This is a continuous policy that helps insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level. There are two pricing options that are available:
Class Pricing Option
This uses a combination of Class III and Class IV milk prices based on the insured’s declared class price weighting factor. The percentage of each class can range from 0% to 100%.
The insured selects the weighted average mix of Class III and Class IV milk futures for a total of 100% between the two classes. The insured selects the Class III percentage, and the Class IV percentage is calculated based on off the selection.
Component Pricing Option
This uses a combination of component milk prices for butterfat, protein, other solids, and nonfat solids. It is based on the insured’s declared butterfat and protein test pounds and declared component price weighting factor. The weighting factor can range from 0% to 100%.
The insured declares their butterfat and protein test pounds, the other solids test is a fixed amount, and the nonfat solids is based on the protein and other solids test.
You can purchase coverage for up to five 3-month periods for either one or both of the price options (Component or Class) during a sales period. There are eight quarters for which coverage is available under the quarterly coverage endorsement.
An insured is considered to have a loss depending on natural occurrences in market prices and yields in the pooled production region. This policy does not insure against death of dairy cattle, other loss or destruction of dairy cattle, or any other loss or damage or any kind.
Indemnity is paid using state-level or pooled state region milk production per cow for the production class or component.
The sales period begins each day when the coverage rates are released on RMA’s website between 2 -4:30pm CST. The sales period ends the following business day at 9:00am CST. Sales opening on a Friday are open until 9:00am CST on Sunday.
Livestock Gross Margin (LGM)
This is a continuous policy that provides protection against the loss of gross margin for the commodity. The gross margin is defined as the difference between the gross margin guarantee and the actual gross margin at the end of the insurance period. The insurable commodities are cattle, dairy cattle, and swine. This is available to all operations no matter the size.
LGM Cattle – This policy covers cattle raised for slaughter. It protects against the loss of gross margin (market value of cattle minus feeder cattle and feed costs) on fed cattle. The insurable operations are calf finishing and yearling finishing. This policy has an 11-month insurance period.
LGM Dairy Cattle – This policy covers milk from dairy cattle. It protects against the loss of gross margin (the market value of milk minus feed costs) on the targeted quantity of marketed milk. This policy has an 11-month insurance period.
LGM Swine – This covers swine raised for slaughter. It protects against the loss of gross margin (market value of hogs minus feed costs) on swine. The insurable operations are farrow-to-finish, feeder pig-finishing, and Segregated Early Weaned (SEW) finishing. This policy has a 6-month insurance period.
The sales period for all LGM commodities begins on Thursday of each week when the coverage prices are released on the RMA website. LGM cattle and LGM swine end the following calendar day at 8:25am CST and LGM dairy cattle ends at 9:00am CST.
Livestock Risk Protection (LRP)
This is a continuous policy that insures a producer’s cattle and/or swine against a decrease in market prices. You can insure feeder cattle, fed cattle, and swine. Insureds may choose coverage prices ranging from 70 to 100 percent of the expected ending value. Indemnities are paid for the difference between the coverage price and the actual ending value.
Feeder cattle – You can buy specific coverage endorsements (SCE) throughout the year for up to 12,000 head of feeder cattle that are expected to weigh up to 1,000 pounds at the end of the insurance period. You may also insure unborn feeder cattle that are born by the end of the endorsement date and intended to be marketed at a target weight of 1.0 – 5.99 cwt. The annual limit for LRP-feeder cattle is 25,000 head per producer per year (July 1 to June 30). The length of insurance coverage available for each SCE is 13, 17, 21, 26, 30, 34, 39, 43, 47, or 52 weeks. Producers can insure calves, steers, heifers, predominantly Brahman cattle, predominantly dairy cattle, and unborn calves.
Fed cattle – You can buy SCEs for up to 12,000 head of heifers and steers (weighing between 1,000 – 1,600 pounds) that will be marketed for slaughter near the end of the insurance period. The annual limit LRP-Fed Cattle is 25,000 head per producer for each crop year (July 1 to June 30). The length of insurance coverage available for each SCE is 13, 17, 21, 26, 30, 34, 39, 43, 47, or 52 weeks.
Swine – You can buy SCEs for up to 70,000 hogs that are expected to reach market weight near the end of insurance period. The annual limit for LRP-Swine is 750,000 hogs per producer for each crop year (July 1 to June 30). The length of insurance coverage available for each SCE is 13, 17, 21, 26, or 30. Unborn swine must have a minimum insurance period of 30 weeks, and insurance coverage can be purchased for up to 52 weeks.