![]() It is calculated based on the EEV (i.e., $150/cwt) and the coverage level (70-100%), which is used to determine the subsidy rate. The producer premium cost per hundredweight can be found at this link. It is approximately the same cost as a put option in the feeder cattle futures market (Burdine 2022). The premium cost rate is set by RMA based on the endorsement type and coverage level. For example, if a producer selects a 97% coverage price level, then RMA will subsidize 35% of the premium cost. Recent increases in subsidization have made the program more cost effective. Table 2 shows the share of the premium that RMA will subsidize based on the selected coverage level. However, it is important to remember that these premiums are subsidized. As with any type of insurance, the higher the coverage level, the higher the cost of the insurance (premium). For example, if the August FC futures price is $150/cwt and the coverage level is 97%, then the coverage price level is approximately $145.50/cwt. The coverage price level, which is the price that is insured, represents a percentage of the EEV. In the above example, the EEV is very close to the price of the August FC futures contract on the date the endorsement is purchased. The EEV is tied to the price of the Chicago Mercantile Exchange (CME) feeder cattle (FC) futures contract maturing near (but not before) the end of the endorsement period (Griffith 2021). The coverage, or protection, that is provided by the endorsement and the price of that protection is related to the expected ending value (EEV) and the premium. For example, on January 15 in any given year, a producer with 30 steers that are projected to weigh 650 lbs and be sold in about 5 months would purchase a 21-week endorsement for the steers cattle type, and the heavy (Type 2) weight type. The appropriate endorsement would be determined by the number of head needing to be insured, the time period until marketing of the cattle, the cattle type, and their weight. Table 1 shows various types of LRP-Feeder Cattle endorsement coverage options currently available for cattle producers. Once this application is approved, the producer would be eligible to purchase an endorsement (Griffith 2021). Any person who owns livestock or a share in livestock may purchase LRP coverage endorsement through an RMA approved agent ( ).To purchase an endorsement a producer would need to go to an approved agent and start by filling out an application, which is a one-time form. More information on conservation compliance is available from FSA ( ). It is important to note, however, that subsidization of the premium is only available for producers who are conservation compliant according to USDA Farm Service Agency (FSA) standards. While this insurance product has been available since 2002, recent increases in premium subsidies have made it more attractive for cattle producers. This study focuses on LRP for Feeder Cattle. ![]() This insurance is currently available for feeder cattle, fed cattle, swine, and lambs (Livestock Risk Protection Feeder Cattle Fact Sheet, 2021). As a single-peril insurance, it does not protect against any risk (i.e., mortality, disease, disaster) other than price decrease. ![]() Created in 2002, this program protects against price risk in livestock operations. Livestock Risk Protection (LRP) is a single-peril insurance program of the USDA Risk Management Agency (RMA).
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