Livestock Gross Margin (LGM) For
Cattle
By Duane GriffithApril 2008
Risk Management Agency
LGM Cattle Overview
Available In All Counties In The States Of: CO, IL, IN, IA, KS, MI, MN, MO, MT, NE,
NV, ND, OH, OK, SD, TX, UT, WV, WI, & WY
Coverage For Production And Marketing Risks
Location of Cattle????
LGM Cattle Overview
Protects Against Loss Of Gross Margin Market Value Of Cattle Minus Cost Of Feeder Cattle Minus Cost Of Feed Equals Gross Margin
Expected Values versus Actual Values
LGM Cattle Overview
12 Insurance Periods Each Year Each Insurance Period Runs For 11 Months
Cattle NOT Insured The First Month Of Any Insurance Period
Sales Period Begins The Last Business Day Of The Month Until 9:00 AM CST The Following Day If Expected Gross Margins Not On Website, LGM
Not Offered That Period http://
www.rma.usda.gov/tools/livestock.html
LGM Cattle Overview
Only Authorized Agents May Sell LGM First Day Applications Can Be
Submitted Is January 31 LGM Cattle Is Sold Monthly Thereafter
LGM Cattle Overview
LGM Pays At The End Of 11-month Period If Gross Margin Guarantee – Actual Gross
Margin > 0 Gross Margin Values Determined From
Futures Markets, And State & National Agricultural Statistics
Service Data Actual Price Received Or Paid By
Producer is Not Used In Any Calculation
LGM Commodity Exchange Endorsement
Two Types Of Operations Insured Calf Finishing Yearling Finishing
Provides Tables that: Determine Contract Month You Reference Determine Values Used To Establish
Expected (EGM) And Actual Gross Margin (AGM)
Calf Finishing Operation
Purchases 550-pound Calves And Feed Them Until Slaughter
Assumes: 550-Pound Purchase Weight; And, 1,150-Pound Slaughter Weight
Yearling Finishing Operation
Purchases Yearling Steers And Heifers And Feed Them Until Slaughter:
Assumes: 750-Pound Purchase Weight; And, 1,250-Pound Slaughter Weight
Definitions
Target Marketing Number Of Cattle Elected To Insure In
Each Month During Insurance Period Target Marketing Report
Insured Submits Report Showing Target Marketing For Each Month
Definitions
Approved Target Marketing's Maximum Target Marketing's Allowed Based On The Lesser Of Farm Capacity Or
Underwriting Capacity For The 10 Month Insurance Period
Definitions
Actual Marketing Total Number Cattle Sold In Each Month
Of The Insurance Period Marketing Report
Report Showing Actual Marketing For Each Month; And,
Accompanied By Packer Sales Receipts
Definitions
CBOT Used To Determine Actual & Expected Corn Prices
CME Used To Determine Actual And Expected
Cattle Price Feeder Cattle Price
Basis (Cattle, Feeder Cattle, And Corn) State And Month Specific Estimates Of Differences
Between Local Prices And CME Or CBOT Future Prices
Definitions
Deductible Zero To $150 Per Head In $10
Increments
EGM/Head For Calf Finishing Operations
Expected Cattle Price For State & Month Cattle Are Marketed X 1150 lbs.
Subtract Expected Cost Of Feed Four Months Prior
Subtract Expected Feeder Cattle Price Eight Months Prior X 550 lbs.
=EGM
EGM/Hd For Yearling Finishing Operations
Expected Cattle Price For Month Cattle Are Marketed X 1250 lbs.
Subtract Expected Cost Of Feed Two Months Prior
Subtract Expected Feeder Cattle Price Five Months Prior X 750 lbs.
= EGM
Gross Margin Guarantee
Expected Total Gross Margin (EGM) Minus The Deductible Times The Sum Of Target Marketings
Causes Of Loss Covered
LGM Insures The Difference Between Actual Gross Margin And Gross Margin Guarantee
Must Be Unavoidable Cause Of Loss, As Required By Act
LGM Policy Does Not Insure Against: Death Or Other Loss Or Destruction Of
Cattle, And Any Other Loss Or Damage Of Any Kind
Insurance Period Coverage
Begins One Month And One Day After Closing Date Premium Must be Paid In Full
Coverage Ends The Earliest Of: Last Month With Target Marketings; As Otherwise Stated In The Policy; Or, If The End Date Is Sat. Sun. Or Federal Holiday,
Or Relevant Report Is Not Available To FCIC For That Day Or Any Other Day Of Ending Period, Then Actual Ending Value Will Be Based On Most Recent Reports Made Prior To That Date
Determining Indemnities
Insurance Provider Will Send Notice Of Probable Loss Ten Days After at End of Period
Insured Submits Marketing Report Within 15 Day Of Receipt Of Notice Of Probable Loss
Actual Marketing Are Less Than 75% Of Total Target Marketing, Indemnity is Reduced Percentage By Which Actual Marketing Fell Below
Total Of Target Marketing
Other Insurance
Insured Must Not Obtain Any Other Livestock Insurance Issued Under The Authority Of The Act On Insured Cattle
Policy Does Not Prevent Insured From Obtaining Other Insurance Is Not Issued Under The Authority Of The Act Protects Against Substantially The Same Peril However, The Subrogation Provisions May Apply
Offsetting Transactions
Insured Must Not Enter Into Any Off-setting Financial Transactions Taking An Offsetting Position Of
Commodity Futures Or Options Markets Violation Of The Above Will Result In
Denial Of Indemnity And No Premium Refund Will Be Given
Record Retention
Requirement To Maintain Records For Three Years
Current Year Failure To Keep Such Records Will Result
In No Indemnity Insured Will Still Be Required To Pay All
Premiums Owed
On February 28th Joe Elects To Insure: 500 Head Of Yearling To Finish Cattle
Intended To Be Sold In June; And, 2000 Head Of Yearling To Finish Cattle
Intended To Be Sold In November Joe Chooses A Deductible Of $30 Per
Head
Example Gross Margin Calculations
Joe Farmer, Feb 28th
Expected Live Cattle Price For June $ 95.80 Basis For June Live Cattle Is -$5.52
Expected Feeder Cattle Price January $114.30 Basis For January Feeder Cattle Is -$11.63
Expected Corn Price For April $ 2.14 Basis For April Corn Is -$0.37
Expected June Prices on Feb. 28th
Expected Cost Of Cattle, Feeder Cattle And Corn For Cattle To Be Sold In June
Expected Live Cattle Price $ 95.80
Minus Live Cattle Basis $ -5.52
Equals $ 90.28
Expected Feeder Cattle Price $114.30
Minus Feeder Cattle Basis $ -11.63
Equals $102.67
Expected Corn Price $ 2.14
Minus Corn Basis $ -.37
Equals $ 1.77
Expected Cost Of Feed For Yearling Finishing Operation To Be Sold In June
LGM Estimated Required Bu. of Corn
57.5
Times Expected Corn Price For The Month
$ 1.77
Equals Expected Feed Costs/Head
$101.78
Expected Gross Margin (EGM) Per Head For JuneExpected Cattle Price ($90.28 X 12.5 Hundred Weight)
$1,128.50
Minus Cost Of Feed $101.78
Equals $1,026.72
Minus Expected Feeder Cattle Price ($102.67 X 7.5 Hundred Weight)
$770.03
Equals EGM $256.69
Expected Gross Margin (EGM) June Cattle
Expected Gross Margin June $256.69/Hd X 500 Head Target Marketings
$128,345
Actual Cost Of Cattle, Feeder Cattle And Corn For Cattle To Be Sold In June
Actual Live Cattle Price For June $ 92.40
Plus Basis for June Live Cattle $ -5.52
Equals $ 86.88
Actual Feeder Cattle Price For June
$114.30
Plus Basis For June Feeder Cattle $ -11.63
Equals $102.67
Actual Corn Price For Sept. $ 2.18
Plus Basis For Sept. Corn $ -0.37
Equals $ 1.81
Actual Cost Of Feed For Cattle To Be Sold In June
LGM Estimated Required Bu. of Corn For a Yearling Finishing Operation
57.5 Bu.
Times Actual Corn Price For Month
$ 1.81
Equals Feed Costs Per Head $104.08
Actual Gross Margin (AGM) Per Head For June
Actual Cattle Price ($86.88 X 12.5 Hundred Weight)
$1,086.00
Minus Cost Of Feed $104.08
Equals $981.92
Minus Actual Feeder Cattle Price ($102.67 X 7.5 Hundred Weight)
$770.03
Equals Actual Gross Margin (AGM)
$211.89
November Cattle Example
Expected Live Cattle Price For Nov. $ 91.20 Basis For November Live Cattle Is -$9.61
Expected Feeder Cattle Price in June $105.10 Basis For June Feeder Cattle Is -$11.80
Expected Corn Price For Sept. Is $ 2.30 Basis For Sept. Corn Is -$0.33
Expected November Prices on Feb. 28th
Expected Cost Of Cattle, Feeder Cattle And Corn For Cattle To Be Sold In November
Expected Live Cattle Price $ 91.20
Plus Live Cattle Basis $ -9.61
Equals $ 81.59
Expected Feeder Cattle Price $105.10
Plus Feeder Cattle Basis $ -11.80
Equals $ 93.30
Expected Corn Price $ 2.30
Plus Corn Basis $ -.33
Equals $ 1.97
Expected Cost Of Feed For Cattle To Be Sold In November
LGM Estimated Required Bu. of Corn For A Yearling Finishing Operation
57.5 Bu.
Times Expected Corn Price For Month
$ 1.97
Equals Feed Costs for Cattle Sold in November
$113.28
Expected Gross Margin Per Head For November Cattle
Expected Cattle Price ($81.59 X 12.5 Hundred Weight)
$1,019.88
Minus Cost Of Feed $ 113.28
Equals $ 906.60
Minus Expected Feeder Cattle Price $93.30 X 7.5 Hundred Weight
$ 699.75
Equals Expected Gross Margin-EGM
$ 206.85
Expected Gross Margin (EGM) November Cattle
Expected Gross Margin November Cattle$206.85/Head X 2,000 Head Target Marketings
$413,700
Actual Cost Of Cattle, Feeder Cattle And Corn For Cattle To Be Sold In November
Actual Live Cattle Price For Nov. (½ Based On Oct. And ½ Based On Dec.)
$ 90.65
Plus Basis-November Live Cattle
$ -9.61
Equals $ 81.04
Actual Feeder Cattle Price For June (2/3 Based On May And 1/3 Based On Sept.)
$108.78
Plus Basis For June Feeder Cattle
$ -11.80
Equals $ 96.98
Actual Corn Price For Sept. $ 2.38
Plus Basis For Sept. Corn $ -0.33
Equals $ 2.05
Actual Cost Of Feed For Cattle To Be Sold In November
LGM Estimated Required Bu. of Corn For a Yearling Finishing Operation
57.5 Bu.
Times Actual Corn Price For Month
$ 2.05
Equals Actual Feed Costs/Head-Nov.
$117.88
Actual Gross Margin Per Head For November
Actual Cattle Price ($81.04 X 12.5 Hundred Weight)
$1,013.00
Minus Actual Cost Of Feed $117.88
Equals $895.12
Minus Actual Feeder Cattle Price ($96.98 X 7.5 Hundred Weight)
$727.35
Equals Actual Gross Margin (AGM)
$167.77
June and November Combined
Expected Gross Margin (EGM)
Expected Gross Margin June Cattle$256.69/Hd X 500 Head Target Marketings
$128,345
Expected Gross Margin November Cattle$206.85 X 2,000 Head Target Marketings
$413,700
Total Expected Gross Revenue (EGM)
$542,045
Gross Margin GuaranteeEGM $542,045 Minus ($30/Hd deductible X 2,500 head)
$467,045
Actual Gross Margin (AGM) Per Month
June = Actual Gross Margin Per Head Of $211.89 X Target Marketings (500 Head)
$105,945
November = Actual Gross Margin Per Head Of $167.77 X Target Marketings (2,000 Head)
$335,540
Total June + November AGM $441,485
Indemnity Paid is:
Gross margin guarantee $467,045 minus the actual total gross margin $441,485
$25,560
Questions??
LGM Forms
© 2006 NCIS LGM 47
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Definitions
Insurance Period 11 Month Period Stated In Summary
Of Insurance; And, Cattle Are Not Insurable In The First
Month Of Any Insurance Period Crop Year
July 1 Thru June 30; And, Designated By The Year It Ends
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 55
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YEARLING FINISHING
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
Example Of SCD 3/31 & Insurance Month Of July –
Yearling Finishing
© 2006 NCIS LGM 56
Example Of SCD 3/31 & Insurance Month Of July – Yearling Finishing
Table 1. Cycles within the insurance periods for LGM for Cattle Insurance
Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 Yearling Finishing Calf Finishing
Mar 31 Apr-Feb May May Dec Mar May Sep Jan Jun Jun Jan Apr Jun Oct Feb Jul Jul Feb May Jul Nov Mar Aug Aug Mar Jun Aug Dec Apr Sep Sep Apr Jul Sep Jan May Oct Oct May Aug Oct Feb Jun Nov Nov Jun Sep Nov Mar Jul Dec Dec Jul Oct Dec Apr Aug Jan Jan Aug Nov Jan May Sep Feb Feb Sep Dec Feb Jun Oct
Feeder Cattle Price
Corn Price
Sales Closing Date
Insurance Period
Insurance Month
Live Cattle Price
Feeder Cattle Price
Corn Price
Live Cattle Price
© 2006 NCIS LGM 57
Example Of SCD 3/31 & Insurance Month Of Oct. – Yearling Finishing
Table 1. Cycles within the insurance periods for LGM for Cattle Insurance
Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 Yearling Finishing Calf Finishing
Mar 31 Apr-Feb May May Dec Mar May Sep Jan Jun Jun Jan Apr Jun Oct Feb Jul Jul Feb May Jul Nov Mar Aug Aug Mar Jun Aug Dec Apr Sep Sep Apr Jul Sep Jan May Oct Oct May Aug Oct Feb Jun Nov Nov Jun Sep Nov Mar Jul Dec Dec Jul Oct Dec Apr Aug Jan Jan Aug Nov Jan May Sep Feb Feb Sep Dec Feb Jun Oct
Feeder Cattle Price
Corn Price
Sales Closing Date
Insurance Period
Insurance Month
Live Cattle Price
Feeder Cattle Price
Corn Price
Live Cattle Price
© 2006 NCIS LGM 58
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
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Example Of SCD 3/31 & Insurance Month Of Oct. –
Yearling Finishing
© 2006 NCIS LGM 59
Example Of SCD 1/31 & Insurance Month Of June – Calf
Finishing
Table 1. Cycles within the insurance periods for LGM for Cattle Insurance
Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 Yearling Finishing Calf Finishing
Jan 31 Feb-Dec Mar Mar Oct Jan Mar Jul Nov Apr Apr Nov Feb Apr Aug Dec May May Dec Mar May Sep Jan Jun Jun Jan Apr Jun Oct Feb Jul Jul Feb May Jul Nov Mar Aug Aug Mar Jun Aug Dec Apr Sep Sep Apr Jul Sep Jan May Oct Oct May Aug Oct Feb Jun Nov Nov Jun Sep Nov Mar Jul Dec Dec Jul Oct Dec Apr Aug
Feeder Cattle Price
Corn Price
Sales Closing Date
Insurance Period
Insurance Month
Live Cattle Price
Feeder Cattle Price
Corn Price
Live Cattle Price
© 2006 NCIS LGM 60
Example Of SCD 1/31 & Insurance Month Of June – Calf
Finishing
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CALF FINISHING
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – Month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Calf Finishing Feeder Cattle Price (Pink – 8 months prior to insurance date)
Calf Finishing Corn Price (Purple – 4 months prior to insurance date)
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – Month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Calf Finishing Feeder Cattle Price (Pink – 8 months prior to insurance date)
Calf Finishing Corn Price (Purple – 4 months prior to insurance date)
© 2006 NCIS LGM 61
Example Of SCD 1/31 & Insurance Month Of Nov. – Calf
Finishing
Table 1. Cycles within the insurance periods for LGM for Cattle Insurance
Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 Yearling Finishing Calf Finishing
Jan 31 Feb-Dec Mar Mar Oct Jan Mar Jul Nov Apr Apr Nov Feb Apr Aug Dec May May Dec Mar May Sep Jan Jun Jun Jan Apr Jun Oct Feb Jul Jul Feb May Jul Nov Mar Aug Aug Mar Jun Aug Dec Apr Sep Sep Apr Jul Sep Jan May Oct Oct May Aug Oct Feb Jun Nov Nov Jun Sep Nov Mar Jul Dec Dec Jul Oct Dec Apr Aug
Feeder Cattle Price
Corn Price
Sales Closing Date
Insurance Period
Insurance Month
Live Cattle Price
Feeder Cattle Price
Corn Price
Live Cattle Price
© 2006 NCIS LGM 62
Example Of SCD 1/31 & Insurance Month Of Nov. – Calf
Finishing
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CALF FINISHING
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – Month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Calf Finishing Feeder Cattle Price (Pink – 8 months prior to insurance date)
Calf Finishing Corn Price (Purple – 4 months prior to insurance date)
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – Month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Calf Finishing Feeder Cattle Price (Pink – 8 months prior to insurance date)
Calf Finishing Corn Price (Purple – 4 months prior to insurance date)
© 2006 NCIS LGM 63
Definitions (Expected)
Expected Cattle Price (For Months With An Unexpired Futures Contract) Simple Avg. Of CME Live Cattle Futures For
A Month Over Last 3 Days Of Trading In The Month Of The Sales Closing Date
Plus State-Specific Cattle Basis For The Month (Table 2)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 64
Definitions (Expected)
Expected Cattle Price (For Months Without A Futures Contract) Weighted Avg. Of CME Live Cattle Futures
Of The Two Surrounding Months With Contracts Over Last 3 Days Of Trading In The Month Of The Sales Closing Date
Plus State-Specific Cattle Basis For The Month (Table 2)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 65
Definitions (Expected)
Expected Feeder Cattle Price (For Months With An Unexpired Futures Contract) Simple Avg. Of CME Feeder Cattle Futures
For A Month Over Last 3 Days Of Trading In The Month Of The Sales Closing Date
Plus The State-Specific AND Operation-Specific Feeder Cattle Basis For That Month (Tables 3 & 4)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 66
Definitions (Expected)
Expected Feeder Cattle Price (For Months With An Expired Futures Contract) Simple Avg. Of CME Feeder Cattle Futures
For A Month Over Last 3 Days Of Trading Of The Month Prior To Contract Expiration
Plus The State-Specific AND Operation-Specific Feeder Cattle Basis For That Month (Tables 3 & 4)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 67
Definitions (Expected)
Expected Feeder Cattle Price (For Months Without A Futures Contract) Weighted Avg. Of CME Feeder Cattle
Futures Of The Two Surrounding Months With Contracts
Refer To Previous Two Slides For Determination Of Prices On Expired & Unexpired Contracts
Plus The State-specific AND Operation-specific Feeder Cattle Basis For That Month (Tables 3 & 4)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 68
Definitions (Expected)
Expected Corn Price (For Months With An Unexpired Futures Contract) Simple Avg. Of CBOT Corn Futures For A
Month Over Last 3 Days Of Trading In The Month Of The Sales Closing Date
Plus State-Specific Corn Basis For The Month (Table 5)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 69
Definitions (Expected)
Expected Corn Price (For Months With An Expired Futures Contract) Simple Avg. Of CBOT Corn Futures For A
Month Over Last 3 Days Of Trading In The Month Prior To The Futures Contract Expiration
Plus State-Specific Corn Basis For The Month (Table 5)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 70
Definitions (Expected)
Expected Corn Price (For Months Without A Futures Contract) Weighted Avg. Of CBOT Corn Futures Of The
Two Surrounding Months With Contracts Over Last 3 Days Of Trading In The Month Of The Sales Closing Date
Plus State-Specific Corn Basis For The Month (Table 5)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 71
Definitions (Expected)
Expected Cost Of Feed Yearling Finishing: 57.5 Bu. X
Expected Corn Price For The Month Calf Finishing: 54.5 Bu. X Expected
Corn Price For The Month
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 72
Definitions (Expected)
Expected Gross Margin Per Month Expected Gross Margin Per Head For The
Type Of Operation X Target Marketings For That Month
Expected Total Gross Margin Summation Of Each Month’s (In The
Insurance Period) Target Marketings X Expected Gross Margin Per
Head
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 73
Definitions (Actual)
Actual Gross Margin Per Head For Yearling Finishing Operations Actual Cattle Price For Month Cattle
Are Marketed X 1250 lbs. Subtract Actual Cost Of Feed Two
Months Prior Subtract Actual Feeder Cattle Price
Five Months Prior X 750 lbs.
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 74
Definitions (Actual)
Actual Gross Margin Per Head For Calf Finishing Operations Actual Cattle Price For Month Cattle
Are Marketed X 1150 lbs. Subtract Actual Cost Of Feed Four
Months Prior Subtract Actual Feeder Cattle Price
Eight Months Prior X 550 lbs.
[2006-NCIS 916 (Definitions)]
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Definitions (Actual)
Actual Cattle Price Simple Avg. Daily Settlement Prices
Last 3 Trading Days Prior To CME Live Cattle Contract Expiration Date
One-half The Average Of Immediately Surrounding Months When Marketings Fall Into Months Without Futures Contracts
Plus The State-Specific Cattle Basis For The Month (Table 2)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 76
Definitions (Actual)
Actual Corn Price Simple Avg. Daily Settlement Prices
($ Per Bushel) Last 3 Trading Days Prior To CBOT Corn
Futures Contract Expiration Date For Months When There Is Not An Expiring
Contract, Use A Weighted Average Of Prices Of The Nearest Two Surrounding Contract Months
Plus The State-specific Corn Basis For The Month (Table 5)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 77
Definitions (Actual)
Actual Cost Of Feed Yearling Finishing: 57.5 Bu. X Actual
Corn Price For The Month (Or As Stated In The SPOI’s)
Calf Finishing: 54.5 Bu. X Actual Corn Price For The Month (Or As Stated In The SPOI’s)
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 78
Definitions (Actual)
Actual Feeder Cattle Price Simple Avg. Daily Settlement Prices
Last 3 Trading Days Prior To CME Feeder Cattle Contract Expiration Date
Weighted Average Of Immediately Two Surrounding Months When Marketings Fall Into Months Without Futures Contracts
Plus The State-Specific Feeder Cattle Basis (Yearling or Calf) For The Month (Tables 3 & 4)
[2006-NCIS 916 (Definitions)]
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Definitions (Actual)
Actual Gross Margin Per Month Actual Gross Margin Per Head For The
Type Of Operation X Target Marketings For That Month
Actual Total Gross Margin Summation Of Each Month’s (In The
Insurance Period) Target Marketings X Actual Gross Margin
Per Head
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 80
Definitions (Actual)
Actual Marketings Total No. Cattle Sold In Each Month Of
The Insurance Period Proof Of Sales Required
Used To Verify Ownership And Determine Approved Target Marketings
[2006-NCIS 916 (Definitions)]
© 2006 NCIS LGM 81
Coverage Availability
Insurance Agent Does Not Have Authority To Bind Coverage
Coverage Will Only Become Effective When Insurance Provider: Notifies Insured In Writing That
Application Has Been Accepted And Approved; And,
Issues Written Summary Of Insurance.
[2005-NCIS 916 2.(b)]
© 2006 NCIS LGM 82
Coverage Availability
For Subsequent Insurance Periods, Coverage Will Only Be Effective If: There Is Sufficient Underwriting Capacity ;
And, Insurance Provider Issues A Written
Summary Of Coverage To The Insured Available For Sale Only On Business
Days When FCIC’s UCM Web Site Is Operational
[2004-NCIS 916 2.(b)]
© 2006 NCIS LGM 83
Coverage Availability
Can Be Purchased From Time Starting After Validation Of Prices And Ending On Following Day At 9:00 A.M. Central Time Or As Otherwise Specified In Special Provisions
Coverage May Not Be Available For Purchase: If Expected Gross Margins Are Not Available On RMA
Website; Or, In Instances Of News Report, Announcement, Or Other
Event That Is Believed To Result In Market Conditions Significantly Different Than Those Used To Rate LGM
[2005-NCIS 916 2.(c)]
© 2006 NCIS LGM 84
Coverage Availability
LGM Sales Will Resume, After A Halting Or Suspension In Sales At Discretion Of Manager Of RMA
Application Must Be Completed Not Later Than The Sales Closing Date Of Each Insurance Period
[2005-NCIS 916 2.(c) & (d)]
© 2006 NCIS LGM 85
Coverage Availability
No Policy Can Be Sold For Any Month Where: Expected Gross Margins Are Not
Available On RMA Website; Or Price Data Is Not Timely Provided To
FCIC For Validation Before 9:00 AM Close Of Sales Period.
[2005-NCIS 916 2.(a)]
© 2006 NCIS LGM 86
Coverage Availability
Insurance Provider Will Not Accept Application Or Extend Coverage Unless They Are Notified By FCIC That Underwriting Capacity Is Available
Sales For Year Will Be Suspended Or Terminated If There Is Insufficient Underwriting Capacity
[2005-NCIS 916 2.(a)]
© 2006 NCIS LGM 87
Insurance Coverage
All Cattle Will Be Insured At 100% Share Share Should Be Reflected By The
Number Of Cattle Listed On The Target Marketing
[06-LGM Q&A]
© 2006 NCIS LGM 88
Insurance Coverages
Deductible Amount Must Be Selected By SCD.
Insured May Select Only One Deductible Amount That Is Applicable For All Target Marketings.
Target Marketings Must Be Submitted By SCD For Each Insurance Period Insured Desires Coverage.
[2005-NCIS 916 3.(b), (c), & (d)]
© 2006 NCIS LGM 89
Insurance Coverages
Insured With Yearling Finishing And Calf Finishing Operations: May Have Separate Guarantees And Loss
Payments May Have Separate Deductibles Are Still Limited To 5,000 Head Per
Insurance Period And 10,000 Annually
[06-LGM Q&A]
© 2006 NCIS LGM 90
Insurance Coverages
Target Marketings: For Any Month Cannot Be Greater
Than Approved Target Marketings For Insurance Period;
Are Due At The Time Of Application In Initial Insurance Period; And,
Are Due By SCD In Subsequent Insurance Periods
[2005-NCIS 916 3.(e)]
© 2006 NCIS LGM 91
Insurance Coverages
No Indemnity Will Be Owed But Insured Will Still Be Responsible For Any Premiums Owed If Determined That Insured’s Marketing Report: Is Not Supported By Written Verifiable
Records; And, Fails To Accurately Report Actual
Marketings Or Other Material Information Total Number Of Cattle Insured May Not
Exceed 5,000 Head In Any Insurance Period Or 10,000 Head In Any Insurance Year
[2005-NCIS 916 3.(f) & (g)]
© 2006 NCIS LGM 92
Insurance Coverages
Sales Of LGM For Cattle May Be Suspended If Extraordinary Events Occur That Interfere With Effective Functioning Of Corn, Feeder Cattle , Or Live Cattle Commodity Markets
Evidence Of Such Events May Include, But Is Not Limited To Consecutive: Limit Down Moves In Live Cattle Futures
Markets; Or Limit Up Moves In The Feeder Cattle And/Or
Corn Futures Markets
[2005-NCIS 916 3.(h)]
© 2006 NCIS LGM 93
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X X
YEARLING FINISHING
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
SCD 2/28 & Insurance Month of JuneYearling Finishing
Premium Calculation
“Determinant Monte Carlo Simulation Procedure” Used To Calculate Premium
“Black Box”/Calculator Program Used: For Simplicity In Quoting LGM for cattle. Less Room For Error When Completing
Lengthy Calculation Process
SCD 2/28 & Insurance Month Of Jun & Nov. – Yearling Finishing
Table 1. Cycles within the insurance periods for LGM for Cattle Insurance
Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 Yearling Finishing Calf Finishing
Feb 28 Mar-Jan Apr Apr Nov Feb Apr Aug Dec May May Dec Mar May Sep Jan Jun Jun Jan Apr Jun Oct Feb Jul Jul Feb May Jul Nov Mar Aug Aug Mar Jun Aug Dec Apr Sep Sep Apr Jul Sep Jan May Oct Oct May Aug Oct Feb Jun Nov Nov Jun Sep Nov Mar Jul Dec Dec Jul Oct Dec Apr Aug Jan Jan Aug Nov Jan May Sep
Feeder Cattle Price
Corn Price
Sales Closing Date
Insurance Period
Insurance Month
Live Cattle Price
Feeder Cattle Price
Corn Price
Live Cattle Price
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X X
YEARLING FINISHING
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
SCD Feb. 28th & Insurance Month of June – Yearling Finishing
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Fe
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X
YEARLING FINISHING
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
X – A month that contains a futures contract for that commodity
Sales Closing (Red)
Insurance Month (Green – month cattle are marketed)
Live Cattle Price (Blue- Same as insurance date)
Yearling Finishing Feeder Cattle Price (Orange – 5 months prior to insurance date)
Yearling Finishing Corn Price (Yellow – 2 months prior to insurance date)
SCD Feb. 28th & Insurance Month of November – Yearling Finishing
Definitions
See The LGM For Cattle Commodity Exchange Endorsement For The Value Of All Basis
Insurance Period
Coverage Begins One Month And One Day Following Sales Closing Date Provided Premium Has Been Paid In Full
Coverage Ends The Earliest Of: Last Month With Target Marketings; As Otherwise Stated In The Policy; Or, If The End Date Is Sat. Sun. Or Federal Holiday,
Or Relevant Report Is Not Available To FCIC For That Day Or Any Other Day Of Ending Period, Then Actual Ending Value Will Be Based On Most Recent Reports Made Prior To That Date
Determining Indemnities
Insurance Provider Will Send Notice Of Probable Loss To Insured Approximately Ten Days After All Actual Gross Margins Applicable For Insurance Period Are Released By RMA
Insured Must Submit Marketing Report Within 15 Day Of Receipt Of Notice Of Probable Loss
If Total Of Actual Marketings Are Less Than 75% Of Total Target Marketing, Indemnity Will Be Reduced By Percentage By Which Actual Marketings Fell Below Total Of Target Marketings
Premium Due
For Initial Insurance Period, Premium Is Due With Application For Insurance
For Subsequent Insurance Periods, Premium Is Due: With Target Marketings Report. No Later Than Sales Closing Date (SCD)
The Premium Is Listed On Summary Of Coverage