The Problem: A Blanket Prohibition That Has Outlived Its Purpose
For crop year 2026, all three major livestock insurance policies — Dairy Revenue Protection (DRP), Livestock Gross Margin (LGM), and Livestock Risk Protection (LRP) — contain language similar to this:
You must not obtain insurance under any other livestock plan of insurance issued under the authority of the Act on the same class of livestock to be marketed during any month for which you have coverage under this policy.
In practice, this means that if a dairy producer has DRP coverage for Oct–Dec 2026, they are completely barred from buying LGM-Dairy coverage for any month in that quarter. If a cattle producer has LRP-Fed Cattle for January, they cannot buy LGM-Cattle for January. Period.
The rationale is simple: prevent double-dipping. Without any overlap guard, a producer could obtain DRP from one AIP and LGM from another, submit the same marketing records to both, and collect indemnities twice on the same milk or livestock.
That’s a legitimate concern. But the blanket prohibition also blocks entirely legitimate coverage strategies — and livestock producers have told us repeatedly that they want more flexibility.
Why Producers Want Concurrent Coverage
Consider a feedyard operator. They have already partially secured feeder cattle for some of their expected fed cattle marketings. For those animals, LRP-Fed Cattle is the natural fit — it covers downside price risk on the specific animals they plan to market. But for additional anticipated marketings where feeder cattle haven’t yet been acquired, LGM-Cattle is more appropriate because it protects the gross margin (the spread between fed cattle revenue and feeder cattle plus corn costs).
Under current rules, these two programs cannot overlap on the same end month. Because LRP imposes per-head limits while LGM does not, producers whose annual marketings exceed LRP head limits are incentivized to concentrate all their LRP purchases into a few months and use LGM for the remainder of the year. Allowing concurrent use would let producers spread LRP coverage across more months, which actually reduces concentration risk for AIPs.
What Made This Reform Possible
For years, the blanket prohibition was the only practical way to prevent program abuse. But a series of modernization steps created the infrastructure for more flexible underwriting:
- Crop Year 2023: RMA migrated LRP and LGM from the legacy eDAS system (in use since 2003) to the modern PASS (Policy Acceptance and Storage System) platform.
- Crop Year 2024: A new “Market Factor” calculation was introduced for LGM-Dairy, based on Cumulative Target Marketings — an approach that makes it possible to detect over-coverage mathematically rather than relying on a blanket prohibition.
- Crop Year 2025: The same Market Factor methodology was extended to LGM-Swine and LGM-Cattle.
These reforms set the stage for what we are now introducing for RY2027.
The RY2027 Change
Starting with RY2027, dairy producers will be able to use LGM-Dairy and DRP on the same calendar quarter. Livestock producers will be able to use LGM-Swine and LRP-Swine, as well as LGM-Cattle and LRP-Fed Cattle, for the same month.
The key question becomes: how do you maintain program integrity when a producer can hold overlapping coverage? The answer is different for each program, but follows a common principle — instead of asking whether the “same milk” or “same cattle” are covered twice, the system compares total marketings against total coverage purchased and prorates indemnities accordingly.
How It Works: Dairy Revenue Protection
The Existing Proration Mechanism
When a producer buys a DRP Quarterly Coverage Endorsement (QCE), they declare how much milk they wish to protect — the Declared Covered Milk Production. The sum across all QCEs for a given calendar quarter is the Total Producer Declared Production.
If the producer’s actual quarterly milk marketings (Total Milk Marketings) are at least 85% of Total Producer Declared Production, indemnities are based on the full declared amounts. But if actual production falls below 85% of the declared total, the covered amount under each QCE is prorated using this formula:
Covered Milk Production = ROUND(MIN(Total Producer Declared Production, Total Milk Marketings / 0.85) × Declared Covered Milk Production / Total Producer Declared Production, 0)
Example 1: DRP-Only (Current Rules)
Two QCEs are purchased for the same quarter:
- QCE A: 1,500,000 lbs declared
- QCE B: 500,000 lbs declared
- Total declared: 2,000,000 lbs
- Actual milk marketings: 1,200,000 lbs (below 85% of 2,000,000 = 1,700,000)
Since marketings are below the 85% threshold, the total covered production is capped:
1,200,000 / 0.85 = 1,411,765 lbs
QCE A’s covered production: 1,411,765 × 1,500,000 / 2,000,000 = 1,058,824 lbs
Even though the producer declared 1,500,000 lbs on QCE A, only 1,058,824 lbs are eligible for indemnities — while the premium is still due on the full 1,500,000 lbs.
What Changes for RY2027
To protect program integrity once DRP and LGM overlap is allowed, the definition of Total Producer Declared Production is expanded. It will now include not just all DRP QCEs for the quarter, but also all LGM-Dairy Target Milk Marketings for any of the three months within that quarter.
The system no longer needs to investigate whether the “same milk is covered twice.” Instead, it guards against double-dipping by comparing total quarterly milk marketings against total coverage purchased for the quarter — across both programs.
Example 2: DRP + LGM-Dairy Overlap (New for RY2027)
Same two QCEs as before, plus LGM-Dairy coverage:
- QCE A: 1,500,000 lbs declared
- QCE B: 500,000 lbs declared
- LGM-Dairy: 1,000,000 lbs covered for months within the same quarter
- New total declared: 3,000,000 lbs
- Actual milk marketings: 1,200,000 lbs
Total covered production is still capped at: 1,200,000 / 0.85 = 1,411,765 lbs
But now QCE A’s share of that cap is diluted by the larger denominator: 1,411,765 × 1,500,000 / 3,000,000 = 705,883 lbs
The math may look more complex, but the elegance is clear: underwriters do not have to investigate whether milk was covered first under LGM and then under DRP, or vice versa. Disputes between claims processors and producers are minimized — producers do not need to prove that their LGM coverage was for “different milk” than their DRP coverage.
How It Works: Livestock Gross Margin
The LGM mechanism is functionally equivalent to DRP’s approach. Under LGM rules, indemnities are prorated whenever the “Market Factor” for any month is less than 1.00:
Month X Market Factor = ROUND(ROUND(MIN(Month X Cumulative Target Market Amount, Month X Actual Market Amount / 0.85), 3) / Month X Cumulative Target Market Amount, 3)
(For months 2 through 11 of the endorsement period.)
Here’s what each term means:
- Month X Actual Market Amount — the amount of milk (or livestock) actually marketed during that month.
- Month X Cumulative Target Market Amount — the sum of all milk (or livestock) covered for that calendar month, under all LGM endorsements.
What Changes for RY2027
Starting in RY2027, the Cumulative Target Market Amount will also include 1/3 of all milk pounds covered under DRP for the calendar quarter to which that month belongs.
Example: LGM-Dairy + DRP Overlap
- LGM-Dairy coverage for November 2026: 300,000 lbs
- DRP coverage for Oct–Dec 2026: 1,200,000 lbs
- Actual milk marketed in November 2026: 400,000 lbs
November 2026 Cumulative Target Market Amount: 300,000 + (1,200,000 / 3) = 700,000 lbs
Actual Market Amount / 0.85: 400,000 / 0.85 = 470,588 lbs
November 2026 Market Factor: MIN(700,000, 470,588) / 700,000 = 0.672
Because the Market Factor is below 1.00, indemnities for November would be reduced proportionally.
Timing Rules for Cattle and Swine
LGM-Cattle and LGM-Swine allow livestock marketings to occur up to 15 days before the start of the target month or up to 15 days after its end. If a producer counts cattle marketed in late December 2026 or early February 2027 toward their January 2027 target month, those animals are reflected in January’s “Actual Market Amount” and cannot be double-counted toward December or February.
How It Works: Livestock Risk Protection
Unlike DRP or LGM, LRP does not have a concept of cumulative marketings. Instead, the FCIC Board adopted two new measures to complement existing underwriting safeguards:
- Same-AIP requirement: Concurrent LRP/LGM coverage is only permitted if both policies are with the same Approved Insurance Provider.
- Feeder cattle retention restrictions: There will be some limitations on a producer’s ability to retain feeder cattle when they hold concurrent LGM-Cattle coverage.
Underwriting Considerations
Effective Date
The new rules apply to coverage purchased on or after July 1, 2026. Concurrent coverage is allowed only if coverage under both insurance plans (DRP and LGM, or LRP and LGM) is purchased after that date. If a producer purchased DRP coverage for Q4 2026 before July 1, 2026, they may not buy LGM-Dairy coverage for October, November, or December 2026 after July 1 — because the earlier DRP coverage remains subject to RY2026 rules.
Same-AIP Requirement
Concurrent coverage is only available if both insurance policies are with the same AIP. Producers who currently have LGM with one AIP and DRP or LRP with another may want to consider transferring policies to a single AIP for RY2027. Note: both policies do not need to be with the same agent — only with the same AIP.
Looking Ahead
This is a complex reform, and we worked closely with RMA to strike the right balance between keeping the program simple to use and implementing the safeguards necessary to prevent abuse. But nothing can substitute for real-world feedback. If you have comments or suggestions, please do not hesitate to reach out!