Livestock Risk Protection (LRP): Confidence Midst a Volatile Marketplace
September 15, 2022Are you a rancher growing either hogs, feeder cattle, or finishing cattle? Does the uncertainty of the markets give you angst? Where are prices headed? What can you do to provide some peace of mind? Livestock Risk Protection (also known as LRP) is the tool that will provide your business with a defense against declining livestock prices for fed cattle, feeder cattle, and swine. It is an “easy to understand,” flexible program that gives you options to establish a price floor on your livestock. Here is how the Livestock Risk Protection (LRP) program works:
6 Key Benefits of Livestock Risk Protection
LRP is a USDA livestock insurance program available to all ranchers/producers that have an ownership share in eligible livestock. The key benefits are:
- Guaranteed price. There is no bid/ask spread to contend with.
- Limited basis risk coverage. The aggregate cash price used better reflects the actual price received.
- Any number of head can be covered (up to limits).
- Numerous endorsement period options. Producer selects the period that fits their risk management plan.
- Wider range of target weights than the Chicago Mercantile Exchange (CME).
- LRP is an insurance policy. LRP may be viewed more favorably by lenders than hedging or speculating (derivative products).
5 More Things to Know About Livestock Risk Protection
In addition to the overall key benefits, here are some more details to know about Livestock Risk Protection:
1. LRP Can Protect Various Types of Cattle
There are varying types of cattle that may be protected by LRP. A producer can cover Fed Cattle and Swine that are marketed for slaughter. The program can also be used to cover cattle that are ready to be put into a feedlot for fattening.
2. There Are Head Limits Per Crop Year
There are limits as to the number of head a producer can insure in a crop year; the crop year is from July 1st through the following June 30th. Cattle and Feeder Cattle have a limit of 12,000 head per Specific Coverage Endorsement and a 25,000 head limit per crop year. Hogs have a 70,000 head limit per Specific Coverage Endorsement and a 750,000 head limit per crop year.
3. Insurable Livestock Must Fall Within Certain Grades and Weight Ranges
The insurable livestock must meet and fall within certain grades and weight ranges. Fed cattle, both steers and heifers, are expected to grade select or higher, yield grade of 1 to 3 and to market at 10 to 16 cwt (live weight).
Feeder cattle must be less than 6 cwt for a combination of steers and bulls, and 6.0 to 10.0 cwt. for steers only. Swine are expected to market within a range of 1.40 to 2.60 lean cwt target weight, (189-351 live cwt).
4. There Are Specific Insurance Periods for LRP
The insurance periods for LRP Fed Cattle and Feeder Cattle are the following weeks: 13, 17,21,26,30,34,39,43,47, or 52. This corresponds with monthly marketing for the course of a year. Swine periods are 13,17,21,26, or 30 weeks.
5. Coverage Levels Vary Between 70-100%
Coverage levels may be selected between 70% and 100% for all types of insurance livestock. The program premiums are subsidized by the USDA from 35% to 55% based on the coverage level selected.
Get Coverage and Protection for Your Beef Operation
Initially, if it appears there is much to decipher and many decisions to make in understanding the program, you are correct. However, with specific illustrations and explanations, the program can soon be understood and used as a vital financial management tool for your livestock operation in addition to other farm insurance coverage you have.
Your financial risk, physical labor, and emotional energy you invest in the farm deserve protection. Please contact us at Ruhl Insurance toll-free at 800-537-6880 or direct at 717-665-2283 to discuss the specifics of your beef operation. You can also reach us at info@iruhl.com.
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.