By Matthew Diersen, Risk and Business Management Specialist, Ness School of Management & Economics, South Dakota State University
Feeder cattle have been under seasonal price pressure, similar to last year. Thus, locking in cattle prices or spending money for insurance may not be a high priority at this time. However, it is never a bad time to plan nor to look for cost-effective ways to manage risk. Livestock Risk Protection (LRP), price coverage sold by insurance agents, is similar to the purchase of put options on cattle futures contracts. LRP is administered by the Risk Management Agency (RMA) with a federally-subsidized premium that is set to increase soon.
Interest in and usage of LRP has fluctuated since first being offered in the early 2000s. Nationally, coverage with the feeder cattle endorsement peaked at over 300,000 head in crop year 2014. Such a total was still less than 1% of the U.S.… Continue reading