WV Small Farm Center

Livestock Gross Margin for Dairy Cattle

LGM Dairy Cattle insurance provides protection to dairy producers when feed costs rise or milk prices drop. Gross margin is the market value of milk minus feed costs. LGM Dairy uses futures prices for corn, soybean meal, and milk to determine the expected gross margin and the actual gross margin. To see an example of this, see this Example of Premium Calculation LGM

For policies insuring multiple months during the insurance period, a premium subsidy is available. This subsidy amount is determined by a dollar deductible selected by the policyholder (ranges from $0—$2 in $0.10 increments). Policyholders choosing a $0 deductible receive a lower premium subsidy (18 percent) and those choosing the highest deductible of $2 receive a higher premium subsidy (50 percent). The above example is of a policyholder with a $0 deductible.

LGM Coverage Prices, Rates, and Actual Ending Values

Premium Calculator

How do I get paid?

The indemnity at the end of the 11-month insurance period is the difference (if positive) between the gross margin guarantee and the actual gross margin. The local market is not used in these calculations.

What is covered?

LGM Dairy covers the difference between the gross margin guarantee and the actual gross margin. Indemnity payments will equal the difference between the gross margin guarantee and the actual total gross margin for the insurance period. LGM-Dairy Does Not Cover • Risk of dairy cattle death • Unexpected production (milk) losses • Unexpected increase in feed use • Anticipated or multiple-year declines in milk prices • Anticipated or multiple-year increases in feed costs

When and how do I sign up?

The insurance period contains the 11 months following the sales closing date. For example, a sales closing date in January has an insurance period of February through December. However, coverage begins in the second month of the insurance period. In this example, the coverage will be from March through December.

For additional assistance, you can use the LGM Handbook to guide you through the decision and purchase process.

Sales Period

LGM Dairy is sold on the last business Friday of each month. The sales period begins as soon as RMA reviews the data submitted by the developer, Iowa Agricultural Insurance Innovations, after the Chicago Mercantile Exchange Group markets close on the last day of the price discovery period. The sales period ends at 8:00 p.m. the following day. If expected milk and feed prices are not available on the RMA Web site, LGM Dairy will not be offered for sale for the insurance period.

Additional Resources

For more information please see the LGM Dairy RMA Factsheet