LRP insurance helps producers manage risk

Livestock Risk Protection insurance (LRP) is a price insurance policy developed as a price risk management tool that protects livestock producers from declining prices. LRP is designed to protect livestock producers by establishing a floor selling price for livestock. LRP insurance pays a producer if the regional/ national cash price index falls below a selected coverage price.

LRP provides coverage for feeder cattle, fed cattle, unborn calves, and swine. Producers have flexibility in timing of purchase, length of coverage, number of head covered, targeted weight of livestock at the end of coverage, and coverage level. LRP coverage levels range from 70% to 100%. The insurance period ranges from 13 to 52 weeks to allow producers to match their policy to the time they normally market livestock. Producers may buy LRP insurance throughout the year from Risk Management Agency (RMA) approved livestock insurance agents. However, cattle sales are only available Monday-Friday with sales period beginning around 4 p.m. Central time and ending at 9 a.m. Central time the following morning.

LRP coverage is calculated based on average prices from the Chicago Mercantile Exchange. If the actual ending value is below the coverage price, producers will be paid an indemnity for the difference between the two.

LRP has become much more affordable recently, with increased subsidies and lower premiums. As shown in the example below, the LRP premium for coverage on the same animal has dropped significantly since 2020. While the amount of guaranteed coverage has increased due to higher markets, the premium is less. For a 26-week term, the premium dropped by $30, and for the 39-week term, the premium dropped by $38.

26-week term

2020 — guarantee per head = $1,008 and producer cost = $64

2023 — guarantee per head = $1,591 and producer cost = $34

39-week term

2020 – guarantee per head = $1,008 and producer cost = $86

2023 – guarantee per head = $1,657 and producer cost = $48

Improvements and Changes for 2023

• Increase head limits:

*Fed Cattle: 12,000 head per endorsement and 25,000 head per crop year.

*Feeder Cattle: 12,000 head per endorsement and 25,000 head per crop year.

*Swine: 70,000 head per endorsement and 750,000 head per crop year.

• A producer can now have both an LRP and LGM policy with stipulations such as not having the same insured livestock insured under multiple policies.

• Modify the premium offset language to allow an insured the choice to receive indemnities without a reduction to offset premium on any endorsements that have not yet ended.

• Require proof of ownership before