By William Halfman and Brenda Boetel
Feeder calf and fed cattle prices are currently high, and so are the input costs to raise them. Price volatility has increased over the past decade, and factors such as trade disruptions, and media reports of health scares can quickly cause national prices to drop. Beef producers are taking on a lot of risk. To help mitigate that price risk, beef producers can look at using Livestock Risk Protection Insurance (LRP) to protect against unforeseen price drops.
There have been several changes in the last few years to make LRP more favorable for farmers to use. Some of these changes are as follows:
- Increased subsidy levels from the original 13 percent subsidy to 35 to 55 percent depending on the percentage of the expected ending price a producer wants to insure.
- Changing the premium due date to the end of the coverage period rather than the beginning.
- Expanding the sale window from 30 days to 60 days prior to the ending coverage. Cattle can be sold up to 60 days prior to the ending coverage date without affecting coverage of the policy purchased.
- Producers may purchase coverage on animals they have a valid purchase agreement for with a fixed price but have not taken possession of as long as possession is taken 90 or more days before coverage ends. Check with your agent to make sure the purchase agreement qualifies for coverage.
- There are new categories specific for dairy producers, that offer coverage for cull cows and unborn calves (beef dairy cross, and beef calves sold within the first two weeks after birth). Details on these two categories are not addressed in this article.
Taken together, these changes have reduced out-of-pocket costs, improved cash-flow timing, and increased flexibility, making LRP more comparable to other price risk management tools.
Source : wisc.edu