Today’s cattle prices are strong. With strong prices come greater opportunity and risk. Those raising feeder cattle can protect against a declining market price with a Livestock Risk Protection (LRP) policy. Let’s explore LRP and how to obtain a policy.
LRP offers many different levels of coverage and insurance periods to match the time of year you market your feeder cattle on your operation. It is available in every county across the U.S. each day of the year. One policy feature allows you to retain ownership of the cattle on the policy after the endorsement date.
The first step to signing up is contacting your AgCountry insurance specialist and filling out a one-time LRP Application, which you can fill out at any time and carries over from year to year. Completing an application does not obligate you to purchase the insurance. Once the application is approved you can choose your specific coverage endorsements. A different price is available to buy each day the market closes. You can have multiple specific coverage endorsements under one application.
Animal types available for coverage under feeder cattle include:
• Steers
• Heifers
• Predominantly Brahman cattle
• Predominantly dairy cattle
• Unborn calves
The next steps are choosing a coverage price and length of coverage. Coverage prices range from 70 to 100 percent of the expected ending value. You then match the length of insurance coverage with the time of year you market cattle. The length of insurance coverage available ranges from 13 to 52 weeks. Note that not all weeks are always offered. You may sell the cattle up to 60 days prior to the selected end date and still be compliant. Policies will be terminated, and premiums would still be due if the animals are sold more than 60 days prior to the end date.
Selecting the end weight of cattle at the policy end date is next. There are two weight ranges to choose from: Weight 1 class is 100-599 pounds and Weight 2 class is 600-1,000 pounds.
You also want to determine how many head of cattle to insure. You can insure up to 12,000 head of feeder cattle per specific coverage endorsement. The annual limit per producer is 25,000 head, which runs annually for July 1 to June 30. You are not required to insure all animals in your operation.
Indemnities are paid if the actual ending value is less than the coverage price. The actual end value is based on the weighted average price from the Chicago Mercantile Exchange Group Feeder Cattle Index. The actual end value is posted at the end of the insurance period on the Risk Management Agency’s (RMA) website. If the actual end value is higher than the coverage price, then no indemnity is paid and the premium will be due. The premium billing date is the first day of the following month after the elected end date.
One of the biggest benefits of LRP is that premiums are due at the end of the coverage period. This differs from other marketing options that may require payment up front.
The RMA website is a great resource to help you make your endorsement decisions. The website features LRP coverage prices, rates, and actual ending values, which are posted daily around 3:30 pm CST. After they are posted for the day and you decide to select an endorsement, we have until 8:25 am CST the following morning to submit the Specific Coverage Endorsement.
LRP is an insurance option you should consider for your operation with today’s higher market prices. Contact your local AgCountry insurance specialist for more LRP details.
