![]() Some on-farm feeders may be contemplating the need for price protection at this time of year on calves retained with the intent to feed them to a finish weight sometime in 2022, using available feed resources. Each of the LRP insurance products connects to a CME contract price with LRP Fed Cattle insurance based on the CME Live Cattle contract price and the various LRP Feeder Cattle insurance products based on the CME Feeder Cattle contract price with adjustments made for weight and sex of the animals. The feeder cattle category is further broken down into Weight 1 (less than 600 pounds) and Weight 2 (600 to 900 pounds) classifications, as well as steers and/or heifers. LRP insurance for cattle is available for feeder cattle (less than 900 pounds) and fed cattle categories (greater than 900 pounds). ![]() Note: New and beginning producers qualify for an additional 10% subsidy. Table 1: Livestock Risk Protection (LRP) insurance premium subsidies. LRP insurance contracts are offered on a per head basis, making it more customizable to smaller size operations, unlike CME contracts that are 40,000-pound (Live Cattle) and 50,000-pound (Feeder Cattle) contracts. LRP insurance is offered under the Federal crop insurance program and premiums are subsidized by the Federal government (Table 1), making it cost competitive to the purchase of put options on the Chicago Mercantile Exchange (CME). Producers obtain this position in exchange for the cost of the insurance premium. ![]() LRP insurance functions like a put option creating a floor on the national selling price at a future point in time, while allowing the producer to benefit from price increases. Livestock Risk Protection (LRP) insurance is a single-peril crop insurance product available from the USDA Risk Management Agency (RMA) to protect cattle and swine producers against unexpected down swings in the national market price. This article was first published in the November 2021 edition of RightRisk News
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