|
frederick, MD | Well rick, if your like me you are going to need to take a while to figure it out. It is wha itt is , margin insuance. You are locking in your margin between feed and milk price. What your doing is paying for someone, I guess the goverment, to buy up the correct puts and calls on soy, corn and milk futures to lock in your margin. If you vist the lgm website and go to the premium calculator you will find a link on there somewhere that will auctually show you what they are buying to cover your insurance.
The good is it is now being subsidized by the federal goverment, and you dont have to pay the premium until the end of the term. The bad is if you lock in one contract for many months you will not get a payment until the end of however many months you insure. I tried to break it up into 3 mo terms but the system will only allow one contract to be entered. So if I have a loss I will not get paid until december.
You can use the default feed numbers or you can put your own in. In the past when I tried to figure in the cost of my forages compared to corn and soy prices the system would not allow a feed number that high to be taken. This has been changed. Most people want to just lock in the concentrate they buy, I want to cover my total feed price. My forages are not free, and if I was not feeding all these hungry creatures I would be selling grain, so I figure that needs to be rolled into the insurance. I am having second thoughts about all the money I have dumped into the program. I just insured a bunch all the way out as far as they would let me go. But I guess I need to look at it as insurance, and with insurance you hope you will never need it. Btw, the agent was pushing only going out 3 months at a time. I think this is bad logic. You and I both know how the dairy bussiness goes. If the price tanks it tanks for a year. So I see no reason to only go out 3 mo. at a time. There is a decent margins in milk last month so I bought the insurance as far out as I could go. In the dairy bussiness I never understood the short term thinging that the insurance and marketing advisers give me. I have worked with an adviser on hedging milk and he was always trying to get me to lots of short term stuff. I always told him, we know what the milk price is going to do in the next 3 mo, at least pretty close. What we dont know is that in 1 year the milk price might be back to 12 dollars. Gee , I hope not. | |
|
LGM Insurance
