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 Livestock Risk Protection (LRP)
*This information was taken directly from Rain & Hail's website.

LRP provides protection against declining livestock prices if the price, as specified in the policy, drops below the producer’s selected coverage price. LRP covers a decline in livestock prices. Producers in all covered states with an ownership share in eligible livestock. Coverage prices range from 70-100% of daily livestock prices for swine, fed cattle, and feeder cattle; and 80-95% in 5% increments for lamb. LRP is priced and available for sale continuously throughout the year.

Determining Coverage

Determine the number of livestock to be marketed and the target weight. Multiply the number of head times the target weight, times the coverage price, times the insured share. Livestock can be insured for various different weekly increments (see chart below for details).

Loss payments

  • Multiply the number of head by the cwt target weight
  • Subtract the actual ending value from the coverage price (loss payment due if positive)
  • Multiply the target weight times the difference between the actual ending value and the coverage price
  • Multiply by the insured share
  • The price at which livestock is sold does not affect the loss payment

Benefits of LRP

  • Guaranteed Price
  • No Bid / Ask spread
  • Limited Basis Risk Coverage
  • Aggregate cash price used better reflects actual price received
  • Any number of head can be covered (up to limits)
  • Numerous endorsement period options
  • Producer selects the period that fits their risk management plan
  • Wider range of Target Weights than CME
  • LRP is an insurance policy
  • May be viewed more favorably by lenders than hedging or speculating (derivative products)

How It Works

Swine
Assumptions: Producer expects to market 1000 head of 2.70 cwt hogs and selects a coverage price of $47.00

Coverage

1,000 hogs

x

2.00 cwt*

x

$47.00

=

$94,000

Actual Ending Value

1,000 hogs

x

2.00 cwt

x

$46.00

=

$92,000

Loss Payment

Assume 100% Ownership

 

 

$2,000

*Live weight is converted to lean weight using a factor of 0.74 (2.70 x 0.74 = 2.00)

Cattle      
Assumptions: Producer expects to market 1000 head of 11 cwt cattle and selects a coverage price of $66.24

Coverage 1,000 head
x
11 cwt
x
$66.24
=
$728,640
Actual Ending Value 1,000 head
x
11 cwt
x
$65.21
=
$717,310
Loss Payment Assume 100% Ownership  
 
$11,330

Lamb
Assumptions: Producer expects to market 50 head of 1.30 cwt lamb and selects a coverage price of $85.50.

Coverage

50 lamb

x

1.30 cwt

x

$85.50

=

$5,558

Actual Ending Value

50 lamb

x

1.30 cwt

x

$80.00

=

$5,200

Loss Payment

Assume 100% Ownership

 

 

$358

 

Eligibility

  Swine Fed Cattle Feeder Cattle Lamb
Market Marketed for slaughter
Marketed for slaughter
Ready to put in feedlot for fattening
Marketed for slaughter
Insurable Livestock Swine that producers expect to have and to market within a range of 1.5 to 2.25 lean cwt target weight (203-304 live cwt) Steers and heifers that producers expect to grade select or higher,yield grade of 1 to 3,and to market at 10 to 14 cwt (live weight).

Steers (<6.0 cwt for steers and bulls, 6.0-9.0 cwt for steers only)
Heifers (<6.0 cwt and 6.0-9.0 cwt)
Dairy Cattle (<6.0 for heifers, steers and bulls, and 6.0-9.0 cwt for heifers and steers)
Brahman breeds (<6.0 for heifers, steers and bulls and 6.0-9.0 cwt for heifers and steers)

Lamb that producers expect to have and to market within a range of 0.5 and 1.5 cwt target weight at the end of the insurance period.
Availability AL, AZ, AR, CA, CO, FL, GA, IA, ID, IL, IN, KS, KY, LA,
MI, MN, MO, MS, MT, NC, ND, NE, NM, NV, OH, OK,
OR, SC, SD, TN, TX, UT, VA, WA, WI, WV, and WY**
AL, AZ, AR, CA, CO, FL, GA, IA, ID, IL, IN, KS,KY, LA,
MI, MN, MO, MS, MT, NC, ND, NE, NM, NV, OH, OK,
OR, SC, SD, TN, TX, UT, VA, WI, WV, and WY**
AL, AZ, AR, CA, CO, FL, GA, IA, ID, IL, IN, KS,KY, LA,
MI, MN, MO, MS, MT, NC, ND, NE, NM, NV, OH, OK,
OR, SC, SD, TN, TX, UT, VA, WA, WI, WV, and WY**
AZ, CA, CO, ID, IN, IL, IA, KS, MI, MN, MO, MT, NE, NM, NV, ND, OH, OK, OR, PA, SD, TX, UT, VA, WV, WI, and WY**
Maximum Head Insurable 10,000 per Specific Coverage Endorsement 32,000 per Crop Year

2,000 per Specific Coverage Endorsement

4,000 per Crop Year

1,000 per Specific Coverage Endorsement

2,000 per Crop Year

7,000 per Specific Coverage
Endorsement 28,000 per Crop Year
Insurance Period 13, 17, 21 or 26 weeks 13, 17, 21, 26, 30, 34, 39, 43, 47 or 52 weeks
13, 17, 21, 26, 30, 34, 39, 43, 47 or 52 weeks
13, 26, or 39 weeks
Coverage Level 70-100% 70-100%
70-100%
80-95% in 5% increments
Actual Ending Value Agricultural Marketing Service (AMS) Negotiated and Swine or Pork Market Formula Categories Agricultural Marketing Service (AMS) 5 Area Weekly Weighted Average Direct Slaughter Cattle - Live Basis Sales, Steers, “35-65% Choice”
Chicago Mercantile Exchange (CME) Feeder Cattle Reported Index multiplied by the Price Adjustment Factor (by type and weight)
Agricultural Marketing Service (AMS) in the “National Weekly Slaughter Sheep Review”.
 

NOTE: The Livestock Price Reinsurance Agreement allows for Private Reinsured Companies to have limited yearly capacity available on a first come, first served basis. The products and product topic summarized in this outline are not all-encompassing and do not substitute for the policy provisions. See the policy provisions and/or contact an agent today for a complete description of available coverages and their terms and conditions.

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