1 livestock gross margin (lgm) for dairy karen b. bodley asa regional sales rep. & katie rossini...

11

Livestock Gross Livestock Gross Margin (LGM) for Margin (LGM) for

DairyDairy

Karen B. Bodley ASA Regional Sales Rep.

& Katie Rossini

Director, Risk Management and Analysis

22

Federal Crop Insurance Corporation

LGM for DairyLGM for Dairy

33

What is LGM for Dairy?What is LGM for Dairy?

Insurance program

– Protects the gross margin between

milk price and feed cost

Written and reinsured by the

Federal Government (Risk

Management Agency)

44

What do you need to What do you need to participate?participate?

1. Determine amount of milk to insure per month

2. Determine amount of feed used to produce the amount of insured milk

3. Determine months to insure

55

What LGM is notWhat LGM is not

It Does Not

– Insure against death of cattle

– Loss for unexpected decrease in milk

production

– Unexpected increases in feed use

– This product does not affect any other

crop insurance product you may currently

purchase

66

Enrollment PeriodEnrollment Period

Insurance can be purchased monthly

– Coverage can be for one month

– Coverage can be up to 10 months

Coverage will attach one full month

following the offering date

– Book on August 27th, coverage begins October 1st

Coverage is offered on the third to last

business day of each month

77

Enrollment ExampleEnrollment Example

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

X

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

X

X – Enrollment Month - Coverage Period

99

Insurance LimitsInsurance Limits

There is no minimum number of hundredweights that a producer can insure

The maximum amount of milk that can be insured is:– 24,000,000 lbs (240,000 cwt) per

insurance period

1010

What are your What are your responsibilities?responsibilities?

Keep accurate feed records (purchases and field grown)

Keep accurate records/reports of milk produced each month

*If at this time you are unable to keep accurate records please talk to one of us and we can help you set up a system that will work for you and your farm

1111

What are acceptable What are acceptable feed records?feed records?

Farm Management Records Ledger Sheets Bin Measurements Field Harvest Records Precision farming and yield Monitoring

systems. Livestock Feeding Records Verifiable receipts of purchase for feed

1212

How do I apply for How do I apply for insurance?insurance?

Application and target marketing report

Marketing report Transfer of right to an indemnity

* Sample forms have been provided in your packets

1313

Target MarketingTarget Marketing

Milk

A producer determines milk in cwt that they

wish to insure – up to a max of 100% of

total production

Feed

Convert energy and protein of current

ration to feed equivalent of corn and

soybean meal

Only for insured milk quantity

1414

Expected Prices Expected Prices

Chicago Board of Trade futures

prices are used for corn and

soybean meal

Chicago Mercantile Exchange

futures prices are used for milk

1515

Expected Pries - Expected Pries - ExampleExample

To calculate LGM coverage for July

‘09

– July ‘09 corn futures price on the

CBOT

– July ‘09 soybean meal futures price on

the CBOT

– July ‘09 milk futures price on the CME

1616

BasisBasis

Basis = Difference between the state

price and the CBOT/CME price for a

given commodity

Predetermined for crop year

– NASS Data (National Agricultural Statistic

Survey)

Does not impact your typical basis

– Additional components, PPD, premiums

1717

Vermont Basis

Milk Corn

($/cwt) ($/bu)

Jan $2.38 $0.34

Feb $2.15 $0.34

Mar $2.42 $0.37

Apr $1.10 $0.40

May $1.39 $0.47

Jun $1.69 $0.47

Jul $1.71 $0.42

Aug $1.44 $0.40

Sep $1.53 $0.36

Oct $1.99 $0.19

Nov $2.27 $0.24

Dec $1.99 $0.25

1818

CostCost

Premiums– Determined monthly

High price volatility = high premiums Insure more months together – pay lower

premiums

Deductibles– Increase deductible – decrease premium

– Range from $0 to $1.50/cwt in $0.10 increments

1919

Premium QuotesPremium Quotes

Obtaining a Quote

– Prior to the sales day (3rd to last

business day of the month), quotes

run off of the previous month’s

prices

– Actual quotes can only be given on

the actual sales day

2020

LGM for Dairy QuoteLGM for Dairy Quote

Scenario:ABC Dairy would like to purchase an 11-month LGM policy

They would like to book 200,000 lbs (2,000 cwt) of milk per month

Their corn equivalent is 13 tons per month and soybean meal equivalent is 7.5 tons per month

They would like a quote with a $1.00 deductible and one with out a deductible

2121

Quote Quote

Sales Closing Date: August 27, 2008Coverage Begins: October 1, 2008 Coverage Ends: July 31,2009

With $1.00 Deductible

Without Deductible

Gross Margin Guarantee:

$366,291.79 $386,291.79

Liability: $427,000.00 $427,000.00

Producer Premium:

$14,563.00 $23,977.00

Producer Premium:

($/cwt) $0.72 $1.19

2222

Quote ComparisonQuote Comparison

Farmer A decided to book milk for October– Milk booked was 200,000 lb, (2,000

cwt) corn fed was 25 tons, and soybean meal was 7.8 tons

Farmer B decides in August that he wants to insure10 months using the same cwt of milk and feed from above

2323

Quote ComparisonQuote Comparison

Farmer A Farmer B

Coverage Months 1 10

Gross Margin Guarantee $36,601.71 $357,476.07

Liability $42,700.00 $427,000.00

Producer Premium $3,010.00 $24,558.00

Premium ($ per cwt) $1.51 $1.23

2424

ApprovalApproval

Insurance application must be

accepted by USDA (RMA – Risk Management

Agency) prior to coverage attaching If program capacity is reached

You may not be able to get

coverage Your coverage quantity may be

decreased

2525

LossesLosses

At the end of the producer’s marketing

plan they will receive a notice of probable

loss

*The end of your marketing plan is the last month in which

you choose to insure your milk

Producer must file a new marketing plan

within 15 days of notice to receive an

indemnity payment

*Sample of Notice of Probable loss located in packet

2626

Getting StartedGetting Started&&

ExamplesExamples

2727

Step 1 – Insurance Step 1 – Insurance PeriodPeriod

Enrollment:

– Monthly 3rd to last business day of every month

– Multi-month, or individual months Can cover as little as one month

Can cover up to 10 months per

enrollment

2828

Step 2a – Target Step 2a – Target MarketingMarketing

Milk

– Up to 100% of expected production Insures milk that is produced

– No minimum

– Up to 24,000,000 pounds per crop

year

2929

Step 2b – Target Step 2b – Target MarketingMarketing

Feed

– Corn Equivalent

– Soybean Meal Equivalent

– Convert current ration into corn and

soybean meal equivalents

– Must be within a range for the

amount of milk you are insuring

3030

Step 3 - DeductibleStep 3 - Deductible

Deductible

– $0 - $1.50/cwt

– $0.10 increments

– Increase deductible – decrease

premium

3131

Step 4 - ApplyStep 4 - Apply

Fill out necessary paperwork

– Target Marketings

– Milk & Feed

3232

Step 5 - IndemnityStep 5 - Indemnity

To Collect your Applicable

Indemnity

– You will receive a notice at the end

of your insurance period

– You must return paperwork within 15

days of notice to claim any indemnity

3333

EXAMPLESEXAMPLES

3434

LGM-Dairy ExampleLGM-Dairy Example

August 27th enrollment

3-month coverage

$0 deductible

Coverage for 200,000 lbs/mo (2,000

cwt) (100% of anticipated production)

Feed target marketings?

3535

LGM-Dairy ExampleLGM-Dairy Example Feed

– Marketing for 200,000 lbs of monthly milk production

– Can use suggested feed conversion rate

– Must be within USDA specified range

Example: Feeding 2 tons of whole cottonseed

Soybean Meal Equivalent:Soybean Meal Equivalent: 2 tons X 0.323 = 0.646 tons0.646 tons

Corn Equivalent:Corn Equivalent: 2 tons X 0.850 = 1.700 tons1.700 tons

3636

S oybean Meal R atio C orn R atioB arley 0.111 0.866B lood Meal 2.025 -1.235B rewer's grain, dry 0.433 0.357B rewer's grain, wet (21% D M) 0.099 0.081B rewer's grain, wet (40% D M) 0.188 0.155C orn, s helled 0 1C orn and cob meal (ear corn) -0.007 0.985C orn gluten meal, dry 1.408 -0.42C orn gluten feed, dry 0.304 0.597Whole cottons eed 0.323 0.85C ottons eed meal (41% C P ) 0.905 0.036C ottons eed meal (36% C P ) 0.867 0.015D is tiller's grain with s olubles , dried (92% D M) 0.394 0.686D is tiller's grain with s olubles , wet (60% D M) 0.257 0.447F eather Meal 1.6 -0.743F is h meal, herring 1.875 -0.865F is h meal, menhaden 1.651 -0.768Hominy 0.057 0.977Meat meal 1.227 -0.349Meat and bone meal 1.426 -0.555Molas s es , cane, dry 0.075 0.791Molas s es , cane, wet -0.037 0.747O ats 0.12 0.779P eanut S kins 0.265 0.439Whole s oybeans 0.836 0.279S oybean meal 1 0S oyhulls 0.1 0.819Thin s tillage (s lop) (6% D M) 0.026 0.045Wheat 0.161 0.884Wheat bran 0.235 0.585Wheat middlings 0.274 0.523

S ugges ted C onvers ion R ates for D airy F eeds , B as ed on P rotein and E nergy C ontent per Ton

3737

LGM-Dairy ExampleLGM-Dairy Example

Total Feed Equivalent

– 7.5 tons of Soybean meal

– 893 bushels of Corn (25 tons)

Milk Production

– 200,000 lb per month

3838

LGM Example 1LGM Example 1

Enrollment: August 27, 2008

Milk: 200,000 lb/month (2,000 cwt)

Corn: 893 bu/month (25 tons)

Soybean Meal: 7.5 ton/month

Insurance Period: Oct – Dec 2008

3939

LGM Example 1LGM Example 1Oct Nov Dec Total

Milk Amount (cwt) 2,000 2,000 2,000

Expected Price $20.77 $20.66 $20.59

Basis $1.79 $2.17 $1.97

$45,120 $45,660 $45,120 $135,900

Corn Amount (bu) 893 893 893

Expected corn price(bu.) $6.15 $6.20 $6.25

Basis $0.14 $0.19 $0.20

Expected Corn Cost $5,620 $5,710 $5,762 $17,091

Amount (tons) 7.5 7.5 7.5

Expected Price $327 $327 $327

Basis $0.00 $0.00 $0.00

Expected Soybean Cost $2,453 $2,453 $2,453 $7,359

$8,073 $8,163 $8,214 $24,450

$37,047 $37,497 $36,906 $111,450

$111,450

$18.57

$7,405$1.23

Expected Feed Cost

Expected Revenue

Soybean Meal

Premium ($):Premium ($/cwt):

Expected gross margin

Gross Margin Guarantee ($):

Gross Margin Guarantee ($/cwt):

4040

LGM Example 1aLGM Example 1a

Enrollment: November 25, 2008

Milk: 100,000 lb/mo (1,000 cwt/mo)

Corn: 445 bu/month (12.5 tons)


Insurance Period: Jan - Apr 2009

4141

LGM Example 1aLGM Example 1aJan Feb Mar Apr Total

Milk Amount (cwt) 1,000 1,000 1,000 1,000

Expected Price $19.88 $19.23 $19.21 $18.90

Basis $2.32 $2.11 $2.32 $1.04

$22,200 $21,340 $21,530 $19,940 $85,010

Corn Amount (bu) 445 445 445 445

Expected corn price(bu.) $6.30 $6.34 $6.38 $6.42

Basis $0.29 $0.29 $0.32 $0.35

Expected Corn Cost $2,931 $2,951 $2,983 $3,014 $11,879

Amount (tons) 3.8 3.8 3.8 3.8

Expected Price $328 $329 $331 $332

Basis $0.00 $0.00 $0.00 $0.00

Expected Soybean Cost $1,229 $1,235 $1,242 $1,245 $4,952

$4,160 $4,186 $4,225 $4,260 $16,831

$18,040 $17,154 $17,305 $15,680 $68,179

$68,179$17.04

$5,024$1.26

Gross Margin Guarentee ($):Gross Margin Guarentee ($/cwt):


Expected Revenue

Expected Feed Cost

Soybean Meal


4242

LGM Example 2LGM Example 2

Enrollment: August 27, 2008

Milk: 200,000 lb/mo (2,000 cwt/mo)

Corn: 893 bu/month (25 tons)


Insurance Period: Oct – Dec 2008

Deductible: $1.00/cwt

4343

LGM Example 2LGM Example 2Oct Nov Dec Total

Milk Amount (cwt) 2,000 2,000 2,000

Expcetd Price w/ Basis $22.56 $22.83 $22.56

$45,120 $45,660 $45,120 $135,900

Corn Amount (bu) 893 893 893

Expected Price w/ Basis $6.29 $6.39 $6.45

Expected Corn Cost $5,617 $5,706 $5,760 $17,083

Amount (tons) 7.5 7.5 7.5

Expected Price $327 $327 $327

Expected Soybean Cost $2,453 $2,453 $2,453 $7,359

$8,070 $8,159 $8,212 $24,442

$37,050 $37,501 $36,908 $111,458

$1.00$6,000

$105,458

$17.58

$4,555$0.76





Deductible ($/cwt)

Total Deductible ($)

Expected Feed Cost

Expected Revenue

Soybean Meal

4444

LGM Example 2 – LGM Example 2 – Settle 1Settle 1

Oct Nov Dec TotalMilk Actual Amount (cwt) 2,000 2,000 2,000

Actual Price w/ Basis $22.00 $24.00 $24.50

$44,000 $48,000 $49,000 $141,000

Corn Actual Amount (bu) 893 893 893


Actual Corn Cost $6,823 $6,912 $7,055 $20,789

Actual Amount (tons) 7.5 7.5 7.5

Actual Price $450 $460 $420

Actual Soybean Cost $3,375 $3,450 $3,150 $9,975

$10,198 $10,362 $10,205 $30,764

$33,802 $37,638 $38,795 $110,236

$105,458

$17.58

Actual gross margin



Actual Feed Cost

Expected Revenue

Soybean Meal

Actual Margin greater than Gross Margin Guarantee – NO INDEMNITY

4545

LGM Example 2 – LGM Example 2 – Settle 2Settle 2

Oct Nov Dec TotalMilk Actual Amount (cwt) 2,000 2,000 2,000


$38,000 $40,000 $37,000 $115,000

Corn Actual Amount (bu) 893 893 893


Actual Corn Cost $6,823 $6,912 $7,055 $20,789

Actual Amount (tons) 7.5 7.5 7.5

Actual Price $365 $355 $385

Actual Soybean Cost $2,738 $2,663 $2,888 $8,288

$9,560 $9,574 $9,942 $29,077

$28,440 $30,426 $27,058 $85,923

$105,458

$17.58

Actual gross margin



Actual Feed Cost

Expected Revenue

Soybean Meal

Actual Margin Less than Gross Margin Guarantee – INDEMNITY PAID $19,535 or $3.26/cwt

4646

Example – Farm UseExample – Farm UseMonths Example TotalMilk Amount (cwt/month) 1,000

Expected Price (CME) $20.00

Basis (State Specific) $2.25

=(Price + Basis) x Amount =Sum of all months

Corn Amount (bu/month) 800

Expected corn price (CBOT) $7.00


Expected Corn Cost =(Price + Basis) x Amount =Sum of all months

Amount (tons/month) 7.0

Expected Price (CBOT) $400


Expected Soybean Cost =(Price + Basis) x Amount =Sum of all months

=Expected Corn + Expected Soybean Meal Price =Sum of all months

=Expected Milk Revenue - Expected Feed Cost

=Gross Margin Gaurantee / Total cwts


Expected Feed Cost

Expected Revenue

Soybean Meal


4747

LGM-Dairy OverviewLGM-Dairy Overview

Benefits

Protects the margin!

Variable size

Variable terms

Deductible

Monthly enrollment

options

Compliments current

RMS programs

Difficulties

Short enrollment

period

Relative to your

state – not your farm

Limited capacity

Can create cash flow

issue

4848

LGM & RMSLGM & RMS

Differences LGM RMS

Price ~ $0.75/cwt and up $0/cwt and up

Protection Protects milk-feed margin

Only protects milk

Settlement Settles at the end of the insurance period

Settles monthly

Time Offered Offered once per month – every month

Offered daily

Coverage Months

1 month – 10 monthsMust cover next available month

1 month – 23 monthsCan cover any

months

4949

Fixed Price Forward Fixed Price Forward ContractContract

Pay Price$15

$16

$17

$18

$19

$20

$21

$22

$23

$/cw

t

Class III Settle Price Forward Contract Price

Average Pay Price

5050

Fixed Price Contract Fixed Price Contract with Upside Riderwith Upside Rider

Pay Price$17

$18

$19

$20

$21

$22

$23

Jan

Feb Mar

AprM

ay Jun Ju

lAug Sep O

ctNov Dec

$/cw

t

Forward Contract Price Class III Settle Price Upside Rider Strike Price

Recaptured

$0.50/cwt Premium

5151

$14

$15

$16

$17

$18

$19

$20

$21

$22

Jan

Feb Mar Apr

May Ju

n Jul

Aug Sep Oct

Nov Dec

$/cw

t

Floor Class III

Minimum Price

$0.40 Premium

$16.00 Minimum Price $16.00 Minimum Price ContractContract

5252

$16.00

$17.00

$18.00

$19.00

$20.00

$21.00

$22.00

$23.00

$24.00

$25.00

2008

$/cw

t

Ceiling Floor Class III

Maximum Potential

Minimum Price

Fence Contract withFence Contract with$18.00 Floor, $23.00 Ceiling$18.00 Floor, $23.00 Ceiling

Fee = $0.26

5353

LGM & RMSLGM & RMS

LGM

Margin Protection Upside Potential Settles on average Book once/month $1.50 Deductible

$0.65 premium

Minimum Price Contract

Milk Protection Upside Potential Settles monthly Book daily Priced $1.50 below

market $0.50 premium

October – December Contract

Same PoundsFixed Price

Contract Milk Protection NO upside potential Settles monthly Book daily Priced at market

$0.09 premium

5454

ContactsContacts

Karen Bodley Regional Sales Rep. 866-297-7729 Ext. 5635Cell: 315-440-5869Email:

[email protected]

Katie RossiniDirector Risk Management & Analysis866-297-7729 Ext. 5581Email:[email protected]

5555

ContactsContacts

Amanda Carosella Customer Service Rep.866-297-7729 Ext. 5522Email: [email protected]

Steve LewisGannon Associates Workers’ Comp & CropInsurance specialist800-654-8840Email: [email protected]

Sean Beirne Gannon Associates AG Marketing Manager800-654-8840Email: [email protected]

5656

Questions?Questions?

Thank you!

5757

HandoutsHandouts

5858

Farm ExampleFarm ExampleMonths Example TotalMilk Amount (cwt/month) 1,000

Expected Price (CME) $20.00


=(Price + Basis) x Amount =Sum of all months

Corn Amount (bu/month) 800

Expected corn price (CBOT) $7.00


Expected Corn Cost =(Price + Basis) x Amount =Sum of all months

Amount (tons/month) 7.0

Expected Price (CBOT) $400


Expected Soybean Cost =(Price + Basis) x Amount =Sum of all months

=Expected Corn + Expected Soybean Meal Price =Sum of all months

=Expected Milk Revenue - Expected Feed Cost

=Gross Margin Gaurantee / Total cwts


Expected Feed Cost

Expected Revenue

Soybean Meal


5959

Farm ExampleFarm ExampleMonths TotalMilk Amount (cwt/month)

Expected Price (CME)

Basis (State Specific)

Corn Amount (bu/month)

Expected corn price (CBOT)

Basis (State Specific)

Expected Corn Cost

Amount (tons/month)

Expected Price (CBOT)

Expected Soybean Cost



Expected Feed Cost

Expected Revenue

Soybean Meal

6060

Extra SlidesExtra Slides

6161

Increase or Decrease Increase or Decrease in Production?in Production?

Cannot claim indemnity on more than 100% of your target marketings

If actual marketings are less than 75% of the target marketings - coverage will adjust proportionately

Anything between 75% - 100% will be 100% covered

6262

Feed Ration Changes?Feed Ration Changes?

Only covering protein and energy equivalent for pounds of milk– How much energy and protein are

required for 1 pound of milk? For the most part, it doesn’t change Have better feed – produce more milk,

but still the same amount of protein and energy per pound of milk

– Settles to CBOT and CME prices Not your farm price

6363

The LGM CycleThe LGM Cycle

6464

LGM-Dairy Eligible LGM-Dairy Eligible StatesStates

6565

Pennsylvania BasisPennsylvania BasisPennsylvania Basis

Milk Corn

($/cwt) ($/bu)

Jan $3.40 $0.34

Feb $3.19 $0.34

Mar $3.32 $0.37

Apr $1.94 $0.40

May $2.23 $0.47

Jun $2.63 $0.47

Jul $2.61 $0.42

Aug $2.38 $0.40

Sep $2.37 $0.36

Oct $2.87 $0.19

Nov $3.19 $0.24

Dec $3.01 $0.25

6666

Vermont BasisVermont BasisVermont

BasisMilk Corn

($/cwt)

($/bu)

Jan $2.38 $0.34

Feb $2.15 $0.34

Mar $2.42 $0.37

Apr $1.10 $0.40

May $1.39 $0.47

Jun $1.69 $0.47

Jul $1.71 $0.42

Aug $1.44 $0.40

Sep $1.53 $0.36

Oct $1.99 $0.19

Nov $2.27 $0.24

Dec $1.99 $0.25

6767

New York BasisNew York BasisNew York

BasisMilk Corn

($/cwt) ($/bu)

Jan $2.32 $0.29

Feb $2.11 $0.29

Mar $2.32 $0.32

Apr $1.04 $0.35

May $1.43 $0.42

Jun $1.57 $0.42

Jul $1.61 $0.37

Aug $1.44 $0.35

Sep $1.39 $0.31

Oct $1.79 $0.14

Nov $2.17 $0.19

Dec $1.97 $0.20

6868

Maryland BasisMaryland BasisMaryland

BasisMilk Corn

($/cwt)

($/bu)

Jan $2.78 $0.23

Feb $2.57 $0.23

Mar $2.70 $0.26

Apr $1.32 $0.29

May $1.61 $0.36

Jun $2.01 $0.36

Jul $1.99 $0.31

Aug $1.76 $0.29

Sep $1.75 $0.25

Oct $2.25 $0.08

Nov $2.57 $0.13

Dec $2.39 $0.14

6969

Massachusetts BasisMassachusetts BasisMassachuse

tts BasisMilk Corn

($/cwt) ($/bu)

Jan $2.94 $0.34

Feb $2.71 $0.34

Mar $2.98 $0.37

Apr $1.66 $0.40

May $1.95 $0.47

Jun $2.25 $0.47

Jul $2.27 $0.42

Aug $2.00 $0.40

Sep $2.09 $0.36

Oct $2.55 $0.19

Nov $2.83 $0.24

Dec $2.55 $0.25

7171

LGM-Dairy Ration LGM-Dairy Ration CalculatorCalculator

Converts to: 426 bushels of corn 12 tons of soybean meal

F eed: T ons F ed:

B arley 2

C orn g luten meal, dry 1.5

D is tiller’s grain w/s olubles (92% D M) 5

F is h meal, menhaden 0.5

Molas s es , cane, dry 1

C orn, s helled 7

S oybean meal 7

7272

Possible OutcomesPossible Outcomes

Increase or Steady Margin – NO PAYMENTS Milk Price Feed Cost Milk Price Feed Cost Milk Price Feed Cost

Decreased Margin – PAYMENTS Milk Price Feed Cost Milk Price Feed Cost Milk Price Feed Cost

7373

Pounds of Milk BookedPounds of Milk Booked

108

329

137 152

228

383

180

50

100

150

200

250

300

350

400

450

2003 2004 2005 2006 2007 2008YTD

2009YTD

Mill

ion

s

7474

Pounds by Contract Pounds by Contract Type Type (2008)(2008)

46

169 166

20

20

40

60

80

100

120

140

160

180

Fixed Price Fence Minimum Price Upside Rider

Mil

lio

ns

7575

Expected Milk Price – Expected Milk Price – October 2008October 2008

Milk Value

Commodity Price/Unit Price Units Value

Class III $/cwt $20.60 1,000 $20,600

State Basis $/cwt $1.00 1,000 $1,000

Total $21,600

Milk Volume 1,000 $21.60

7676


Corn $/bu $6.85 408 $2,795

Soybean Meal $/ton $360 13 $4,680

Total $ $7,475

Milk Volume cwt 1,000 $7.47

Feed Value

Expected Feed Value – Expected Feed Value – October 2008October 2008

7777

Expected Margin – Expected Margin – October 2008October 2008

Gross Margin Guarantee


Milk Price $/cwt $21.60 1,000 $21,600

Feed Cost ($7,475)

Difference $ $14,125

Margin $/cwt $14.13

7878

ExampleExample

Gross Margin Guarantee at $14,125– Indemnity paid only when actual margin

decreases

– Indemnity = Gross margin guarantee - Actual margin Milk Price and Feed Price

Gross Margin Guarantee = $14,125

Actual Margin = $13,545

Indemnity = $ 580$ 580

1 livestock gross margin (lgm) for dairy karen b. bodley asa regional sales rep. & katie rossini...

Documents

milk price

milk futures price

corn futures price

milk productionunexpected

soybean meal futures

state price

cbotcme price

lgm coverage