USDA’s Risk Management Agency (RMA) is concerned about adequate funding for the popular Livestock Gross Margin (LGM) Dairy plan of insurance.

“Congress makes $20 million a year available for all livestock programs,” says RMA administrator Bill Murphy. “The popularity of the newly-designed dairy program exhausted these funds in March, halfway through the fiscal year.”

Murphy says the agency has historically only spent about $3-4 million a year of that $20 million annual allocation. “What changed this year is that the dairy industry requested two changes. One, to provide a subsidy, which was not in there before. And they also requested that the premium payment to be changed from the beginning of the insurance period to the end, like the rest of our crop insurance programs.”

As a result, the program was so popular for dairy producers this year that they used up all the funds in four months, which was about $15 million or 75% of the total annual allocation for all livestock programs. LGM Dairy provides protection to dairy producers when feed costs rise or milk prices drop. Gross margin is the market value of milk minus feed costs. LGM Dairy uses futures prices for corn, soybean meal, and milk to determine the expected gross margin and the actual gross margin.