What protection does livestock gross margin (LGM) provide?

Livestock Gross Margin (LGM) provides a specific type of protection against fluctuations in the feeding margin for cattle and swine. This insurance product is designed to protect livestock producers from fluctuations in the prices of feed and livestock, particularly the gross margin, which is defined as the revenue from the sale of livestock minus the costs of feed.

In practical terms, if the prices of feed rise significantly or livestock prices fall, producers might find their profitability severely impacted. The LGM coverage specifically helps mitigate the risk of declining margins by providing a payout when the gross margin falls below a certain guaranteed level, thus ensuring that producers can manage their financial risks more effectively.

This unique focus on the feeding margin distinguishes LGM from other forms of insurance that might cover different risks, such as natural disasters, property damage, or disease outbreaks affecting livestock, which are not the primary concern of LGM.