Livestock Risk Protection

This past week my family and I attended a conference on the Livestock Risk Protection(LRP) program. It is a program that protects you from price risk  by guaranteeing you a certain price for your feeder cattle under 600 pounds and over 600 pounds . With the extreme high prices of cattle at the moment my family decided it would be best to enter into this program to protect us from a decline in price. The first step is to decide how many head of cattle you want to lock in and how far ahead you want to lock these cattle in. The insurance periods range from 13 to 52 weeks but you must have the cattle in order to lock in your price. Once you decide the length of the period there is a chart that provides you with a list of prices and different coverage options. After this is determined you pay a premium according to the coverage level you selected and you can subtract this number from your guaranteed coverage price to get your margin. According to The Stock Exchange, LRP gives producers two potential advantages:

• the ability to cover a small or an odd number of head as opposed to covering 50,000 pounds on the futures market
• it effectively gives the producer a price-floor basis for any class of cattle 

LRP has become a fairly popular program for beef producers in the Midwest because of recent fluctuations in the market. I believe this program is similar to what crop producers have with crop insurance and can be beneficial to not only backgrounding operations but to cow-calf producers as well.