We’ll let you in on one of the best kept secrets of the crop insurance industry – Livestock Risk Protection (LRP). This federally sponsored and subsidized program is designed to protect your herd (and your profits) against declines in market prices.

Unique challenges of livestock production call for a unique solution. Livestock Risk Protection insurance coverage for cattle, unborn calves, and more serves that very purpose.

Ready to learn if LRP is the right coverage for you? Explore three things you need to know about Livestock Risk Protection.

LRP is insurance for your livestock operation, plain and simple. It is administered by the United States Department of Agriculture Risk Management Association (USDA RMA) to protect livestock producers should the market decrease due to factors such as input volatility, herd expansion, or cyclically lower prices.

LRP coverage does not protect against mortality, condemnation, physical damage, or disease. However, it does offer livestock producers the ability to maximize profits on the sale of livestock by allowing them to wait to market until cattle and swine reach a target weight and by providing payments if regional and national cash price indexes fall below a floor price.

Flexibility is one of the core benefits of LRP, beginning with the livestock themselves. In fact, you can purchase coverage for:

As an added benefit to producers, the 2022 LRP update increased the maximum number of head able to be insured in a single crop year. This change further reduces the need for producers to purchase a futures contract or options on futures.

Learn the differences between LRP, futures, and options. The unique benefits of LRP insurance make it an attractive solution for livestock producers.

Livestock Risk Protection coverage can be purchased any time of the year through RMA-approved insurance agents.

As you apply, you’ll select a target weight based on a range that is wider than the Chicago Mercantile Exchange. Target weight is defined differently for cattle and swine. Feeder cattle are paid based on live weight while swine are paid on lean weight. LRP feeder cattle coverage takes into account basis risk and livestock market prices, ensuring flexibility for producers.

Your application will consist of choosing a coverage price and coverage level that ranges from 70 to 100 percent of an expected ending value.

You’ll also set a coverage endorsement period ranging from 13 to 52 weeks. This period is established as close as possible to the date that livestock will be sold. The end of the endorsement period is critical for determining the price at the end, and any potential indemnity is paid to cover price declines.

Premium payments depend upon a variety of factors including coverage level and price, endorsement period, and target weight but are due only at the end of the insurance period. The USDA subsidizes these premiums from 20 to 35 percent, based on coverage level. These premiums are subsidized as part of the federal crop insurance program, covering the producer premium and helping producers lock in price protection.

At the end of that period, if the market price falls below the established coverage price, you may receive an indemnity payment to cover the difference. Producers benefit from price increases but are paid an indemnity if the actual ending price falls below the expected ending price.

In the event of a loss, required documentation must verify:

If livestock are not sold at the end of the period but a loss occurs, you must provide proof of ownership and a certified, signed statement, attesting that covered livestock were not sold before the end date but were marketable at that time.

It is also important to note that LRP is a continuous policy and will automatically renew if not canceled in writing by June 30.

LRP has offered these customized benefits for decades. However, the 2022 update to Livestock Risk Protection for cattle and swine offers additional advantages to producers.

The RMA defines unborn feeder cattle as livestock not born on the coverage effective date that are expected to be marketed before the end date.

Livestock must be born prior to the end date and the number of cows must be able to produce the number of unborn calves. Cow-calf producers should have ownership of the pregnant cows, as established by the following examples of documentation:

Unborn swine have special documentation requirements in the instance of a loss. When documenting the sale, the insured may not be the seller but might be the buyer instead.

The most recent update to Livestock Risk Protection for cattle issued by the RMA allows for up to 12,000 head per endorsement and 25,000 head per crop year for fed and feeder cattle. The same modification allows for coverage for up to 70,000 head of swine per endorsement and 750,000 head per crop year.

The recent updates and variety of coverage customizations can make it tricky to navigate Livestock Risk Protection coverage alone. Fortunately, the High Plains Farm Credit team has a Certified Livestock Insurance Agent on staff to assist you along the way. Contact us today!