Risk Management Agency Livestock Gross Margin - Dairy Sale (LGM) - Friday, October 26th
BACKGROUND: The Livestock Gross Margin for Dairy Cattle (LGM for Dairy Cattle) insurance policy provides protection against the loss of gross margin (market value of milk minus feed costs) on the milk produced from dairy cows. 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 for Dairy Cattle 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. Any producer who owns dairy cattle in the contiguous 48 states is eligible for LGM for Dairy Cattle insurance policy coverage.
Section 523(b)(10) of the Federal Crop Insurance Act limits the overall amount of fiscal year funding on livestock plans of insurance to $20 million. The Risk Management Agency (RMA) is authorized to allocate this underwriting capacity to the various livestock insurance plans. Livestock expenses considered for underwriting capacity purposes include administrative and operating subsidy, and premium subsidy.
ACTION: RMA plans to make available for the October 26, 2012, sales period $14.9 million in underwriting capacity for Livestock Gross Margin for Dairy Cattle (LGM-Dairy). This will allow for additional sales of LGM-Dairy while still allowing for sales of the other livestock plans of insurance. RMA has provided this information to Approved Insurance Providers and instructed them to notify their agents who sell LGM-Dairy to alert dairy producers of the October 26 sales period and the available funding. Due to the popularity of the LGM-Dairy program and because of this statutory cap on funding, RMA anticipates that the sales period for LGM-Dairy will be very short.
WHEN: Sales of LGM-Dairy will not begin prior to 4:30 p.m. CST on October 26th, 2012. Sales will begin on the half hour if information to determine the Expected Gross Margins is not available by 4:30 p.m. CST. For instance, if the expected gross margins have not been released by 4:30 p.m. CST, sales will begin at 5:00 p.m. CST, and so on. As stated above this is a popular program and the sale is likely to go very quickly.