Next LGM-Dairy policy sale is July 26

The next Livestock Gross Margin-Dairy (LGM-Dairy) sales period begins Friday afternoon, July 26, according to Alan Zepp, Risk Management Program coordinator with Pennsylvania’s Center for Dairy Excellence. LGM-Dairy will be offered for sale by crop insurance agents, with producers eligible to purchase margin insurance for a 10-month period (September 2013 to June of 2014), or any combination of months during that period.

Reviewing market fundamentals and conditions in his monthly “Protecting Your Profits” conference call, Zepp said current default milk and feed prices indicate insurable margins for the 10-month period are above the actual average margins for the same 10-month period over the past five years.

The September 2013-June 2013 average of expected margins ($0.00 deductible policy) is $14.38/cwt., $2.22/cwt. above the five-year average actual margin of $12.16/cwt. The three-year average margin (2010-2012) for the September-June period was $13.72/cwt. Current futures market prices project all 10 months would have an indemnity payment.

The premium for a $0 deductible policy to insure a $14.38/cwt. margin is estimated at 51¢/cwt. (11¢/cwt. to insure a $13.38/cwt. margin for a $1 deductible policy). About 15%-20% of fiscal year 2013 USDA Risk Management Agency LGM-Dairy underwriting capacity remains for the next sales period.

Zepp noted uncertainty surrounding the 2013 Farm Bill leaves the future of the Milk Income Loss Contract (MILC) program up in the air. MILC is currently is due to expire in September 2013. With that uncertainty, LGM-Dairy currently provides a very low-cost way to guarantee cash flow for the first half of 2014, he said.

“Protecting Your Profits” information and a recorded podcast are now posted at http://centerfordairyexcellence.org/protecting-your-profits/. The website also adjusts LGM-Dairy estimated margins weekly, based on updated futures prices. For further information, producers can contact Zepp at azepp@centerfordairyexcellence.org or phone 717-346-0849.

Coming up in August, the next PYP conference call/webinar will be held Aug. 28, with the LGM-Dairy sales period set for Aug. 30.