If there is anything the tight margins and price swings of 2020 and 2021 has taught producers, it’s how important price protection can be in an operation. With many analysts calling for at least a temporary upward swing in livestock and some commodity prices, this could be an ideal time to lock in some protection.
Livestock Risk Protection
Livestock Risk Protection (LRP) insurance allows producers to lock in a base price and protect themselves against declining livestock markets. Coverage levels range from 70%-100% with weight options to fit any operation: Cattle before they are born to 1,400 lbs., Swine before they are born to 225 lean lbs., Lambs from birth to 150 lbs. The last few years have brought about multiple changes to the LRP policy including increased head limits, higher subsidy levels (see chart), and changes to the billing date that coincide with the selling of insured livestock. With multiple insurance options and increased government subsidies, if you haven’t looked at LRP in the last year, now is the time.
LRP Subsidy Changes
| Coverage Level Span | Previous Subsidy Rate | Updated Rate in 2020 | Current Subsidy Rate in 2021 |
|---|---|---|---|
| 70% - 79.99% | 13% | 35% | 55% |
| 80% - 84.99% | 13% | 35% | 50% |
| 85% - 89.00% | 13% | 35% | 45% |
| 90% - 94.99% | 13% | 30% | 40% |
| 95% - 100% | 13% | 25% | 35% |
Dairy Revenue Protection
Dairy Revenue Protection (DRP) insures against unexpected declines in milk revenue as a result of a decline in milk prices, a decline in milk production or a combination of both. Producers can choose to price their milk based off class pricing (class III and class IV milk prices) or component pricing (combination of butterfat, protein, nonfat and other milk solids) in order to customize the policy to their operation. With coverage levels ranging from 80% -95% and multiple quarter options, DRP can be customized to fit every operation, from large to small.
