Note to California Producers Who Participate in Dairy Revenue Protection Crop Insurance Program

This is just a heads up to California producers who purchase Dairy Revenue Protection crop insurance coverage. There is a feature of this program that uses milk production per cow as an adjuster to the calculation of actual revenue, which is then compared to expected revenue for the purpose of determining indemnity payments.

Every endorsement includes an expected yield per cow that is fixed based on the date of purchase. Every quarter, the Expected Yield Per Cow for future quarters is updated when the USDA quarterly Milk Production Report is released. The bird flu caused a large reduction in milk production per cow in the 4^th quarter of 2024. DRP endorsements purchased to cover Q4 2024 milk production were adjusted accordingly, and this led to significantly higher indemnity payments. However, that lower per cow production is now reflected in a significantly lower expected yields per cow for Q2 2025, Q3 2025, and Q4 2025 DRP quotes.

The Q2 2025 expected yield dropped by 257 pounds per cow, or a little over 4%, and the Q3 2025 expected yield dropped by 228 pounds, also about 4%. The 2025 Q4 expected yield is even lower at 322 pounds, down about 5.5%. What this means is that if California milk production rebounds to normal levels later this year, DRP endorsements purchased now will likely take a yield per cow hit if the milk prices drop below floor prices and indemnities come into play. There will be a new USDA quarterly milk production report in late April, and if Q1 2025 production has recovered, the expected yields per cow will increase.

The DRP is a good program. The yield per cow formula used in California adjusts expected yields rapidly to stay as accurate as possible. The yield per cow adjustment was greatly beneficial to producers for Q4 2024 indemnities, but buyer beware, new DRP purchases for Q2 and Q3 in particular will have the potential for the yield per cow factor to be a negative on indemnities.