Agricultural Economics Department
Date of this Version
July 2006
Abstract
Livestock Gross Margin Insurance (LGM) for Cattle is a relatively new insurance policy offered through USDA’s Risk Management Agency (RMA) that offers protection against a decline in cattle feeding margins. LGM provides protection as a bundled option that comprehensively covers the cost of corn, the cost of feeder cattle and the fed cattle selling price, unlike traditional options on futures where these margin components must be hedged separately. Essentially, LGM provides insured producers an indemnity when the spread between fed cattle sales prices and feeder cattle and corn input prices narrows due to changing market conditions.
Comments
Published in Cornhusker Economics, 07/26/2006. Produced by the Cooperative Extension, Institute of Agriculture and Natural Resources, Department of Agricultural Economics, University of Nebraska–Lincoln.
http://www.agecon.unl.edu/Cornhuskereconomics.html