Livestock Gross Margin Insurance

LINK TO THE USDA GLOSSARY CLICK HERE

What types of losses are covered by LGM for Cattle?

LGM for Cattle covers the difference between the gross margin guarantee and the actual gross margin. LGM for Cattle does not insure against death loss or any other loss or damage to the producer’s cattle.
For Livestock Mortality Coverage click here

What is the Livestock Gross Margin for Cattle Insurance Policy?

The Livestock Gross Margin for Cattle (LGM for Cattle) Insurance Policy provides protection against the loss of gross margin (market value of livestock minus feeder cattle and feed costs) on cattle. 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 Cattle Insurance Policy uses futures prices to determine the expected gross margin and the actual gross margin. Adjustments to futures prices are state- and month-specific basis levels. The price the producer receives at the local market is not used in these calculations.

Who is eligible for the LGM for Cattle Insurance Policy?

Any producer who owns cattle in the states of Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Texas, Utah, West Virginia, Wisconsin, and Wyoming is eligible for LGM for Cattle insurance coverage.

What cattle are eligible for coverage under the LGM for Cattle Insurance Policy?

Only cattle sold for commercial or private slaughter primarily intended for human consumption and fed in Colorado, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Dakota, Texas, Utah, West Virginia, Wisconsin, and Wyoming are eligible for coverage under the LGM for Cattle Insurance Policy.

LGM for Cattle has two advantages features.

Producers can sign up for LGM for Cattle twelve times per year and insure all of the cattle they expect to market over a rolling 11-month insurance period. The producer does not have to decide on the mix of options to purchase, the strike price of the options, or the date of entry.

The LGM for Cattle policy can be tailored to any size farm. Options cover fixed amounts of commodities and those amounts may be too large to be used in the risk management portfolio of some farms.

How is LGM for Cattle different from traditional options?

LGM for Cattle is different from traditional options in that LGM for Cattle is a bundled option that covers both the cost of feeder cattle and the cost of feed. This bundle of options effectively insures the producer’s gross margin (cattle price minus feeder cattle and feed costs) over the insurance period.

Can LGM for Cattle be exercised?

No. LGM for Cattle cannot be exercised. LGM works as a bundle of options that pay the difference, if positive, between the value at purchase of the options and the value at the end of a certain time period. So, LGM for Cattle would pay the difference, if positive, between the gross margin guarantee and the actual gross margin, as defined in the policy provisions.

For assistance in obtaining insurance please contact our agent by clicking here.


Please note; the information provided above is only part of the available reading on Livestock Gross Margin. More information and up to date reference please visit this site here at the RMA USDA website by clicking here

I