Don’t Give Up on LGM-Dairy

1/26/2013 7:00 AM
By Charlene M. Shupp Espenshade Special Sections Editor

Bumps in the road with the Livestock Gross Margin for Dairy program left a bitter taste with farmers last year, with many saying they were not interested in the insurance program anymore. And fall 2012 policy purchases show that Northeastern dairy farmers took a pass on the program.

However, farmers should not discount LGM-Dairy, according to Alan Zepp of the Center for Dairy Excellence.

“I still hear from farmers, I tried it once and it didn’t work,’ ” he said. “My question is would you stop planting corn because of a stand failure?”

Zepp said LGM-Dairy is a product designed for long-term commitment, and farmers need to learn how it works best at their dairy farms.

“The goal is to keep money in the check book if (milk) prices crash again,” he said.

This is not a program for betting against the market.

Zepp held a teleconference Wednesday with dairy farmers just ahead of this weekend’s sign-up period. January sign-ups began Friday and conclude today.

While it might be too late for many to sign up for this period, he expects funding will remain for farmers to sign up Feb. 22-23. He said farmers should talk with their crop insurance agents to evaluate purchasing contracts next month.

So far, Pennsylvania and Vermont dairy producers have dropped off their insured milk volume dramatically, with only an estimated 670,000 pounds insured compared with 4.4 million a year ago.

Wisconsin has increased its coverage levels while New York state’s participation has decreased less dramatically.

“This tells us what parts of the country are using LGM,” Zepp said.

He said there is still a place for LGM-Dairy in a farm’s risk management plan. Reviewing the policies purchased last August, October and November, milk prices, and corn and soybean futures indicate there will be an indemnity payment for a 10-month policy.

Zepp also talked about the current conditions in the dairy industry.

Slaughter cow prices have declined slightly from the summer, but are still at record highs. Yet, despite record high prices, the national dairy cow numbers have been declining slowly.

At the time of the conference call, Zepp was waiting for the December announcements from USDA for several dairy commodities. Butter storage has increased and is at its highest levels since 2007. Cheese inventories are down slightly.

The U.S. dollar is holding around the three-year average, so the dollar will not affect dairy export values.

Looking at commodity trading, Zepp said several market wire services he reviews regularly had very little news regarding agricultural commodities.

“I think outside traders are not paying attention to the ag commodities, so the markets are quiet,” he said.

Does milk have a lot of untapped potential in today’s competitive beverage market?

  • Yes
  • No
  • Unsure

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