AgDM newsletter article, October 2007
by William Edwards, extension economist, 515-294-6161, email@example.com
Lamb producers and feeders in Iowa and 26 other states can now manage the risk of declining prices for fed lambs with an insurance product known as Livestock Risk Protection (LRP).
LRP has been available for cattle and hog producers for several years. Lamb-LRP is very similar to the cattle and hog programs. An application can be filed with any crop insurance agent authorized to sell LRP coverage. This allows lamb feeders to purchase a “specific coverage endorsement” any time they have a group of lambs that will go to market. Coverage can be purchased for projected marketing dates 13, 26 or 39 weeks in the future.
Each Friday a projected market price, called the “expected ending value” is posted on the Risk Management Agency (RMA) Website (under Coverage Prices, Rates and Actual Ending Values ) for each feeding period. Coverage can be purchased for a price equal to 80, 85, 90 or 95 percent of the expected ending value, for any number of lambs (up to 7,000 head) and target selling weight. Premiums are listed on the RMA Website, and are subsidized 13 percent by the USDA. Coverage can be purchased Monday mornings from 10 a.m. to 7 p.m. Central time.
At the end of the coverage period the actual ending value of the lambs is calculated based on the insured number and weight, and the current price of slaughter lambs as reported by the Agricultural Marketing Service (AMS) of the USDA. If the ending value of the lambs is less than the revenue guarantee that was purchased, the policy holder will be paid an indemnity equal to the difference.
More detailed explanations of Lamb-LRP, with examples, are available in Briefing Paper No. 83 from the Agricultural Marketing Center at Montana State University, can be found at: http://www.ampc.montana.edu/briefings/briefing83.pdf, or Ag Decision Maker Information File Risk Management Tool for Sheep Producers.
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