Livestock Gross Margin
(LGM) For Cattle
By Duane Griffith
April 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


CME


Used To Determine Actual & Expected Corn Prices
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
Example Gross Margin Calculations
Joe Farmer, Feb 28th

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
Expected June Prices on Feb. 28th

Expected Live Cattle Price For June


Basis For June Live Cattle Is -$5.52
Expected Feeder Cattle Price January $114.30


$ 95.80
Basis For January Feeder Cattle Is -$11.63
Expected Corn Price For April

Basis For April Corn Is -$0.37
$ 2.14
Expected Cost Of Cattle, Feeder Cattle And Corn
For Cattle To Be Sold In June
Expected Live Cattle Price
$ 95.80
$ -5.52
Minus Live Cattle Basis
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
Times Expected Corn Price For The
Month
Equals Expected Feed Costs/Head
57.5
$ 1.77
$101.78
Expected Gross Margin (EGM) Per Head For
June
Expected Cattle Price
($90.28 X 12.5 Hundred Weight)
Minus Cost Of Feed
$1,128.50
$101.78
Equals
Minus Expected Feeder Cattle
Price ($102.67 X 7.5 Hundred
Weight)
Equals EGM
$1,026.72
$770.03
$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
57.5 Bu.
Operation
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
$1,086.00
($86.88 X 12.5 Hundred Weight)
Minus Cost Of Feed
$104.08
Equals
$981.92
Minus Actual Feeder Cattle Price
$770.03
($102.67 X 7.5 Hundred Weight)
Equals Actual Gross Margin (AGM)
$211.89
November Cattle Example
Expected November Prices on Feb. 28th

Expected Live Cattle Price For Nov.


Basis For November Live Cattle Is -$9.61
Expected Feeder Cattle Price in June $105.10


$ 91.20
Basis For June Feeder Cattle Is -$11.80
Expected Corn Price For Sept. Is

Basis For Sept. Corn Is -$0.33
$ 2.30
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
Plus Feeder Cattle Basis
$105.10
$ -11.80
Equals $ 93.30
Expected Corn Price
Plus Corn Basis
Equals
$ 2.30
$ -.33
$ 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
$
Equals Feed Costs for Cattle Sold in
November
$113.28
1.97
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.
$ 90.65
(½ Based On Oct. And ½ Based On Dec.)
Plus Basis-November Live Cattle
$ -9.61
Equals $ 81.04
Actual Feeder Cattle Price For June $108.78
(2/3 Based On May And 1/3 Based On Sept.)
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
57.5 Bu.
For a Yearling Finishing Operation
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)
Minus Actual Cost Of Feed
$1,013.00
$117.88
Equals
Minus Actual Feeder Cattle Price
($96.98 X 7.5 Hundred Weight)
Equals Actual Gross Margin (AGM)
$895.12
$727.35
$167.77
June and November Combined
Expected Gross Margin (EGM)
Expected Gross Margin June Cattle
$256.69/Hd X 500 Head Target
Marketings
Expected Gross Margin November
Cattle
$206.85 X 2,000 Head Target
Marketings
Total Expected Gross Revenue
(EGM)
Gross Margin Guarantee
EGM $542,045 Minus ($30/Hd
deductible X 2,500 head)
$128,345
$413,700
$542,045
$467,045
Actual Gross Margin (AGM) Per Month
June = Actual Gross Margin Per
Head Of $211.89 X Target
Marketings (500 Head)
November = Actual Gross Margin
Per Head Of $167.77 X Target
Marketings (2,000 Head)
Total June + November AGM
Indemnity Paid is:
Gross margin guarantee $467,045
minus the actual total gross
margin $441,485
$105,945
$335,540
$441,485
$25,560
Questions??
LGM Forms
© 2006 NCIS
LGM 47
© 2006 NCIS
LGM 48
© 2006 NCIS
LGM 49
© 2006 NCIS
LGM 50
© 2006 NCIS
LGM 51
© 2006 NCIS
LGM 52
© 2006 NCIS
LGM 53
Definitions

Insurance Period



Crop Year


© 2006 NCIS
11 Month Period Stated In Summary Of
Insurance; And,
Cattle Are Not Insurable In The First Month
Of Any Insurance Period
July 1 Thru June 30; And,
Designated By The Year It Ends
[2006-NCIS 916 (Definitions)]
LGM 54
Example Of SCD 3/31 & Insurance
Month Of July – Yearling Finishing
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
YEARLING FINISHING
X
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)
© 2006 NCIS
LGM 55
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
Sales Closing
Date
Mar 31
© 2006 NCIS
Col. 2
Col. 3
Insurance Insurance
Month
Period
May
Apr-Feb
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Col. 6
Col. 5
Yearling Finishing
Corn
Live Cattle Feeder Cattle
Price
Price
Price
Mar
Dec
May
Apr
Jan
Jun
May
Feb
Jul
Jun
Mar
Aug
Jul
Apr
Sep
Aug
May
Oct
Sep
Jun
Nov
Oct
Jul
Dec
Nov
Aug
Jan
Dec
Sep
Feb
Col. 4
Col. 9
Col. 8
Calf Finishing
Corn
Live Cattle Feeder Cattle
Price
Price
Price
Jan
Sep
May
Feb
Oct
Jun
Mar
Nov
Jul
Apr
Dec
Aug
May
Jan
Sep
Jun
Feb
Oct
Jul
Mar
Nov
Aug
Apr
Dec
Sep
May
Jan
Oct
Jun
Feb
Col. 7
LGM 56
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
Sales Closing
Date
Mar 31
© 2006 NCIS
Col. 2
Col. 3
Insurance Insurance
Month
Period
May
Apr-Feb
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Col. 6
Col. 5
Yearling Finishing
Corn
Live Cattle Feeder Cattle
Price
Price
Price
Mar
Dec
May
Apr
Jan
Jun
May
Feb
Jul
Jun
Mar
Aug
Jul
Apr
Sep
Aug
May
Oct
Sep
Jun
Nov
Oct
Jul
Dec
Nov
Aug
Jan
Dec
Sep
Feb
Col. 4
Col. 9
Col. 8
Calf Finishing
Corn
Live Cattle Feeder Cattle
Price
Price
Price
Jan
Sep
May
Feb
Oct
Jun
Mar
Nov
Jul
Apr
Dec
Aug
May
Jan
Sep
Jun
Feb
Oct
Jul
Mar
Nov
Aug
Apr
Dec
Sep
May
Jan
Oct
Jun
Feb
Col. 7
LGM 57
X
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Example Of SCD 3/31 & Insurance
Month Of Oct. – Yearling Finishing
X
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)
© 2006 NCIS
LGM 58
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
Sales Closing
Date
Jan 31
© 2006 NCIS
Col. 2
Col. 3
Insurance Insurance
Period
Month
Feb-Dec
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Col. 4
Col. 5
Col. 6
Yearling Finishing
Live Cattle Feeder Cattle
Corn
Price
Price
Price
Mar
Oct
Jan
Apr
Nov
Feb
May
Dec
Mar
Jun
Jan
Apr
Jul
Feb
May
Aug
Mar
Jun
Sep
Apr
Jul
Oct
May
Aug
Nov
Jun
Sep
Dec
Jul
Oct
Col. 7
Col. 8
Col. 9
Calf Finishing
Live Cattle Feeder Cattle
Corn
Price
Price
Price
Mar
Jul
Nov
Apr
Aug
Dec
May
Sep
Jan
Jun
Oct
Feb
Jul
Nov
Mar
Aug
Dec
Apr
Sep
Jan
May
Oct
Feb
Jun
Nov
Mar
Jul
Dec
Apr
Aug
LGM 59
Example Of SCD 1/31 & Insurance
Month Of June – Calf Finishing
X
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
CALF FINISHING
X
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 60
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
Sales Closing
Date
Jan 31
© 2006 NCIS
Col. 2
Col. 3
Insurance Insurance
Period
Month
Feb-Dec
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Col. 4
Col. 5
Col. 6
Yearling Finishing
Live Cattle Feeder Cattle
Corn
Price
Price
Price
Mar
Oct
Jan
Apr
Nov
Feb
May
Dec
Mar
Jun
Jan
Apr
Jul
Feb
May
Aug
Mar
Jun
Sep
Apr
Jul
Oct
May
Aug
Nov
Jun
Sep
Dec
Jul
Oct
Col. 7
Col. 8
Col. 9
Calf Finishing
Live Cattle Feeder Cattle
Corn
Price
Price
Price
Mar
Jul
Nov
Apr
Aug
Dec
May
Sep
Jan
Jun
Oct
Feb
Jul
Nov
Mar
Aug
Dec
Apr
Sep
Jan
May
Oct
Feb
Jun
Nov
Mar
Jul
Dec
Apr
Aug
LGM 61
Example Of SCD 1/31 & Insurance
Month Of Nov. – Calf Finishing
X
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
CALF FINISHING
X
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 62
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
[2006-NCIS 916 (Definitions)]
LGM 63
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
[2006-NCIS 916 (Definitions)]
LGM 64
Definitions (Expected)

Expected Feeder Cattle Price (For Months
With An Unexpired Futures Contract)


© 2006 NCIS
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)]
LGM 65
Definitions (Expected)

Expected Feeder Cattle Price (For Months
With An Expired Futures Contract)


© 2006 NCIS
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)]
LGM 66
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 Operationspecific Feeder Cattle Basis For That Month
(Tables 3 & 4)
© 2006 NCIS
[2006-NCIS 916 (Definitions)]
LGM 67
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
[2006-NCIS 916 (Definitions)]
LGM 68
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
[2006-NCIS 916 (Definitions)]
LGM 69
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
[2006-NCIS 916 (Definitions)]
LGM 70
Definitions (Expected)

Expected Cost Of Feed


© 2006 NCIS
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)]
LGM 71
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)

© 2006 NCIS
Target Marketings X Expected Gross Margin Per Head
[2006-NCIS 916 (Definitions)]
LGM 72
Definitions (Actual)

Actual Gross Margin Per Head For
Yearling Finishing Operations



© 2006 NCIS
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)]
LGM 73
Definitions (Actual)

Actual Gross Margin Per Head For Calf
Finishing Operations



© 2006 NCIS
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)]
LGM 74
Definitions (Actual)

Actual Cattle Price

Simple Avg. Daily Settlement Prices

Last 3 Trading Days Prior To CME Live Cattle
Contract Expiration Date


© 2006 NCIS
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)]
LGM 75
Definitions (Actual)

Actual Corn Price

Simple Avg. Daily Settlement Prices ($ Per
Bushel)

Last 3 Trading Days Prior To CBOT Corn
Futures Contract Expiration Date


© 2006 NCIS
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)]
LGM 76
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)

© 2006 NCIS
Calf Finishing: 54.5 Bu. X Actual Corn Price
For The Month (Or As Stated In The SPOI’s)
[2006-NCIS 916 (Definitions)]
LGM 77
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
[2006-NCIS 916 (Definitions)]
LGM 78
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)

© 2006 NCIS
Target Marketings X Actual Gross Margin Per
Head
[2006-NCIS 916 (Definitions)]
LGM 79
Definitions (Actual)

Actual Marketings

Total No. Cattle Sold In Each Month Of The
Insurance Period


© 2006 NCIS
Proof Of Sales Required
Used To Verify Ownership And Determine
Approved Target Marketings
[2006-NCIS 916 (Definitions)]
LGM 80
Coverage Availability


Insurance Agent Does Not Have
Authority To Bind Coverage
Coverage Will Only Become Effective
When Insurance Provider:


© 2006 NCIS
Notifies Insured In Writing That Application
Has Been Accepted And Approved; And,
Issues Written Summary Of Insurance.
[2005-NCIS 916 2.(b)]
LGM 81
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
© 2006 NCIS
[2004-NCIS 916 2.(b)]
LGM 82
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:


© 2006 NCIS
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)]
LGM 83
Coverage Availability


© 2006 NCIS
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)]
LGM 84
Coverage Availability

No Policy Can Be Sold For Any Month
Where:


© 2006 NCIS
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)]
LGM 85
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
© 2006 NCIS
[2005-NCIS 916 2.(a)]
LGM 86
Insurance Coverage

All Cattle Will Be Insured At 100%
Share

© 2006 NCIS
Share Should Be Reflected By The Number
Of Cattle Listed On The Target Marketing
[06-LGM Q&A]
LGM 87
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.
© 2006 NCIS
[2005-NCIS 916 3.(b), (c), & (d)]
LGM 88
Insurance Coverages

Insured With Yearling Finishing And Calf
Finishing Operations:



© 2006 NCIS
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]
LGM 89
Insurance Coverages

Target Marketings:



© 2006 NCIS
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)]
LGM 90
Insurance Coverages


© 2006 NCIS
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)]
LGM 91
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:


© 2006 NCIS
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)]
LGM 92
SCD 2/28 & Insurance Month of June
Yearling Finishing
X
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
YEARLING FINISHING
X
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)
© 2006 NCIS
LGM 93
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
Sales Closing Insurance Insurance
Date
Period
Month
Feb 28
Mar-Jan
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Col. 4
Col. 5
Col. 6
Yearling Finishing
Live Cattle Feeder Cattle Corn
Price
Price
Price
Apr
Nov
Feb
May
Dec
Mar
Jun
Jan
Apr
Jul
Feb
May
Aug
Mar
Jun
Sep
Apr
Jul
Oct
May
Aug
Nov
Jun
Sep
Dec
Jul
Oct
Jan
Aug
Nov
Col. 7
Col. 8
Col. 9
Calf Finishing
Live Cattle Feeder Cattle Corn
Price
Price
Price
Apr
Aug
Dec
May
Sep
Jan
Jun
Oct
Feb
Jul
Nov
Mar
Aug
Dec
Apr
Sep
Jan
May
Oct
Feb
Jun
Nov
Mar
Jul
Dec
Apr
Aug
Jan
May
Sep
SCD Feb. 28th & Insurance Month of
June – Yearling Finishing
X
X
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)
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
YEARLING FINISHING
SCD Feb. 28th & Insurance Month of
November – Yearling Finishing
X
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)
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
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