USDA’s Livestock Risk Protection Insurance for Feeder Cattle: Protecting Livestock Producers
Written by: Brandon Willis
Unpredictable market conditions and price fluctuations can pose significant risks to livestock
producers. To help mitigate these risks, the United States Department of Agriculture (USDA)
offers the Livestock Risk Protection (LRP) insurance program for feeder cattle. Let’s explore
what this program is, how it works, and what it covers.
What is Livestock Risk Protection (LRP) Insurance for Feeder Cattle?
Livestock Risk Protection (LRP) insurance is a federal crop insurance program administered by
the USDA. LRP insurance is designed to protect livestock producers against a decline in feeder
cattle prices. By setting a floor price and purchasing coverage, farmers can know that even if
prices drop, they have some financial protection.
How does Livestock Risk Protection (LRP) Insurance for Feeder Cattle work?
Below are key aspects of how LRP insurance for feeder cattle works:
1. Coverage Length: Livestock producers interested in participating in LRP insurance for
feeder cattle can select coverage lengths that best suit their needs. LRP offers coverages
typically ranging from 13 to 52 weeks. Producers choose a policy that coincides with
when they plan to market their livestock so LRP payments align closely with the market
price they receive.
2. Coverage Price: The coverage price is a key component of LRP insurance and something
a producer chooses when they sign up for LRP coverage. The coverage price is based on
expected market prices for feeder cattle. It is the price below which the actual market
price of feeder cattle must fall for an insurance indemnity (payment) to be triggered. It
acts as a floor price that provides a level of protection against price declines.
3. Premium Payment: Producers are required to pay a premium to participate in LRP. The
premium depends on factors such as the coverage level, coverage price, and the
number of head of cattle being insured. The premium is not due until the month after
the LRP contract ends.
4. Indemnity Payment: If the actual market price of feeder cattle, as determined by the
Feeder Cattle Index, falls below the coverage price at the conclusion of the insurance
period, an indemnity payment is triggered. The indemnity payment is designed to
compensate producers for the difference between the coverage price and the actual
market price, helping to offset financial losses resulting from the price decline.
What does Livestock Risk Protection (LRP) Insurance for Feeder Cattle cover?
LRP insurance for feeder cattle covers the decline in feeder cattle prices. Producers can protect
themselves against unexpected declines in feeder cattle prices by purchasing insurance
coverage. LRP insurance provides financial stability and support to livestock producers, enabling
them to manage risks and ensure the continuity of their operations.
LRP gives farmers the flexibility to sell their livestock when market conditions are favorable
while still having the security of insurance if prices decrease. It helps protect them from
financial losses if the prices of their livestock go down unexpectedly.
