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Livestock Gross Margin (LGM) Insurance in Missouri

Joe Horner, Ryan Milhollin, Bryce Bock and, Raymond Massey (June, 2014)

Summary

In livestock production, gross margin is the different between revenue from livestock or milk sales and feed costs. Its is an indicator of profitability. Livestock gross margin (LGM) insurance offers livestock producers a way to manage gross margin risk by guaranteeing a minimum gross margin. If the gross margin guarantee at the beginning of the contract period is higher than the actual gross margin at the end of the contract period, the policyholder earns an indemnity. LGM insurance protects expected gross margin rather than a selling price, which is what livestock risk protection (LRP) insurance is for. It does not protect against risks such as disease or death.