Indemnity
If at the conclusion of a marketing month the Actual Gross Margin (AGM) is below the EGM and the difference is greater than the deductible + premium, an indemnity is paid out. If the AGM is greater than the EGM, then premium is due.
Livestock Gross Margin (LGM) insurance is a federal crop insurance product that provides cattle producers protection against a loss of gross margin incurred while feeding cattle. This gross margin equation is also commonly referred to as the "Cattle Crush".
LGM simplifies margin protection: LGM is a unique tool which conveniently bundles three commodities (corn, feeder, and fed cattle) into a single product which is customizable to your marketing plans.
LGM is subsidized and affordable: Protecting comprehensive margin risk across three commodities can be expensive and challenging. Depending on the deductible selected, the USDA subsidizes LGM premiums from 18% to 50% making LGM an affordable avenue to protect operating margins.
We know LGM: We understand the importance of protecting your operating margin in volatile market environments and have extensive experience using a variety of risk management tools. Because we follow the cattle operating margin levels daily and have analyzed historic LGM sales period trends, seasonality, and data, we can develop an LGM plan that fits your timing, risk tolerance, and risk management budget.
Expected Gross Margin (EGM): is the projected margin by marketing month and is based off Chicago Mercantile Exchange (CME) futures (EGM formulas below). Using LGM hinges on whether producers like the EGM levels enough to want to protect against a future decline.
Type of LGM policies: Choose either a Yearling Fed or Calf Fed policy.
Select Marketing Months: LGM coverage can begin one month after sign up date. Insureds select which marketing months to participate in. Each sales period offers 11 different marketing months.
Input Target Marketings: Insureds enter how many head they want to insure by marketing month. There are no head count limits. Note: Insureds must have head counts in at least two marketing months per sales period.
1. Application: Producers submit an application to establish an LGM policy.
Ask your EastCo agent for the LGM Application Requirements document for more details.
2. Sales periods: Sales periods occur weekly (new for the 2023 crop year) at
or around 4:30 p.m. CST every Thursday afternoon and are open until 9 a.m.
CST the next day (Friday). Consult your EastCo agent to analyze the Expected
Gross Margin (EGM) levels, the historical ranges, seasonalities, and trends to
see if the current EGM is an ideal level to insure in.
3. Submit Target Marketings: Producers select yearling or calf LGM, select a deductible, and submit head counts for target marketings by marketing months to bind LGM coverage. You must insure cattle in two different marketing months.
4. Premium: Premiums are billed at the end of the sales period or after the last target marketing month per policy period.
5. Ongoing: Keep records to prove ownership of cattle covered under LGM. Be sure to have packer receipts for claims.
If at the conclusion of a marketing month the Actual Gross Margin (AGM) is below the EGM and the difference is greater than the deductible + premium, an indemnity is paid out. If the AGM is greater than the EGM, then premium is due.