Producers can insure dairy ‘margins’ in 2009

USDA’s Risk Management Agency announced availability of Livestock Gross Margin insurance for Dairy Cattle (LGM Dairy), beginning with the 2009 livestock reinsurance year.

LGM Dairy protects against loss of gross margin (market value of milk minus feed costs) on milk produced from dairy cows. The indemnity at the end of the 11-month insurance period is the difference between the gross margin guarantee and the actual gross margin (if positive).

The policy uses futures prices and state basis for corn and milk to determine expected and actual gross margin, and may be tailored to any size farming operation.

LGM Dairy is different from traditional options in that it is a bundled option covering the price of both milk and feed costs. Producers can sign up 12 times per year and insure up to 240,000 cwt. per year.

Dairy producers in Arizona, Colorado, Connecticut, Delaware, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont, West Virginia, Wisconsin and Wyoming will be eligible for LGM Dairy insurance.

Midwest DairyBusiness carried preliminary details of the program in its November 2007 issue. Find a copy of that article on the MidwestDairyBusiness web site link.

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