USDA Offers LGM-Dairy Policy for Aug. 31 Sales Period

August 29, 2012 09:06 AM

The additional $2.5 million “could be gone in less than 20 minutes,” one risk management strategist says.

An additional $2.5 million will be available for the Livestock Gross Margin (LGM) dairy policies for the Aug. 31, 2012 sales period, USDA’s Risk Management Agency (RMA) has announced.

In October 2011 and November 2011, dairy producers used the $13.1 million of subsidies in a very short time, says Ron Mortensen, with Dairy Gross Margin, LLC.

“In the November offering, for example, nearly $7 million was gone in just 53 minutes,” Mortensen says. “This month, the money could be gone in less than 20 minutes.”

LGM for Dairy next will be available on Oct. 26, 2012, when the new government fiscal year adds money to the subsidy program, Mortensen addss. For the future, the U.S. House of Representatives has proposed raising the livestock risk management subsidy funding from $20 million to $50 million per year.

LGM for Dairy is a risk management tool that allows producers to protect against falling milk prices and rising feed costs. It is margin insurance, backed by the federal government, and is similar to crop insurance.

“This is the only risk management tool that now exists for dairymen except for traditional exchange-traded options and futures,” says Mortensen. “In September, the MILC program will change. This government program will now give almost no support to dairymen. “

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