Next LGM-Dairy policy sale is Oct. 25

The next Livestock Gross Margin-Dairy (LGM-Dairy) sales period begins Friday afternoon, Oct. 25, 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 (December 2013 to September 2014), or any combination of months during that period.

The December 2013-September 2013 average of expected margins ($0.00 deductible policy) is $13.89/cwt., still more than $1.50/cwt. above the five-year average actual margin of $12.23/cwt.; and just over the three-year average of $13.44/cwt. 

The premium for a $0 deductible policy to insure a $13.89/cwt. margin is estimated at 51¢/cwt. (12¢/cwt. to insure a $12.89/cwt. margin for a $1 deductible policy).

Looking at market conditions, Zepp said Class III futures markets prices are similar to a month ago, while class IV prices continued to climb. Class IV prices have been the “higher of” since February and current futures prices project that to continue until January 2015. If class IV continues to be the higher of, producers could see a situation that is the opposite of 2012: high producer price differentials keep Northeast milk checks favorable, but Class III prices create indemnities for LGM-Dairy.

Dairy exports in July accounted for 17.6% of July’s milk production, Zepp noted. Steady world demand, declining supply from other countries, and favorable prices would suggest this trend could continue. August and September domestic and international cheese and butter prices are fairly steady, but the spread between domestic and international prices would indicate that export sales will continue to be brisk for the near term.

“Protecting Your Profits” information and a recorded podcast will be 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.