Livestock Risk Protection (LRP) Insurance: Protecting Your Livelihood Against Livestock Market Risk
September 15, 2023
Livestock farming is an important line of business for many producers in southeast South Dakota and northwest Iowa. For many farmers, their livestock is a significant contributor to their livelihood. Just like crops, there are many risks that producers must mitigate with their livestock. From adverse weather conditions to illnesses and injuries, there are plenty of things to worry about and manage. Then when it comes time to bring the livestock to market, price fluctuations can be one of the biggest risks of them all. That’s where LRP insurance comes in as an invaluable tool at a producer’s disposal. Below is information on what LRP is and how it can be beneficial for livestock owners.
What is LRP Insurance?
Livestock Risk Protection (LRP) insurance is a risk management tool offered by the United States Department of Agriculture (USDA) Risk Management Agency (RMA). It is designed to insure against a financial loss that may be experienced due to a decline in market prices. LRP is available on different types of livestock, from cattle to swine. It can have a key impact on a livestock producer’s risk management strategy.
How does LRP Insurance work?
LRP insurance provides coverage for declines in market prices; here’s how it typically works:
- Coverage Selection: There are a variety of coverage levels and insurance periods to choose from. Producers will evaluate the time their livestock will be marketed and then select coverage periods and levels that best match. This coverage level determines the percentage of protection a producer will receive.
- Coverage Prices and Timing: Due to fluctuating market conditions, coverage prices, rate premiums, and ending values are posted online daily by the USDA. Producers can select the price that fits their needs and budget. According to the USDA’s website, a producer may choose coverage prices ranging from 70 to 100 percent of the expected ending value. At the end of the insurance period, if the actual ending value is below the coverage price, you can receive an indemnity payment for the difference between the coverage price and actual ending value. Typical ranges of coverage are from 13 to 52 weeks and depends on the type of livestock being insured. For more information on LRP coverage prices, rates, and actual ending values, visit https://www.rma.usda.gov/en/information-tools/livestock-reports.
- Purchasing LRP Insurance and Premium Payments: LRP insurance must be purchased through a livestock insurance agent. Information for your local Rivers Edge Bank insurance agents can be found below. Coverage is purchased via one-time transactions known as Specific Coverage Endorsements (SCE). Multiple SCEs may be purchased throughout the year.
What are the benefits of LRP Insurance?
- Price Risk Mitigation – Because LRP insures against declining market prices, it helps provide a safety net due to price volatility. It allows producers to protect themselves from declining markets while still enabling themselves to benefit from increased prices.
- Customizability – LRP insurance can be tailored to a producer’s own specific needs and desires. Owners can choose coverage levels, timing, and which type of livestock they would like to cover.
- Government Subsidies – Because the USDA subsidizes a portion of the premium costs, it can make LRP insurance more affordable for producers. This helps support small and medium-sized livestock operations to have better access to these risk mitigation tools.
- Enhanced Financial Planning – LRP insurance allows livestock owners to better plan their finances. It can help provide a floor price for your livestock that will limit potential losses.
- Peace of Mind – As previously mentioned, producers have plenty to manage and mitigate when it comes to their livestock. LRP insurance allows them to focus on their operation without constantly worrying about the stress of market fluctuations.
How do you purchase LRP coverage?
Our insurance agents are here and ready to help! Rivers Edge Bank partners with NAU Country Insurance Company to provide you an array of LRP insurance options. To discuss your options or to get more information, please feel free to reach out to your loan officer at Rivers Edge or fill out a contact form here and we will get you in touch with one of our awesome agents. Our insurance agent information can be found below:
Lance Steuck – Hawarden, IA Phone: (712) 551-1005
Tony Lauters – Hawarden, IA Phone: (712) 551-1005
Justin Beckstrand – Marion, SD Phone: (605) 648-3683
Rivers Edge Bank and NAU Country are an Equal Opportunity Provider. LRP insurance products are not a deposit; not FDIC insured; not insured by any federal government agency; not guaranteed by the bank; and may go down in value.
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