No Funds Remaining in LGM-Dairy Program This Year

Higher milk prices and margins motivated dairy producers to purchase the last of the funds April 24 for the USDA-RMA dairy insurance policy.

USDA’s Risk Management Agency has suspended sales for its Livestock Gross Margin for Dairy insurance program (LGM-Dairy) until further notice due to lack of remaining funds.

All allocated funds for the LGM-Dairy have been used, confirms Ron Mortensen of Dairy Gross Margin LLC. Additional funds may become available later in the year.

“The higher milk prices and margins motivated dairymen to buy more LGM-Dairy on April 24,” Mortensen says.

LGM-Dairy has used $11.2 million in subsidy money. Other RMA livestock programs have used $2.5 million. This leaves $4.6 million to be allocated among all of the livestock programs until the end of September, notes Mortensen. That includes cattle, sheep and swine.

In the past, additional money has been allocated to LGM-Dairy. In August 2012, additional funds were allocated.

LGM-Dairy provides protection against loss of gross margin, which is the market value of livestock minus feed costs, on the milk produced from dairy cows. The program:

• Covers up to 10 months or any combination of months.
• Insures price changes, not individual animals.
• Can vary amounts of corn and protein tonnage each month.
• Can vary amount of milk each month.
• Purchase 12 times a year on the last business Friday of the month.
• Available in 48 states.

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 LGM-Dairy insurance policy uses futures prices for corn, soybean meal and milk to determine the expected gross margin and the actual gross margin. The price the producer receives at the local market is not used in these calculations.

Learn more about the program here and and here.