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Number of Dairy Producers Using LGM for Dairy Advances at a Rapid Pace

Mar 21, 2011

Livestock Gross Margin for Dairy has made a big surge forward in the last three months, with about 1.8% of the milk in the country covered under the risk management program.

 
Marv Portrait 4By Marv Carlson, Dairy Gross Margin, LLC
 
Livestock Gross Margin for Dairy (LGM-Dairy) has made a big surge forward in the last three months. As of Feb. 25, about 1.8% of the milk in the country is covered. This compares to coverage by futures and options of 3% to 5%.
 
There are two reasons for the increased use of the LGM-Dairy product. First, the industry is in need of having a way to manage risk. LGM-Dairy fits that bill with an option-like floor price for gross margin. If prices of milk move lower and prices of feed move higher, the dairyman has a floor price. If the prices of milk move higher and the feed moves lower, he sells his milk in the marketplace at the higher prices. He has achieved the goal of supporting cash flow without putting a top on his income.
 
The second reason for the increases is the change in the LGM-Dairy product. First, the producer pays the premium at the end of the insurance period. Second, the RMA/USDA is now subsidizing the premium by 18% to 50%, depending upon the deductible selected.
 
Dr. Brian Gould from the University of Wisconsin has a premium estimator that he created and supports. This calculator allows the dairyman to look at the prices of milk, corn and soybean meal and get an estimated premium. Then, the last Friday of the month, the policy can be purchased through a crop insurance agent licensed to sell LGM for Dairy.
 
Historical data and other information can be found on our website at www.dairygrossmargin.com. Go to Premium Estimator to access Dr. Gould’s premium estimator. Go to History to review historical data regarding LGM-Dairy. 
 
Summary of the LGM for Dairy policies for this 2011 crop year follows:
To give you an idea of the averages, first a look at some states individually. Then look at RMA’s data in the big chart at the end.       
 
·                     California
                35 policies
                2.8 million cwts. covered
                $650,000 in RMA/USDA subsidy paid
                $41,257 -- average premium paid by producer
                80,085 cwt. -- average cwt. covered in each policy
                $.52/cwt. -- average premium paid per cwt.
                $.23/cwt. -- average amount of premium paid by government
               
·                     Washington
                55 policies
                2.424 million cwts. covered
                $558,800 in RMA/USDA subsidy paid
                $22,050 -- average premium paid by producer
                44,000 cwt. -- average cwt. covered in each policy
                $.50/cwt. -- average amount of premium paid by government
                $.23/cwt. -- average amount of premium paid by government
 
·                     Idaho
                37 policies
                1.29 million cwts. covered
                $186,400 in RMA/USDA subsidy paid
                $14,959 -- average premium paid by producer
                34,900 cwt. -- average cwt. covered in each policy
                $.42/cwt. -- average amount of premium paid per cwt.
                $.14/cwt. --average amount of premium paid by government
 
·                     Wisconsin
                367 policies
                6.831 million cwts. covered
                $1,467,000 in RMA/USDA subsidy paid
                $9,932 --average premium paid by producer
                18,600 cwt. -- average cwt. covered in each policy
                $.53/cwt. -- average premium paid per cwt.
                $.21/cwt. -- average amount of premium paid by government
 
·                     New York
                79 policies
                2.188 million cwts. covered
                $500,948 in RMA/USDA subsidy paid
                $17,354 -- average premium paid by producer
                27,700 cwt . -- average cwt. covered in each policy
                $.62/cwt. -- average premium paid per cwt.
                $.22/cwt. -- average amount of premium paid by government
 
·                     Pennsylvania
                181 policies
                1.625 million cwts. covered
                $368,647 in RMA/USDA subsidy paid
                $5,431 -- average premium paid by producer
                8,978 cwt. -- average cwt. covered in each policy
                $.60/cwt. -- average premium paid per cwt.
                $.23/cwt.  -- average amount of premium paid by government
 
·                     Vermont
                100 policies
                4.416 million cwts. covered
                $968,900 in RMA/USDA subsidy paid
                $19,740 -- average premium paid by producer
                44,160 cwt. -- average cwt. covered in each policy
                $.45/cwt. -- average premium paid per cwt.
                $.22/cwt. -- average amount of premium paid by government
 
·                     Nationally
1,090 policies
                $13,908 -- average premium paid by producer
                26,000 cwt. -- average cwt. covered in each policy
                $.53/cwt. -- average premium paid per cwt.
                $.22/cwt. -- average amount of premium paid by government
                This data implies a $.30 deductible has been used on average
                Total subsidy paid by government to date is $7.55 million
 
RMA’s Data: a producer’s policy may have multiple units (monthly target marketings)

 

Commodity
State
Ins
Policies
Policies
Policies
Units
Units
Number
Liabilities
Total
Subsidy
Plans
Sold
Earning Premium
Indemnity Paid
Earn Premium
Indemnity Paid
cwt's
Premium
DAIRY CATTLE
CALIFORNIA
Livestock Gross Margin
27
27
0
35
0
2,803,415
47,283,020
1,444,350
650,143
DAIRY CATTLE
COLORADO
Livestock Gross Margin
3
3
0
5
0
460,000
8,045,600
308,125
95,519
DAIRY CATTLE
CONNECTICUT
Livestock Gross Margin
4
3
0
4
0
106,512
1,865,634
61,822
28,495
DAIRY CATTLE
DELAWARE
Livestock Gross Margin
4
4
0
6
0
48,796
779,310
31,556
7,427
DAIRY CATTLE
FLORIDA
Livestock Gross Margin
16
9
0
10
0
1,201,141
21,041,970
823,976
406,308
DAIRY CATTLE
GEORGIA
Livestock Gross Margin
1
1
0
1
0
161,246
2,825,030
87,750
42,120
DAIRY CATTLE
IOWA
Livestock Gross Margin
37
35
0
42
0
912,800
15,472,051
451,736
213,950
DAIRY CATTLE
IDAHO
Livestock Gross Margin
25
24
0
37
0
1,292,175
20,253,734
553,545
186,480
DAIRY CATTLE
ILLINOIS
Livestock Gross Margin
29
29
0
29
0
802,812
14,018,845
404,575
200,573
DAIRY CATTLE
INDIANA
Livestock Gross Margin
4
4
0
5
0
268,500
4,703,320
148,493
58,990
DAIRY CATTLE
KANSAS
Livestock Gross Margin
3
3
0
5
0
580,000
9,842,800
303,695
132,060
DAIRY CATTLE
KENTUCKY
Livestock Gross Margin
1
1
0
1
0
20,000
349,600
11,336
5,441
DAIRY CATTLE
MASSACHUSETTS
Livestock Gross Margin
3
3
0
3
0
101,500
1,691,550
66,093
20,995
DAIRY CATTLE
MARYLAND
Livestock Gross Margin
24
22
0
38
0
349,397
5,483,064
172,462
53,791
DAIRY CATTLE
MICHIGAN
Livestock Gross Margin
93
80
1
99
1
3,960,710
67,241,890
2,091,697
765,399
DAIRY CATTLE
MINNESOTA
Livestock Gross Margin
121
91
1
124
1
1,763,401
29,716,337
1,014,932
402,913
DAIRY CATTLE
MISSOURI
Livestock Gross Margin
2
2
0
3
0
49,800
872,272
27,067
12,993
DAIRY CATTLE
NORTH CAROLINA
Livestock Gross Margin
4
4
0
4
0
80,100
1,402,088
47,031
23,517
DAIRY CATTLE
NEW HAMPSHIRE
Livestock Gross Margin
2
2
0
3
0
17,000
297,520
7,157
3,493
DAIRY CATTLE
NEW YORK
Livestock Gross Margin
64
60
0
78
0
2,143,957
36,727,429
1,358,033
494,480
DAIRY CATTLE
OHIO
Livestock Gross Margin
11
11
0
11
0
132,550
2,221,156
75,657
34,625
DAIRY CATTLE
OKLAHOMA
Livestock Gross Margin
1
1
0
1
0
150,000
2,380,500
46,807
0
DAIRY CATTLE
OREGON
Livestock Gross Margin
1
1
0
3
0
360,000
5,806,800
254,035
121,937
DAIRY CATTLE
PENNSYLVANIA
Livestock Gross Margin
108
90
3
181
3
1,625,297
26,794,982
983,046
368,647
DAIRY CATTLE
SOUTH DAKOTA
Livestock Gross Margin
10
5
0
6
0
131,898
1,978,062
72,847
22,080
DAIRY CATTLE
TEXAS
Livestock Gross Margin
4
2
0
3
0
26,000
364,660
9,382
4,550
DAIRY CATTLE
UTAH
Livestock Gross Margin
16
16
0
31
0
737,475
11,767,670
272,383
102,914
DAIRY CATTLE
VIRGINIA
Livestock Gross Margin
13
12
0
19
0
544,700
8,961,239
243,579
94,276
DAIRY CATTLE
VERMONT
Livestock Gross Margin
83
83
0
100
0
4,416,130
71,450,239
1,974,820
968,942
DAIRY CATTLE
WASHINGTON
Livestock Gross Margin
39
39
0
55
0
2,424,028
39,363,378
1,213,881
558,843
DAIRY CATTLE
WISCONSIN
Livestock Gross Margin
336
269
1
367
1
6,831,700
113,898,734
3,645,534
1,467,104
DAIRY CATTLE
WYOMING
Livestock Gross Margin
1
0
0
0
0
0
0
0
0
Grand Total:
 
1,090
936
6
1,309
6
34,503,040
574,900,484
18,207,402
7,549,005

 

Marv Carlson is with Dairy Gross Margin, LLC, in Sioux Rapids, Iowa. Contact him at marv@dairygrossmargin.com or (712) 240-8395. Visit the firm’s website for more information: www.dairygrossmargin.com.

 

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