Dairymen can use risk management tool to cover spread between projected and actual gross margins.
HARRISBURG, Pa. — Pennsylvania dairy producers can better protect their profits from losses due to high feed costs and low milk prices under changes that make dairy insurance easier and more affordable to purchase.
Agriculture Secretary Russell C. Redding said the changes to livestock gross margin (LGM) for dairy, which take effect with the Dec. 17 and Dec. 18 enrollment period, include moving the due date of premiums from the beginning of the insurance period to the end and federally subsidized premiums.
“Recent changes to LGM for Dairy mean that more producers can take advantage of dairy insurance to minimize their business risk and help them remain viable. Already, some Pennsylvania dairy producers have benefited from livestock gross margin for dairy, protecting their income by receiving up to five times their premium back,” said Redding.
Livestock gross margin for dairy is a month-to-month dairy risk management tool that covers the difference between the projected and actual gross margins during a producer-selected number of months for a targeted amount of milk.
A loss payment results when the expected gross margin exceeds the actual gross margin. Pennsylvania was a leader in getting the livestock gross margin for dairy changes approved.
In April, Redding testified before the U.S. Senate and House of Representatives agriculture committees calling for aggressive actions to reform dairy policy and pricing mechanisms, including changes to livestock gross margin for Dairy.
Redding also worked with federal Agriculture Secretary Tom Vilsack and Risk Management Agency administrator William Murphy to gain their support for changes to make dairy insurance more accessible to Pennsylvania producers.
Federal subsidies from 18 percent at zero-deductible to 50 percent for $1.10 to $2 per hundredweight are available to producers who enroll for two or more months.
Policies are available on a month-to-month basis to insure some or all milk from one to 10 months. Producers pay varied premiums, from zero to $2 per hundredweight, depending on the desired level of coverage.
Prices are announced the last business Friday of each month, and producers have until 9 p.m. the following evening to purchase a policy based on those prices.
For more information about livestock gross margin for dairy, contact a crop insurance agent or Karen Powell, risk management specialist, at 717-705-9511.