3 minute read
Take a Look at Livestock Risk Protection
Written by: Bill Roiger, Sr Insurance and Marketing Education Specialist
There is risk in raising livestock. Farmers and ranchers who do so may be unaware that insurance policies exist to mitigate against challenges they face. Livestock Risk Protection (LRP) is an option that all growers and raisers should explore for its potential benefits.
Livestock insurance does not grab headlines like crop policies. Crop insurance specialists have historically centered discussions around corn, soybeans, small grains, and the like. This is not based on individual bias as much as federal crop insurance product development, availability of products, and the rollout of crop insurance products over time.
This is where LRP comes in. Although not exactly accurate, LRP can be framed as revenue protection for your livestock. Think of it as where livestock marketing meets federal crop insurance. This product allows you to set a price floor on the value of the animal while keeping the top side open. The premium subsidy through the Federal Crop Insurance Corporation also makes it a more affordable option.
The types of operations eligible for LRP include swine finishing, cow/calf, cattle backgrounding, and fed cattle finishing operations. AgCountry can show you the numbers and timeframes that could provide major benefit to your bottom line if you operate in any of these capacities.
To further understand what this plan is and how it works, let us compare LRP to row crop MPCI revenue protection—a plan that many of us are quite familiar with. (see Figure 1.)
It is important to also examine the fine print details before making any decisions. Here are a few things LRP does not do:
• LRP is not a speculative marketing tool. For example, let us say a cow/calf operator’s calf crop of steers generally weigh an average of 600 pounds at weaning. The farmer is unable to secure LRP coverage for the value of 900-pound steers.
• The dates should generally align. Let us use the same operator as above. The farmer’s calves are born in the spring and are sold off the ranch on September 15 each fall. The farmer should not pick coverage expiring November 15. The coverage should expire closer to September 15 to match the ranching practice and schedule.
• For finishing swine and fed cattle: Within 60 days on either side of the coverage endorsement expiring, the finished animals must be delivered to slaughter. If not, the farmer pays the premium cost yet forfeits any indemnity due to them.
• The insured must have ownership in the cattle or swine to purchase LRP. Again, this is not a speculative tool.
It is important to further discuss how an LRP policy would work on your operation. Please note that your initial application can be signed at any time. This does not obligate you to spend a dime. The obligation is that if you do decide to lock in a coverage endorsement on this product, it must be under the active application.
Keep an eye on the market. Contact AgCountry periodically to discuss if the time is right to take some risk off the table and place it onto a coverage endorsement through LRP. Remember, you do not need to insure all your livestock. You can try LRP on a handful of head, or a group, to learn the possibilities.
