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MPP vs LGM for 2015

Published on: 18:47PM Apr 12, 2016

~~MPP vs LGM for 2015
MPP for 2015
It’s time to look back. The Margin Protection Program (MPP) provided by USDA has now completed 2015 coverage. Some producers bought up coverage to $8.00 and $6.50. Premiums for $8.00 coverage ranged from $.47 to $1.20 /cwt depending on size. For $6.50 coverage, premiums were $.07 to $.24/cwt. The $6.50 coverage generated no indemnity payment rendering returns of $-.07 to $-.24.
The $8.00 coverage level did generate an average indemnity of $.13 but did not generate enough to cover premium costs. Net after premium costs would have been in the range of -$.34 to -$1.07, depending on size.
Livestock Gross Margin (LGM) for the 2015 did yield positive results. A dairy producer purchased LGM six months prior to the coverage period. Each time he purchased LGM, he covered three months. He used a $1.00 deductible and low feed.  See the table below. The average premium was $.25/cwt and was due five months after coverage ended. If you had purchased this coverage four times, you would have received net of premium a payment of $.58/cwt.
Purchase LGM six months prior and cover:
*January, February, March
*April, May, June
*July, August, September
*October, November, December

Remember, you can purchase LGM-Dairy if you have not signed up for MPP. 
Ron Mortensen is principal of Dairy Gross Margin, LLC, an agency that specializes in LGM-Dairy products, and owner of Advantage Agricultural Strategies, Ltd., a commodity trading advisor.