Livestock Gross Margin Insurance Protection for Swine

Livestock Gross Margin Insurance Protection for Swine (Draft 8/31/11) Available in 48 contiguous states

Gross margin protection (income minus feed cost (based on board of trade prices) for swine to be sold for commercial or private slaughter can be covered by this RMA/USDA The program uses futures prices to determine the Expected Gross Margin and the Actual Gross Margin. An indemnity may be payable when the Actual Gross Margin is less than the Expected gross Margin for the enrollment period (The price the producer receives at the local market is not used in these calculations).

Types of Operations Covered: Farrow to Finish Operation - A type of farm operation that covers all aspects of breeding, farrowing and raising swine to slaughter.

Feeder Pig Finishing Operation - A type of farm operation that specializes in the feeding of swine (feeder pigs) from a weight of approximately 50 pounds to slaughter.

SEW Operation - A type of farm operation that specializes in the feeding of swine (Segregated Early Weaned pigs) from the age of approximately 12 - 21 days to slaughter. Enrollment: Can insure the swine a producer expects to market during each enrollment period. Twelve times per year (last business Friday of each month). There are twelve Insurance periods per year, each is for six months, with coverage available for last 5 months of the 6 month period. The first enrollment period – Expected to be available October 28, 2011 Target Marketings: All or part of swine may be included for all or selected months of each insurance period, not to exceed 15,000 head per insurance period or 30,000 head period/reinsurance year. Coverage: Protects against loss of gross margin (market value minus feed costs) of swine. Begins the second month following sales closing date and can continue for the next 5 months. Prices: Based on simple averages of futures contract daily settlement prices. Deductibles: Chose from $0-$20 deductible per head in $2 increments.

Expected Gross Margin (EGM): Based on the market value of the swine minus feed costs (corn and soybean meal equivalents) using CME futures prices. Actual Gross Margin (AGM): Based on the market value of the swine minus feed costs using CME Actual Prices.

Actual Gross Margin per Swine by type of operation (combination types on same policy have separate guarantees and loss payments): For farrow to finish operations, the actual swine price for the month swine are marketed times 0.74, times the assumed weight of the swine at marketing (260 pounds, or as stated in the Special Provisions), minus the actual cost of feed three months prior to that month, (using CME prices).

For feeder and SEW pig finishing operations: the actual swine price for the month swine are marketed times 0.74, times the assumed weight of the swine at marketing 260 pounds, or as stated in the Special Provisions, minus the actual cost of feed two months prior to that month (using CME prices). For example, the actual gross margin per swine for April for a farrowing to finish operation is the actual swine price for April times 0.74, times 2.6 hundredweight, less the actual cost of feed for January.

For feeder pig finishing operations or SEW pig finishing operations: the actual gross margin per swine for April is the actual swine price for April times 0.74, times 2.6 hundredweight, less the actual cost of feed for February

Indemnity: If the Actual Gross Margin is less that the Expected Gross Margin (minus the deductible) for the period of enrollment an indemnity may be payable. For More Information: See http://www.rma.usda.gov/livestock or Contact a crop insurance agent (list available www.rma.usda.gov) .