Livestock Gross Margin (LGM) insurance programs have existed for swine and feeder cattle for a number of years. These insurance programs, administered through USDA’s Risk Management Agency (RMA), are designed to offer protection against a decline in livestock feeding margins (i.e., selling price minus feed costs). For cattle, the insurance product pays producers an indemnity when the spread between fed cattle sales value and the costs associated with feeder cattle and corn feed are reduced. With swine, an indemnity is paid based on the sale price of market hogs and the costs associated with the feeding of corn and soybean. In 2007, the Federal Crop Insurance Corporation approved Livestock Gross Margin insurance for dairy farms (LGM-Dairy). This program will be available starting in August 2008 for dairy producers in Wisconsin and across the U.S. LGM-Dairy is a natural extension of the cattle and swine insurance programs and represents a new risk management tool that allows dairy farm operators to purchase insurance to protect against unanticipated decreases in their gross margin, where this gross margin is the difference between estimated milk revenue and purchased feed costs.3 Under this policy, the indemnity at the end of insurance period is the difference, if positive, between the expected and actual gross margin. LGM-Dairy uses futures prices and historical state corn and milk basis information to determine the expected gross margin and the actual gross margin used in the above indemnity calculation.