LGM-Dairy contracts available Friday

Hoard's Dairyman: 

LGM-Dairy contracts available Friday

Date: 
Tue, 08/28/2012

USDA’s Risk Management Agency announces the remainder of LGM-Dairy funds will be available this Friday.

by Lucas Sjostrom, Hoard’s Dairyman Associate Editor

Time is fading quickly if you want to land a contract for Livestock Gross Margin (LGM) insurance for dairy cattle. This Friday, August 31, approximately $2.5 million will be released as part of the final FY 2012 offering. The federal government’s fiscal year runs from October 1 to September 30 each year.

The full release from USDA’s Risk Management Agency can be found here: http://www.rma.usda.gov/bulletins/pm/2012/12-038.pdf

LGM-Dairy was announced as a program in June 2008, beginning with the 2009 insurance year. According to the government release, “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 was available through the U.S. government for both swine and cattle beginning in 2008.

For the next farm bill, as we wrote in our August 25 issue (Hoard’s Has Heard, page 531) that the House Agriculture Committee authorized an additional $30 million per year in their version of the farm bill, the Senate has no such provision. But (as found on page 505 of our August 10 issue) the Senate version also states that those participating in LGM-Dairy cannot participate in the proposed Dairy Security Act, and vice versa.

There has been much discussion in the past year about the LGM program for dairy. At a dairy economists and policy analysts workshop this May, many sessions spoke specifically about the LGM-Dairy program. Visit the workshop's website at http://dairy.wisc.edu/Workshops/2012SaltLakeCity/ to learn from Cameron Thraen and John Newton of The Ohio State University, Tiffany LaMendola of Blimling & Associates and Alan Zepp with the Pennsylvania Center for Dairy Excellence.

One point of controversy has been the government subsidy of LGM-Dairy. Once the government funding ran out (as it almost did in just two months this year), no more LGM-Dairy may be licensed. Some would argue that even without the subsidy the program is viable. Also, this spring, Andrew Novakovic, professor at Cornell University, wrote a series of three articles in Hoard’s Dairyman comparing crop insurance and the LGM-Dairy program.

The Novakovic series can be found in our March 25 (“Could margin insurance protect our industry?” page 187), April 10 (“What can we learn from crop insurance?” page 231 or online, here: http://www.hoards.com/DE-DP/crop-insurance) and April 25 (“Two protection plans, multiple outcomes” page 275) issues.

For even more information, Wisconsin’s Understanding Dairy Markets website provides a large catalog of information: http://future.aae.wisc.edu/lgm_dairy.html

Take a look at the links and articles we referenced to decide if LGM-Dairy is right for you. If it is, best of luck in broker’s quick fingers this Friday.

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