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 About LRP
Livestock Risk Protection Insurance (LRP) is an insurance program through USDA Risk Management Agency (RMA) that provides single-peril price protection for livestock producers selling feeder cattle, fed cattle, or swine.
The insurance product pays an indemnity to insured producers if a national average cash price is lower than their insured coverage price level when the coverage expires. As a single-peril product, LRP only insures against price level declines. No other cause of loss is insured, such as death or poor performance of the livestock.
While LRP protects a selling price floor for livestock, it does not guarantee insured producers a cash price received. The program grants the right to an indemnity based on national cash market prices. Producers are still exposed to risk of changes between local cash markets where the livestock are actually sold and national cash markets against which the policy is indemnified. This difference is called LRP basis and is important for producers to consider when evaluating a potential hedge with LRP. LRP basis in some local markets like Nebraska is generally favorable to producers relative to futures basis in that there is less variability in LRP basis. Consequently, LRP basis may be more accurately predicted than futures basis using historical data.
Note: LRP has been expanded to include lamb operations. Available through
USDA-RMA, LRP for Lamb provides protection against unexpected lamb
price declines. The insurance program is currently available to
livestock producers who own lambs in any of the following 27 states:
Arizona, California, Colorado, Iowa, Idaho, Illinois, Indiana, Kansas,
Michigan, Minnesota, Missouri, Montana, Nebraska, New Mexico, Nevada,
North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota,
Texas, Utah, Virginia, West Virginia, Wisconsin, and Wyoming. For
more information about LRP for Lamb, visit USDA-RMA's website or the American Sheep Industry
Association's website.
For Dr. Tim Petry's Powerpoint slides on LRP for lamb, visit the Livestock Economics page at NDSU.
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