information provided on your application and quarterly
coverage endorsement.
Formula: [(declared butterfat test x expected butterfat price +
declared protein test x expected protein price + 5.7 x
expected other solids price) x declared component price
weighting factor + (declared butterfat test x expected butterfat
price + (declared protein test + 5.7) x expected nonfat solids
price) x (1-declared component price weighting factor)] x
declared covered milk production ÷ 100 x your coverage level
x declared share x protection factor.
$183,672 = [(3.85 x $2.70 + 3.15 x $1.90 + 5.7 x
$0.15) x .5 + (3.85 x $2.70 + (3.15 + 5.7) x $0.85) x (1-0.5)] x
1,000,000 ÷ 100 x 0.95 x 1.0000 x 1.10
Step 2. Determine the premium
The premium rate is based on the simulated losses under the
component pricing option. For this example, the premium rate
is $0.027 per dollar of liability.
Gross Premium $4,959 = $183,672 x $0.027 Subsidy $2,182
= $4,959 x .44
Producer premium $2,777 = $4,959 - $2,182
Indemnity calculation
Step 1. Determine covered milk production
Determine if total milk marketings is greater than 85% of the
declared covered milk production summed over all quarterly
coverage endorsements for the applicable quarter. 1,000,000
times .85 equals 850,000.
900,000 greater than 850,000.
Actual milk production per cow
6,120 pounds per cow per
quarter
Milk Marketings
900,000 pounds
Actual butterfat test
3.85
Actual butterfat price
$2.25
Actual protein test
3.15
Actual protein price
$1.70
Other solids test
5.70
Actual other solids price
$0.12
Actual nonfat solids price
$0.75
(17 of 17)
Covered milk production equals 1,000,000.
Step 2. Determine if the actual butterfat test and the actual
protein test are greater than 90% of the declared component
values.
Declared butterfat test 3.85, and the lower limit for actual is
3.85 x .90 = 3.47. The actual is greater than 90% of the
declared test value so the final butterfat test is 3.85. 90% of
the declared protein test 3.15 x .90 = 2.84; the actual test
value is greater than 90% of the declared so the final protein
test is 3.15.
Step 3. Calculate the final component pricing milk revenue
Formula: [(final butterfat test x expected butterfat price + final
protein test x expected protein price + 5.7 x expected other
solids price) x declared component price weighting factor
+ (final butterfat test x expected butterfat price + (final protein
test + 5.7) x expected nonfat solids price) x (1-declared
component price weighting factor)] x declared covered milk
production ÷ 100.
$175,763 = [(3.85 x $2.70 + 3.15 x $1.90 + 5.7 x
$0.15) x .5 + (3.85 x $2.70 + (3.15 + 5.7) x $0.85) x (1-0.5)] x
1,000,000 ÷ 100
Step 4. Calculate final revenue guarantee for the component
pricing option
Formula: final component pricing milk revenue x your
coverage level.
$166,975 = $175,763 x 0.95
Step 5. Calculate the yield adjustment factor
Formula: Actual milk production per cow ÷ expected milk
production per cow.
1.0200 = 6,120 ÷ 6,000
Step 6. Calculate the actual milk revenue for the component
pricing option
Formula: [(final butterfat test x actual butterfat price + final
protein test x actual protein price + 5.7 x actual other solids
price) x declared component price weighting factor + (final
butterfat test x actual butterfat price + (final protein test + 5.7)
x actual nonfat solids price) x (1-declared component price
weighting factor)] x declared covered milk production x yield
adjustment factor ÷ 100.
$153,008 = [(3.85 x $2.25 + 3.15 x $1.70 + 5.7 x
$0.12) x .5 + (3.85 x $2.25 + (3.15 + 5.7) x $0.75) x (1-0.5)] x
1,000,000 x 1.0200 ÷ 100
Step 7. Calculate the indemnity on component pricing policy
If the final revenue guarantee is less than the actual milk
revenue, then no indemnity is due. If the final revenue
guarantee is greater than the actual milk revenue an
indemnity is due. In this example - (final revenue guarantee -
actual milk revenue) x actual share x protection factor.
$15,364 = ($166,975 - $153,008) x 1.0000 x 1.10
