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    Crop Insurance News and Analysis – July 20, 2020 -Livestock Gross Margin for Dairy, Cattle and Swine

    July 23, 2020 By //  by Kim Arrigo

    On July 20, 2020, the Risk Management Agency (RMA) issued Product Management Bulletin: PM-20-048, regarding the Livestock Gross Margin (LGM) Plan of Insurance for Dairy, Cattle, and Swine and the policies for LGM Dairy, Cattle and Swine. https://www.rma.usda.gov/en/Policy-and-Procedure/Bulletins-and-Memos/2020/PM-20-048; https://www.rma.usda.gov/-/media/RMAweb/Policies/Livestock-Gross-Margin-Cattle/2021/LGM-Cattle-Policy.ashx; https://www.rma.usda.gov/-/media/RMAweb/Policies/Livestock-Gross-Margin-Dairy/2021/LGM-Dairy-Policy.ashx; https://www.rma.usda.gov/-/media/RMAweb/Policies/Livestock-Gross-Margin-Swine/2021/LGM-Swine-Policy.ashx. In PM-20-048, RMA states the Federal Crop Insurance Corporation Board of Directors (Board) approved revisions to the LGM plan of insurance for Cattle, Dairy, and Swine, under section 508(h) of the Federal Crop Insurance Act, on June 23, 2020. RMA states that the revisions: 1) allow premium to be paid at the end of the endorsement period for LGM Cattle; and 2) add premium subsidy to LGM Cattle and Swine, which will be based on the deductible selected by the livestock producer. RMA states that for LGM Cattle the premium subsidy will range from 18 percent with 0 deductible up to 50 percent with a deductible of $70 or greater. RMA states that for LGM Swine, the premium subsidy will range from 18 percent with 0 deductible up to 50 percent with a deductible of $12 or greater.

    RMA also issued Frequently Asked Questions (FAQs), and Fact Sheets for LGM Dairy, Cattle and LGM Swine. https://www.rma.usda.gov/en/News-Room/Frequently-Asked-Questions/Livestock-Gross-Margin—Swine; https://www.rma.usda.gov/en/News-Room/Frequently-Asked-Questions/Livestock-Gross-Margin—Dairy; https://www.rma.usda.gov/en/News-Room/Frequently-Asked-Questions/Livestock-Gross-Margin—Cattle; https://www.rma.usda.gov/en/Fact-Sheets/National-Fact-Sheets/Livestock-Gross-Margin-Insurance-Cattle; https://www.rma.usda.gov/en/Fact-Sheets/National-Fact-Sheets/Livestock-Gross-Margin-Swine.

    ANALYSIS – It appears that the Board is now allowing premium to be paid at the end of the insurance period, which is consistent with most crop insurance policies and the recent changes to the Livestock Risk Protection policies. The Board is also adding premium subsides to be included in the LGM policy for Cattle and Swine. Premium subsidy was already included in the LGM policy for Dairy. The LGM Dairy policy does not state how premium subsidy is calculated. With respect to the LGM Cattle and Swine policies, the premium subsidy is determined based on a dollar deductible. According to the LGM Swine policy, the deductible is $0 to $20 per head. According to the LGM Cattle policy, the deductible is $0 to $150 dollars per head.

    However, under section 508(e) of the Federal Crop Insurance Act (FCIA), premium subsidy is based on the coverage percent, not dollar amounts, but it does allow for comparable coverage. While the premium subsidy of 50 percent is available when the producer selects at least 47 percent of the maximum deductible for LGM Cattle and 60 percent of the maximum deductible for LGM Swine, it is not clear how these are comparable to the coverage levels associated with the premium subsidies authorized in the FCIA, which are based on total liability not percent of deductible. To receive a premium subsidy of 50 percent, the coverage level would need to be at least 75 percent but less than 80 percent. Presumably RMA has made this determination but it is not contained in any of the published documents.

    With respect to the National Fact Sheets, these documents only provide minimal information. It is recommended that all interested parties review the actual policy when determining the terms and conditions of insurance.

    All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.

    Filed Under: Blog

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