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LGM Analyzer

Overview

The LGM-Analyzer is a software suite developed at the University of Wisconsin that can be used to assist in the use of the Livestock Gross Margin for Dairy (LGM-Dairy) insurance program for revenue risk management.  The user can evaluate the performance and cost of LGM-Dairy either using historical data or in anticipation of the upcoming LGM-Dairy contract offering the cost of a yet to be LGM-Dairy offering.

The LGM-Analyzer Suite of Programs

There are currently three seperate programs that comprise the LGM-Analyzer suite. T hese programs are the:   (i) LGM-Dairy Premium Estimator, (ii) LGM-Dairy Optimizer and (iii) Bundled Options Estimator.  Below is a brief description of each of these software systems.   Although the above three programs are standalone the input data is shared across application and thus minimizing duplicate data entry.

The Premium Estimator
This program can be used if you want to estimate LGM-Dairy premiums for a user-defined LGM-Dairy contract.  An LMG-Dairy contract is specified by the % of production insured each month over the life of the contract and deductible level.
The LGM-Dairy Least Cost Optimizer
Select this if you want to minimize the premium costs for attaining a pre-defined level of target Income over Feed Cost (IOFC) for all milk produced on-farm.  Note that for some target IOFC's less than 100% of milk will need to be insured to achieve the total target IOFC.  In contrast to the Premium Estimator when using the Optimizer, the user does not supply the contract.   The Optimizer designs the least cost contract for you.
Bundled Options Comparison
This software can be used to compare the cost of using a traditional bundled options strategy to establish a similar level of IOFC floor as provided by a particular LGM-Dairy contract design.   Under the bundled options strategy, Class III puts are used to establish a revenue minimum and corn/SBM call options are used to establish a feed cost ceiling.  With the establishment of a revenue minimum and a feed cost maximum, the producer has established a minimum IOFC.  When the options contracts mature, the value of the options will be added to help offset the options premium costs.

Topic Specific Help Documents

  • Using the Premium Estimator
  • Using the Least Cost Optimizer
  • Bundled Options Cost Comparison
  • How to Evaluate Contract Perfomance for an Active LGM-Dairy Contract
  • Evaluating Actual Contract Performance for a Completed LGM-Dairy Contract