– Andrew P. Griffith, University of Tennessee
Recently a question was asked concerning the use of Livestock Risk Protection (LRP) insurance for managing price risk in feeder cattle. LRP is the only nationally available price risk management product available to small cattle producers that are unable to produce and market 50,000 pounds or more of feeder cattle at one time. LRP has a few advantages in that it is an insurance product and as few as one animal can be covered under a policy.
However, LRP does not appear to be a product that provides much support based on research conducted at the University of Tennessee in 2016. The study evaluated Tennessee LRP feeder cattle offerings from 2007 to 2016. The study evaluated 13, 17, and 21 week coverage lengths and 85 to 100 percent coverage levels for each month.
The only LRP options that had greater than a 50 percent probability of receiving a positive return from purchasing insurance were 97 to 100 percent coverage levels for 17 weeks when marketing in February, 21 weeks when marketing in March and November, and 13 weeks when marketing in October.