lGM
Buying a Policy
Pro Ag Typically uses LGM insurance to create a price floor while providing some corn coverage. Producers can sign up for LGM insurance every week on Thursdays, but the signup must be completed no later than 8:25 am CST on Fridays.
Your Choices
- Number of head to insure
- Months you want coverage
- Deductible level - Producer has the option to choose a deductible anywhere from $0 to $150 per head for cattle. We frequently use the $70
- Calf Finishing or yearling finishing option
rEQUIREMENTS
- Must have head covered for a minimum of two months to qualify for subsidy discount.
- Cattle must be sold in the chosen month with a grace period of 15 days before and after. Coverage months with LGM must not overlap with LRP coverage in the same month.
Advantages
- Low cost price floors
- a cattle $70 deductible costs less than LRP insurance
- Policy settles against futures, not cash
- No Margin Requirements
- You don't have to pay a premium until the policy expires.
Understanding margin and prices
Crush Margin
The crush margin, or spread between the market value of fed cattle and feed costs, we use the following values:
- 550-pound feeder cattle
- 52 bushels of corn per head
- 1,300-pound finishing weight
Expected Margin
Expected margin when coverage is placed is set based on the futures market close for the effective date.
Actual cattle prices
Cattle settle as a 3-day average of the futures market
- For contract months, the average is 3 days prior to the first notice day
- For non-contract months, the 3-day average is set during the 3 trading days prior to the end of the month.
Pricing Timelines
For calf finishing, actual prices are set at three separate times.
- For feeder cattle, 8 months prior to cattle marketings.
- For corn, 4 months prior to cattle marketings.
- For cattle, during the month listed for marketings.
