Dairy

Protect dairy operations from heat stress losses.

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Objective, index-linked solutions for managing temperature and humidity extremes that impact milk production—available as insurance or derivative structures, depending on your needs.

Heat stress is the dairy industry’s $1.5 billion annual challenge, causing production losses that traditional insurance can't address. Arbol’s heat stress products offer location-specific protection based on Temperature Humidity Index (THI) and verified weather data, not damage assessments.

Used by 5,000+ Agency Partners

Backed by ERA5, PRISM, + CPC Datasets

When heat overwhelms, milk production and revenue suffer.

Heat stress affects dairy cattle when the Temperature Humidity Index (THI) exceeds 68, causing immediate drops in milk production, feed intake, and reproductive performance.

Even mild heat stress can reduce milk yield by 10%, while severe conditions can cause losses exceeding 25%. Traditional coverage options don’t address the reality that heat stress impacts occur without physical damage to facilities.

Arbol’s heat stress products are structured around precise THI calculations and weather data, offering automated payouts when temperature and humidity conditions exceed livestock comfort thresholds.

How Parametric Coverage Works

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Choose a Risk

THI threshold, stress hours, or temperature extremes

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Define Triggers

Set trigger thresholds (e.g. THI >78 for 5+ consecutive days) by farm, county, or processing region

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Coverage Initiated

Arbol tracks daily temperature and humidity data

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Payouts Automated

If the trigger is met, payment is issued—no livestock assessment needed

Payout Amount
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Probability
Threshold
Historical Payout
Heat stress solutions are offered as insurance or derivatives depending on licensing and client needs.

Heat Stress
Solutions Offered

These solutions help brokers, dairy cooperatives, and agribusinesses manage the $13 billion global impact of heat stress, preserve cash flow during extreme weather, and build climate resilience into dairy operations.

Average Maximum Temperature

Daily Maximum Temperature

Trigger Methodology

Temperature Threshold vs. Historical Average

Complexity Level

Low

Best Suited For

Feed suppliers, equipment companies, and service providers

Example Payout

Payout when temperature exceeds 105° F for 5+ consecutive days

Average Maximum THI

Temperature + Humidity Combined (THI)

Trigger Methodology

% of Historical Average Maximum (e.g. 110%)

Complexity Level

Moderate

Best Suited For

Large dairy operations with multiple locations

Example Payout

Payout when max THI exceeds 110% of 20-year average

Stress Hours

Cumulative Weighted Heat Exposure

Trigger Methodology

Texas A&M Weighted System

Complexity Level

High

Best Suited For

Individual farms focused on cumulative damage

Example Payout

Payout when total weighted stress hours exceed 150

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Real-World Applications for
Heat Stress Coverage

TX Dairy Farm
Risk

Production Loss

Trigger

THI >78 for 5+ consecutive days

Structure

Insurance

Use Case

Milk yield reduction of 15-25%

WI Dairy Cooperative
Risk

Supply Disruption

Trigger

Avg max THI exceeds 110% of historical avg

Structure

Derivative

Use Case

Member farm delivery shortfalls

CA Milk Processor
Risk

Processing Volume

Trigger

Stress hours >150 in Jun-Aug period

Structure

Insurance

Use Case

Processing capacity underutilization

NE Feed Supply Company
Risk

Customer Demand

Trigger

THI >72 for 10+ days in growing season

Structure

Derivative

Use Case

Reduced feed sales to heat-stressed herds

IA Dairy Equipment Leasing
Risk

Equipment Utilization

Trigger

Cumulative THI >2000 during peak season

Structure

Insurance

Use Case

Lower equipment demand during heat stress

Client
Risk
Trigger
Structure
Use Case
TX Dairy Farm

Production Loss

THI >78 for 5+ consecutive days

Insurance

Milk yield reduction of 15-25%

WI Dairy Cooperative

Supply Disruption

Avg max THI exceeds 110% of historical avg

Derivative

Member farm delivery shortfalls

CA Milk Processor

Processing Volume

Stress hours >150 in Jun-Aug period

Insurance

Processing capacity underutilization

NE Feed Supply Company

Customer Demand

THI >72 for 10+ days in growing season

Derivative

Reduced feed sales to heat-stressed herds

IA Dairy Equipment Leasing

Equipment Utilization

Cumulative THI >2000 during peak season

Insurance

Lower equipment demand during heat stress

Heat stress solutions may be offered as insurance or derivatives depending on the jurisdiction, client structure, and regulatory requirements. Insurance products are offered through Arbol Insurance Services, a licensed general agent. Derivative solutions are not insurance and will not indemnify direct physical losses to livestock or facilities.

Why Clients + Agents Use Arbol

Independent Data

Based on independent, transparent data (PRISM, ERA5, Texas A&M THI calculations)

Custom Triggers

Triggers customized by region, herd type, and risk tolerance using proven dairy science research

Legally Compliant

Works with brokers to structure legally compliant products for dairy industry regulations

Flexibility

Offers flexibility: pure hedge or regulated insurance depending on client structure and jurisdiction

FAQ

Explore common questions about dairy heat stress coverage.

How is Temperature Humidity Index (THI) calculated and validated?

THI is a scientifically recognized metric that combines ambient temperature and relative humidity to assess heat stress in livestock. Arbol calculates THI using validated weather data from trusted third-party sources like PRISM, ERA5, and research institutions such as Texas A&M. This ensures that all triggers are based on standardized, objective inputs—not subjective on-farm assessments.

Can I combine heat stress with other weather triggers in one product?

Yes. Arbol offers flexible, multi-trigger structures that can include THI-based heat stress along with additional perils such as drought, rainfall, or even milk yield benchmarks (in some cases). This allows dairy operations and cooperatives to align risk protection with their broader climate exposure and business objectives.

Do I need a license to quote or offer these products?

Yes. If you are offering the product as insurance, you must be a licensed insurance agent or broker. If structured as a derivative, regulatory requirements vary by jurisdiction and client type. Arbol will help you determine eligibility and licensing based on your region and client profile.

What is the difference between an insurance vs. derivative heat stress product?

Insurance: Offered through Arbol Insurance Services, a licensed general agent. Provides regulated coverage with defined benefits, ideal for traditional dairy operations and cooperatives.

Derivative: A financial instrument linked to weather outcomes, offering faster execution and more customization. Suitable for entities that do not need indemnification but want to hedge financial exposure from heat stress.

Is this available for organic or specialty dairy operations?

Yes. Arbol’s THI-based heat stress products are not limited by farm certification status. Whether you operate a conventional, organic, or specialty dairy, coverage can be tailored to reflect your location, herd sensitivity, and production model.

Can I layer heat stress with milk price or yield triggers?

Yes. While Arbol does not directly offer milk price-linked derivatives, our team can help structure solutions that align with market conditions, seasonal yield patterns, and operational risk. In many cases, heat stress protection is layered with seasonal production windows, delivery expectations, or historical output benchmarks to provide meaningful revenue support.

Start a dairy heat stress risk assessment with Arbol.

Arbol works through licensed agents and brokers. Products may be structured as insurance or derivatives depending on jurisdiction and client profile.

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Temperature Insights