Cattle producers weigh Livestock Risk Protection coverage
As cattle prices continue to fluctuate and weather events impact feed availability, more livestock producers are turning to Livestock Risk Protection insurance.
The Livestock Risk Protection insurance plan is a federally subsidized tool created to protect farmers and ranchers against declining markets. Administered by the U.S. Department of Agriculture (USDA) Risk Management Agency, LRP allows producers to choose from a range of coverage levels and insurance periods that align with when their cattle are typically marketed at finishing weight.
Karter Castleberry, a cattle producer in Southwest Arkansas, explained that his decision to sell calves throughout the year is often based on market prices, but with LRP, that stress has gone away.
“LRP has allowed me to know how much money I am guaranteed for next year,” said Castleberry. “This helps me decide what I need and don’t need throughout the year.”
LRP acts as a price insurance for cattle producers. Producers select a coverage price and an insurance period – usually 13 to 52 weeks – lining up with their expected sale date. If the national fed cattle price at the end of that period falls below the coverage price, producers may receive an indemnity payment.
Unlike traditional futures contracts, LRP can be purchased through approved insurance agents and is designed to be accessible to more farmers and ranchers. Coverage is available for both feeder cattle and fed cattle, offering flexibility depending on the type of operation.
“The reason I did it was, to me, the premium wasn’t that expensive considering the risk you’re taking out of the market,” said Castleberry.
For example, if a producer insures cattle at $180 per hundred-weight and the market price drops to $170, the program will pay $10 per hundred-weight on covered head. While it doesn’t guarantee profit, LRP helps producers protect their bottom line during unpredictable market swings.
“What I like best about LRP is you know what the policy cost is up front, and you can weigh your options and then decide to lock in those prices,” said Rex Herring, a Sevier County extension agent.
The USDA’s Risk Management Agency has also made changes in recent years that make LRP more accessible, especially for small and mid-sized operations. Higher premium subsidies, increased head limits and more flexible coverage periods have helped drive a steady rise in enrollment in recent years, according to the agency’s summary of business data.
“I believe LRPs have played a significant role in getting the cattle market to where it is today,” said Darron Schoen, USDA-approved livestock and crop insurance agent based in Missouri.
Producers interested in learning more about LRP insurance can contact a USDA-approved livestock insurance agent or visit the USDA Risk Management Agency website at rma.usda.gov for more information.
