Cattle market insurance coverage is also known as Livestock Risk Protection (LRP) insurance. LRP is a type of revenue protection that enables a producer to lock in a floor price for their livestock and be paid an indemnity if the overall market price dips below the chosen coverage price during their chosen endorsement period.
LRP insurance falls into the crop insurance category in Title XI of the Farm Bill, meaning that it is a USDA-subsidized program. The Federal Government will pay a portion of the producer's premium, making this coverage very affordable for most operations.
LRP insurance insures the livestock market prices, not the livestock itself.
One of the first steps to using an LRP insurance policy is choosing your coverage window AKA your endorsement period. Policies can last anywhere between 13-52 weeks. During this time, you are covered if the livestock overall market price drops lower than your chosen floor price by the end date.
Along with an endorsement period, you also are able to lock in a floor price based on the USDA’s Agricultural Market Service Expected Ending Price, which is updated almost daily. If the market price (based on the futures and CME feeder index) dips below your chosen floor price during your coverage period, the difference is covered by an indemnity payment through your LRP policy.
Your portion of your LRP insurance policy premium is tax-deductible and is not due until 30 days after the end of your endorsement period. However, if your indemnity covers the premium balance in full, you may not have to pay out of pocket at all, and any leftover indemnity will go straight to you to use however you choose.
Producers insured with LRP are able to sell their livestock within 60 days of the end of their endorsement period, but they are not required to sell livestock insured. If a producer retains ownership of their livestock during their coverage period, they can still receive an indemnity payment if the overall market has declined. Likewise, a producer would also receive an indemnity if the market prices dip below their floor price and they do sell their livestock during an endorsement period.
Whether or not you actually sell your stock, and for what price, does not matter. Your receiving of an indemnity from your LRP insurance is only dependent on the overall USDA’s Agricultural Market Service Expected Ending Price dropping below your floor price during your coverage period.
With an LRP insurance policy, your upside potential is unlimited. Although you are covered if the market dips below your floor price, you are not restricted if the market price for your livestock rises above your floor price. You are able to cash in on the higher market price and still retain a profit once you pay off the balance of your premium.
Again, you are able to retain ownership of your stock if the overall market price rises above your floor price, but your premium would still be due 30 days after the end of your endorsement period.
At Redd Summit we believe that even though the cattle market is volatile, your profits shouldn’t be.
Through Redd Summit, you can secure LRP insurance for your:
- Fed and feeder cattle
- Unborn calves
- And, there is no minimum number of head required
You’ll also have the support of our industry experts, who closely monitor market conditions, to determine when it is the best time to enact your policy and lock in your floor price. Then, when your policy ends, either you are paid an indemnity or a premium is due. In both scenarios, your operation remains profitable because you are protected from cattle market declines.
Give us a call or schedule a meeting with an agent to learn more about LRP through our insurance experts.
Livestock Risk Protection Insurance covers the cattle market prices, not the cattle themselves. However, there are other insurance products that cover mortality as well.
With LRP insurance, ranchers can lock in a “floor price” for their livestock, and receive an indemnity payment if the overall market drops below their floor price during their endorsement period.
While there are some assistance programs intended to protect ranchers from cattle mortality related to catastrophic events, LRP insurance insures the livestock prices, not the cattle themselves.
LRP insurance protects your operation from drops in the cattle market by enabling you to lock in a floor price, and be paid an indemnity on the difference if the overall market declines during your coverage period.
The premium on your LRP varies depending on your operation. However, because of the USDA subsidy, the Federal Government will pay a portion of your premium. Additionally, if your indemnity payment satisfies the balance of your premium in full, any additional payment goes straight to you with nothing out of your pocket.
LRP insurance does not cover cattle deaths from nitrate poisoning. LRP insurance covers cattle market prices, not the livestock itself.
LRP insurance is a great risk management tool for ranches of operations large and small. Ranchers with LRP can maintain their profitability regardless of declines in the cattle market.
Livestock Risk Protection insurance.
Cattle ranchers can mitigate their risks with both LRP and PRF insurance.
Livestock Risk Protection (LRP) insurance is a USDA subsidized insurance program that ranchers use to stay profitable during cattle market declines. Insured producers lock in a floor price for their cattle, and are paid an indemnity on the difference if the market dips below their floor price during their endorsement period.
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