Livestock Risk Protection Insurance FAQ Logan Haviland and Ryan Feuz
What is Livestock Risk Protection insurance?
Livestock Risk Protection (LRP) insurance is a partially subsidized livestock insurance provided by the Risk Management Agency (RMA) of the United States Department of Agriculture (USDA) that protects producers against unexpected price declines. LRP insurance allows producers to lock in a guaranteed minimum price for their livestock, providing a level of financial certainty in an unpredictable market (RMA, 2022).
How does LRP work?
When using LRP, producers initially choose an insurance policy's termination date that aligns closely with the anticipated marketing date for their livestock. Additionally, they select the desired coverage level of the expected ending value, effectively determining the coverage price for their policy. In the event that the price falls below the insured coverage price on the policy's termination date, the producer would receive an indemnity payment to compensate for the shortfall. The prices for various insurable commodities are based on indexes of national prices (not local prices), and thus, some level of basis risk is expected when using this product to establish a price floor.
How can producers apply for LRP coverage?
Producers can apply for LRP coverage by working with an approved livestock insurance agent. Producers begin by filling out an application that establishes eligibility. After application approval, producers submit a specific coverage endorsement (SCE) with their insurance agent when they intend to purchase a contract and lock in a price. The SCE includes information on the weight range, coverage length, and coverage level selected by the producer, as well as the expected market price and premium rate for the coverage period. Find licensed livestock insurance agents using the USDA Agent Locator tool (https://publicrma.fpac.usda.gov/apps/AgentLocator/#!/#%2F).
What options do producers select? Commodity
The following commodities are insurable: • Feeder cattle, including steers, heifers, predominantly Brahman cattle, predominantly dairy cattle, unborn steers and heifers, unborn Brahman, and unborn dairy. • Fed cattle. • Swine, including unborn swine.
Coverage length
The coverage length is the duration of the insurance period, ranging from 13 to 52 weeks, depending on the commodity insured. Producers can choose the coverage length that best meets their needs and matches the length of time they plan to hold their livestock. 1