Livestock Risk Protection Insurance: Fed Cattle Logan Haviland and Ryan Feuz
What are the specifics about fed cattle insurance?
Within the Livestock Risk Protection (LRP) insurance program, fed cattle are not separated by gender. Fed cattle typically range from 1,000 to 1,600 pounds on average, with the marketing month for slaughter varying based on operational needs, demand, and other market conditions. Fed cattle specific coverage endorsements (SCE) for LRP insurance may be purchased with an annual limit of 25,000 head for an individual producer per year, with a maximum per SCE of 12,000 head (Risk Management Agency [RMA], 2022). While that is the maximum per contract, producers can purchase LRP insurance contracts for as little as one head. Find general information about how the LRP insurance program works in the companion Utah State University Extension fact sheet titled “Livestock Risk Protection Insurance FAQ.”
What are the “optimal” coverage contracts?
LRP contracts that return an indemnity to a producer greater than the subsidized premium cost could be defined as having a positive net return. Those combinations of coverage length and level that have historically provided the highest probability of a positive net return while also providing the highest average net return could be defined as “optimal” contracts (Haviland & Feuz, 2022). Table 1 summarizes these optimal contracts for each marketing month (the month in which a producer intends to market livestock). LRP coverage lengths of 13, 17, 21, 26, and 30 weeks are shown, with coverage levels of 85%–100% split into 5 groups: • • • • •
1 = (85.00% - 89.99%). 2 = (90.00% - 92.49%). 3 = (92.50% - 94.99%). 4 = (95.00% - 97.49%). 5 = (97.50% - 100.00%).
The optimal contracts, already defined, are those cells within Table 1 shaded in gray and marked with an “X.” An online tool, Livestock Risk Protection (LRP) Support Tool (https://farmanalysis.usu.edu/lrp/), is available to help producers visualize which contracts are optimal based on their marketing month and specific commodity. The optimal contracts identified within Table 1 may not correspond directly to those identified using the LRP online decision tool. This discrepancy can arise as the online tool is continuously updated as new LRP data becomes available.
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