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Improvements in LGM dairy insurance

Improvements in LGM dairy insurance
USDA has been working on improving insurance coverage for America’s farmers and ranchers — in particular, to improve insurance coverage for dairy producers.

We here at USDA have been working on improving insurance coverage for America’s farmers and ranchers.  In particular, we have been working hard to improve insurance coverage for dairy producers.  In recent years, dairy farmers across the country faced a crisis and thousands considered bankruptcy.  One of the ways in which USDA has taken action is by improving the Livestock Gross Margin for Dairy Cattle plan of insurance.

Recently the Federal Crop Insurance Corporation Board of Directors – a public-private partnership between the Federal Government, the crop insurance industry, and farmers – approved two major improvements to this dairy insurance policy.  For the first time, a subsidy for the premium payment is being offered to producers who purchase the insurance for at least two months a year.  The subsidy amount that a producer receives varies on the size of the deductible that the producer chooses.  On average, the earned premium subsidy rate to date is 37 percent.  In addition, similar to other crop insurance products, Livestock Gross Margin Dairy insurance policy premium payments will now be due at the end of the coverage period instead of at the beginning. This will help producers with cash-flow issues and make it easier for them to purchase the product.

These changes are very popular with dairy farmers. Since the changes went into effect in December, we have seen a record amount of milk covered by insurance. Dairy farmers purchased insurance on 5.8 million hundredweight in December alone, or close to 4 times as much milk that was covered from July through November of 2010 (1.6 million hundredweight).  We hope that, as more dairy farmers find out about this effective tool, these numbers will continue to grow.

Livestock Gross Margin Dairy insures feed costs and milk prices. It is sold on the last business Friday of each month with the sales period ending at 8:00 p.m. the following day. However, if expected milk and feed prices are not available in a particular insurance period, the insurance will not be sold for that period. At the end of an 11-month insurance period, a dairy farmer receives a claims payment if the selected gross margin guarantee is larger than the actual gross margin.  The actual gross margin is the market value of milk minus the feed costs.

For more information about Livestock Gross Margin insurance policies or to find an insurance agent please visit USDA’s Risk Management Agency web site at

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