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 LRP Glossary
Actual Ending Value (AEV)—The cash index price on the end date of coverage. These values are reported by USDA after the end date is reached. The AEV is compared to the Coverage Price to determine if an indemnity is due. The indexes used to determine AEV are discussed in Study Guide Chapter 3. Feeder cattle, fed cattle, and swine each use a different index to determine AEV.
Actuarial Documents—The information for the crop year, available on the RMA website, which shows the dates, coverage prices, rates, coverage levels, and other related information regarding LRP coverage.
Cost per cwt—The premium cost of LRP coverage on a per unit basis. Cost per cwt is calculated by multiplying Coverage Price by the Rate for that coverage level. Cost per cwt can be incorporated into breakeven price level calculations as discussed in Study Guide Chapter 1.
Coverage Level—The percent of EEV that is the coverage provided by the policy.
Coverage Price—The actual level of price protection covered by LRP ranging from 70% to 100% of EEV. The Coverage Price is the selling price insured, or floor price. If the cash market index (defined below) is lower than the Coverage Price on the insurance end date, an indemnity is paid to make up the difference.
Crop Year—The twelve month period, beginning July 1 and ending on the following June 30 and designated by the calendar year in which the period ends. The crop year in which the effective date falls will designate the crop year for an SCE.
Effective Date—The date associated with the beginning of insurance for an SCE. This is the date coverage begins. The effective date is also the date that the rates were published on the RMA website.
End Date—The date the insurance coverage expires. The end date is the day on which an indemnity is determined. This is the only date the insurance coverage has value because the coverage cannot be lifted or offset prior to the end date. End date is found by adding the endorsement length to the effective date (the date coverage is purchased).
Expected Ending Value (EEV)—The expected national or regional cash index price for a future date. It depends on expected future price levels and on the endorsement end dates. EEV is the price level that USDA estimates the cash price index will be on the ending date of the LRP contract and is the basis for the LRP insurance coverage level.
Indemnity—The amount paid by the insurance policy if AEV is less than the Coverage Price. The indemnity is calculated by subtracting AEV from the Coverage Price.
Insured Value—The total dollar amount of coverage calculated by multiplying the number of livestock insured on an SCE by the target weight, by the Coverage Price, and by the insured share.
LRP Basis—The difference between a producer's local cash selling price and the AEV for LRP insurance.
Producer Premium—Total premium minus the premium subsidy paid by FCIC.
Rate—The price of coverage. The rate is a percentage of the value of insured production, and it is used in calculating the premium cost of the price protection. USDA adjusts EEV, Coverage Prices, and rates each day LRP is available.
Sales Period—The period during which an SCE may be purchased beginning when prices and rates are published by RMA and ending at 9 am CST the following business day. Sales are available Saturday mornings but are not available Monday mornings, Sundays, or any date that would have an effective date of a Federal or market holiday.
Specific Coverage Endorsement (SCE)—An endorsement to the LRP policy necessary to provide coverage that includes information about the livestock insured. This is how coverage is actually purchased.
Substantial Beneficial Interest (SBI)—An interest held by any person of at least 10 percent in the applicant or insured.
Target Weight—The anticipated weight of the livestock at the ending period as specified in the SCE.
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