Farm Progress

Understand livestock insurance policy before purchasing.

Mindy Ward, Editor, Missouri Ruralist

March 30, 2017

2 Min Read
PROTECTING PRICE: The USDA-RMA Livestock Risk Protection program allows farmers to protect against sharp decreases in price.

University of Missouri Extension ag business specialist Darla Campbell finds that farmers looking to put a floor price under livestock sales may consider Livestock Risk Protection insurance.

LRP provides protection against price declines for sheep, swine or cattle. However, the majority of policies taken out are for cattle.

The cost usually ranges from 1% to 5% of the value of the animal, and the premium must be paid at the time the policy is purchased.

Policies are subsidized by the federal government at 13%, which is much lower than the typical 50% crop insurance subsidy, Campbell explains in the monthly Ag Connection newsletter.

"To obtain this insurance, producers should find a reputable and experienced agent," she notes. A one-time application, which establishes producer eligibility, is required.

Then the producer purchases a Specific Coverage Endorsement (SCE), which includes making the following decisions:

1. Number, type and weight of livestock
2. Coverage level (percent)
3. Endorsement length (number of weeks until expected to sell)
4. Ownership share (must be >10%)

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According to the USDA-Risk Management Agency, the number of livestock covered in a policy can range from one to 1,000 per contract, or up to 2,000 in one year (July1 to June 30).

With the main buyers of the policy in Missouri being cattle producers, it is important to understand how the policy works.

• Cattle are split into steers, heifers, dairy and Brahman.
• Cattle are insured by weight and classification — feeder cattle (under 600 pounds) and fed cattle (600 to 900 pounds).

Campbell says that the coverage level ranges from 70% to 100%, but not all coverage levels are available on any given day. "As would be expected, when the percentage goes up," she says, "so does the cost."

She explains that the endorsement length is the time from which the policy is purchased until the expected sale date of the insured animals. According to the RMA, this period for feeder cattle can be 13, 17, 21, 26, 30, 34, 39, 43, 47 or 52 weeks. "Match the weeks closest to when the cattle will be ready for market," Campbell adds. "Do not sell any earlier than 30 days before the specified time."

This insurance and the volatility of livestock markets are widespread topics of interest for agriculture, she says, and farmers should pay close attention as the next farm bill approaches.

About the Author(s)

Mindy Ward

Editor, Missouri Ruralist

Mindy resides on a small farm just outside of Holstein, Mo, about 80 miles southwest of St. Louis.

After graduating from the University of Missouri-Columbia with a bachelor’s degree in agricultural journalism, she worked briefly at a public relations firm in Kansas City. Her husband’s career led the couple north to Minnesota.

There, she reported on large-scale production of corn, soybeans, sugar beets, and dairy, as well as, biofuels for The Land. After 10 years, the couple returned to Missouri and she began covering agriculture in the Show-Me State.

“In all my 15 years of writing about agriculture, I have found some of the most progressive thinkers are farmers,” she says. “They are constantly searching for ways to do more with less, improve their land and leave their legacy to the next generation.”

Mindy and her husband, Stacy, together with their daughters, Elisa and Cassidy, operate Showtime Farms in southern Warren County. The family spends a great deal of time caring for and showing Dorset, Oxford and crossbred sheep.

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