Answering Common Questions About Livestock Risk Protection (LRP)
Livestock Risk Protection (LRP) allows cattle and swine producers to protect against declining market prices and ensure their peace of mind. In the event that prices fall, livestock are still covered and allow the producer to realize the upside on the cash market.
There are a number of different coverage levels and insurance periods offered to match the time your livestock would normally be marketed.
At the end of the insurance period, if the actual ending value is below the coverage price, an indemnity will be paid for the difference.
Join Mike Fanning, Ph.D., PAS (Head of Livestock Insurance, FBN® Crop Insurance) and Roger Givens (FBN Crop Insurance Agent, Oklahoma) as they answer some common questions about LRP in this webinar.
What you’ll learn
What is LRP (00:27)
How LRP differs between fed cattle and feeder cattle (01:32)
How the application process works (02:25)
Important applications deadlines to be aware of (03:19)
Coverage periods (03:50)
How an indemnity payment is calculated (04:47)
What sets FBN’s coverage apart (05:47)
Let FBN help find a smart, simple, and personalized plan for you. We use data to ensure you have the right insurance to fit your farm’s needs. So even if it's a second opinion, let's line up what you need from this critical risk-management tool.
Call (877) 576-4468 to speak with an agent or visit FBN.com/insurance to learn more.
Mikaela Tierney (00:01):
Hello and welcome to the FBN Livestock Risk Protection Webinar. I'm Mikaela Tierney with FBN, and today I'm joined by the Head of FBN Livestock Insurance Mike Fanning, and FBN crop insurance agent Roger Givens. They'll spend the next few minutes answering some common questions about livestock risk protection, also known as LRP.
To begin, what is livestock risk protection?
Roger Givens (00:24):
Livestock risk protection is a tool that producers use to hedge against a loss. So we have a feeder cattle class, which is from birth to a thousand pounds and fed cattle, which is anything over a thousand, up to 1600 pounds. This tool also includes swine as well, and it sets a floor for the producer to hedge any loss against losses. We can maintain the cattle and own the cattle for the upside stay in the cash market if he chooses to.
Mike Fanning (01:03):
And the other point to bring out is that this coverage is on a per head basis and you don't have to worry about filling CME contract sizes. So it allows a little more flexibility in buying your risk management protection
Roger Givens (01:18):
Per head as well as steers heifer difference as well. So that saves the producer a little money being able to break it up into steers and heifers instead of a total weight contract.
Mikaela Tierney (01:31):
How does LRP differ between fed cattle and feeder cattle?
Mike Fanning (01:37):
So the difference between these are is on the LRP feeder cattle coverages are based on the feeder cattle futures contracts and they target cell weights can be up to a thousand pounds, whereas fed cattle, LRP Fed cattle is based on the CME live cattle futures and their cell target weights range between 1000-1600 hundred pounds.
Mike Fanning (02:03):
And then the settlement values with LRP feeder cattle is going to be based on the CME cash settled price index report for feeder cattle and for fed cattle. The actual lending values based off the USDA Ag Marketing Services five area weekly weighted average report. So those are the main differences between the two.
Mikaela Tierney (02:30):
How does the LRP application process work?
Roger Givens (02:34):
A producer would simply fill out an application, answer a few questions, send that in, we get that approved, that that sets their account to where then it's just a phone call when they find a price they like, a time they want to cover them and nothing is set as a contract. And at that point, coverage is triggered. Premium is due the month after that coverage expires, if there isn't a premium. If the price drops below their coverage, then that would trigger an indemnity.
Mikaela Tierney (03:19):
Are there any application deadlines that producers need to be aware of?
Roger Givens (03:25):
The application can be filled out throughout the year at any time. The only deadline would be if they're currently with an agent and they choose to transfer, that would need to be done by June 30th.
Mike Fanning (03:40):
Okay. And that transfer is effective for the following and subsequent years, so there's no within year transfers.
Mikaela Tierney (03:48):
Got it. All right. And then what coverage periods are available for LRP?
Roger Givens (03:53):
The coverage period runs in approximately four week intervals, starting at 13 weeks out and can run up to 52 weeks out. It depends on the offerings. But you'll have a choice of 13 weeks out to 52 and four week intervals.
Mike Fanning (04:13):
And those offerings do change daily because the coverages are based on what is traded on the respective CME futures for the day.
Roger Givens (04:26):
I might also add that coverage is not, does not, you can't put coverage onto approximately four o'clock in the afternoon after the board closes is when prices are figured and we, you can have coverage on Monday through Friday in the evenings.
Mikaela Tierney (04:47):
Got it. And then how is LRP indemnity payment calculated?
Roger Givens (04:51):
A producer will choose his coverage price at the end and the ending date of that contract. If the price is below that selected coverage price and indemnity is triggered, figured per head per pound. And then if the price is above that, then the premiums do.
Mike Fanning (05:17):
So in the indemnity calculation when there is a loss, so the actual value is less than the coverage price, they'll take that difference and multiply it by the same number of heads and that target weight that was identified by the producer when they purchased the coverage endorsement. It's very straightforward, it's strictly the number of head insured target weight times the loss on a per hundred weight basis.
Mikaela Tierney (05:46):
What sets FBN coverage apart?
Roger Givens (05:52):
We try to come in with a producer and sit down and look at his entire operation. We want to hedge against loss of cattle. We want them to be protected against the cost of gain, which might be feed can, we can discuss that with them. Pharmaceuticals, we wanna be part of the entire program on that operation. And I think that sets us apart.
Mikaela Tierney (06:21):
And can you share any customer stories from FBN Insurance customers?
Roger Givens (06:29):
What I hear mostly out there from customers is they like that option to purchase pharmaceuticals from us and to purchase coverage from us. A wide range of coverage, like I said, on the livestock, on the grain. They really seem to like the per head cost. It saves them a little money. There's not gonna be any added fees anywhere. There's not gonna be any surprises down the road. It is what it is per head and they're gonna know that is their max cost.
Mike Fanning (07:07):
Yeah, we've, we've heard some other customers too when it comes to the LRP, they prefer it to buying coverage on the board because it is on a per head basis and they're not having to meet contract sizes where they could be over-insured or underinsured. They can ensure an exact number of heads and get the exact coverage that they need. That's been the primary reason a lot of these guys have switched from going on the board to using LRP.
Mikaela Tierney (07:42):
Great. So how can someone get in touch with FBN if they're interested in learning more about LRP?
Roger Givens (07:49):
They could reach out to their local FBN agent. If they don't have one, they can search us up on the internet, give us a call. Oh, we're nationwide, covering the entire nation. So we're out there, give us a holler and we'll get in contact with you and get you taken care of.
Mikaela Tierney (08:12):
Awesome. So for more information, you can visit FBN.com/insurance or you can connect with us by phone by calling (877) 576-4468.
The purpose of the following material is to promote awareness of risk management concepts and to highlight risk management products, features, benefits and availability. This presentation does not provide full details of policy provisions or approved procedures. Producers should consult with a local agent for specific details and program requirements.
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