Livestock Risk Protection (LRP)
Safeguarding Your Livestock Against Market Price Decline
Livestock Risk Protection (LRP) is a valuable tool for livestock producers seeking protection from market price fluctuations. Approved by the Federal Crop Insurance Corporation (FCIC) and overseen by the USDA’s Risk Management Agency (RMA), LRP offers protection against unexpected drops in market prices for your livestock, including feeder cattle, fed cattle, and swine (including unborn livestock). With LRP, you can ensure your livestock’s value is protected as you prepare them for market.
What Is Livestock Risk Protection (LRP)?
LRP is a federally approved and privately developed insurance product designed to protect producers from price declines in the market value of their livestock. It is available through private insurance providers and offers flexible options to fit the needs of livestock producers.
LRP helps mitigate the financial impact of market price drops during a specified insurance period. If the market price at the end of the insurance period is lower than the expected price at the effective date of the policy, LRP compensates you for the difference, ensuring you don’t suffer financially from unpredictable price changes.
Who Is Eligible for LRP?
To qualify for LRP, you must meet the terms and conditions outlined in the LRP insurance policy. The following livestock types are eligible for LRP coverage:
- Fed cattle
- Feeder cattle
- Swine
- Unborn livestock (Cattle & Swine)
Application Process
Continuous Policy: Once approved, your LRP policy remains in effect for each crop year, which runs from July 1 to June 30. The policy continues automatically unless canceled in writing by you or your insurance provider.
Application Submission: You can apply for LRP at any time during the crop year. However, coverage begins only when a Specific Coverage Endorsement (SCE) is submitted and accepted. The SCE specifies details such as the type of livestock, insurance period, and coverage level.
Eligibility: To establish eligibility, you must provide your Social Security Number (SSN), Employer Identification Number (EIN), and a Substantial Beneficial Interest (SBI) form that lists anyone with at least a 10% interest in your livestock operation. This information ensures compliance with policy limits and eligibility.
How LRP Works
LRP provides financial protection against a decline in market prices during the insurance period. Coverage is flexible, allowing producers to choose the level of protection that best matches the time their livestock will be ready for market.
Coverage Highlights:
- Market Price Protection: If the market actual ending value at the end of your insurance period is lower than the expected ending value, LRP compensates you for the difference, ensuring you don’t lose income due to unfavorable market conditions.
- Customizable Coverage: Producers can choose the coverage level, number of livestock, and insurance period (which generally ends within 60 days of the date the livestock is planned to be marketed or reach the target weight).
- No Coverage for Death or Loss: LRP only covers market price risk based on the Chicago Mercantile Exchange (CME) and does not cover livestock losses due to death, illness, or other causes. You may want to combine LRP with other forms of insurance for comprehensive protection.
Steps to Get LRP Coverage
Apply for Coverage: Submit your LRP application. You will need to complete and submit Form AD-1026 with your local Farm Service Agency (FSA) office. This establishes eligibility but does not attach coverage until an SCE is filed.
Submit a Specific Coverage Endorsement (SCE): The SCE outlines details about the livestock you want to insure, including the class, number of head, target weight, and coverage level. Coverage begins only when the SCE is submitted during an active sales period and accepted.
Sales Periods: LRP sales periods are short windows of time during which coverage prices and rates are posted on the USDA RMA’s website in the afternoon shortly after the CME market close. Sales typically close at 8:25 AM Central Time the following day and will not be available if the Chicago Mercantile Exchange (CME) market is closed for a holiday.
Livestock Risk Protection Policy Options
LRP offers flexibility in how you structure your coverage, depending on your needs.
Coverage and Limitations:
- Ownership Interest: LRP covers livestock you own or have an ownership interest in during the insurance period. This includes unborn swine, provided you own the pregnant sows or hold a percentage interest in the breeding operation.
- Number of Livestock: You can insure as many head of livestock as you’re eligible for, but you cannot insure the same livestock under multiple endorsements at the same time.
- Marketable Livestock: To receive an indemnity, the livestock must be marketable by the end of the insurance period, and you must provide proof of ownership or sale.
What Does LRP Cover?
LRP provides protection against declining market prices for your livestock during the insurance period. Here’s a breakdown of what’s covered:
- Market Price Decline: LRP compensates you if the market price determined at the end date of the insurance period falls below the expected ending value.
- Fed and Feeder Cattle, Swine: Coverage includes market price declines for fed cattle, feeder cattle, and swine. You can also insure unborn livestock, provided you have ownership interest in the breeding operation.
- LRP is offered in all counties in all states
What’s Not Covered:
- Death or Illness: LRP does not cover losses due to the death or illness of livestock.
- Production Risks: The policy does not protect against poor performance, disease, or other production-related issues.
Other Insurance: LRP cannot be combined with other federally reinsured livestock policies for the same livestock during the same insurance period.
Costs and Premiums
The cost of LRP coverage depends on several factors, including the number of livestock insured, the selected coverage level, and the length of the insurance period.
- Premium Billing: Premiums are billed on the first day of the month following the end of the insurance period and must be paid in full.
- Subsidies: LRP policies are subsidized by the federal government, making them more affordable for producers.
How to File a Claim
If the market actual ending value falls below your expected ending value, you may file a claim to receive an indemnity. Claims must be submitted within 60 days following the end date of your insurance period, and you’ll need to provide documents verifying ownership or sale of the livestock.
Why Choose LRP?
LRP offers a flexible and reliable way to protect your operation from market price fluctuations. It allows you to plan for future market risks while ensuring financial stability for your operation. Whether you’re raising cattle or swine, LRP gives you the peace of mind knowing that you’re protected against the uncertainties of the livestock market.
Conclusion
Livestock Risk Protection (LRP) provides coverage for producers seeking to safeguard their livestock from market price declines. With customizable coverage options, government-subsidized premiums, and flexible insurance periods, LRP is an effective way to manage the financial risks associated with livestock production.
Get started today by contacting an authorized insurance agent and submitting your LRP application. Protect your operation from the unpredictability of the market with Livestock Risk Protection.