Page 12 - MWC 10-26-2023s

LRP TRENDS The Midwest Cattleman · October 26, 2023 · P12
continued from page 3
also increased. During fiscal total premium to total liabil- most of that time, steadi-
in Texas, South Dakota, and year 2023 the value of feeder ity for feeder cattle coverage ly increased the cattle price
Nebraska, as each state had cattle covered was almost $7 was 0.03. Last year the ratio levels. Thus, the indemnity
more than 400,000 head in- billion and the value of fed was 0.04. From a risk per- payments were low for feeder
sured. In fiscal year 2019 cattle covered was almost $2 spective, this implies that cattle and zero for fed cattle.
fewer than 4,000 head were billion. buyers of LRP are buying a Producers need to remember
covered as fed cattle. In fis- The sharply higher sub- little more coverage than be- that when LRP is paying out
cal year 2023 there were over sidy on LRP premiums has fore. The subsidy combined cattle prices have likely fall-
850,000 head covered as fed been the primary driver of across fed and feeder cattle en.
cattle. The fed cattle cover- the increase in sales and cov- in 2023 was over $110 mil-
age was popular in Nebras- erage. Hedges using futures lion. Producers paid about
ka, Texas, and Iowa, as each would require margin depos- twice that amount for the
state had more than 100,000 its. With the increase in fu- coverage. The market, during
head insured. tures prices, that would have
For perspective, the 2022 been observed as higher mar-
U.S. calf crop was 34.5 mil- gin calls at higher interest
lion head. Thus, the share rates this past year. Hedges PARAMOUNT
covered is growing, but noth- using put options would be
ing like the shares of corn or more expensive at the time of
wheat acres insured. There purchase as they are not sub- Elevate to a more valuable female.
were still only 19,259 poli- sidized. In addition, option For over a decade, Red Angus females have commanded
cies sold for feeder cattle and premiums are paid up-front more at auction than all other breeds, including Angus.
6,768 policies sold for fed cat- while LRP premiums are According to Superior Livestock data, Red
tle in 2023. The 2017 Cen- paid for at the end of the cov- Angus heifers brought nearly $17/cwt more –
sus of Agriculture reported erage period. Higher interest that equates to a $92/head premium
729,046 operations had beef rates can also effectively re- on a weaned replacement female.
cows. During 2022 the 26,000 duce the cost of LRP relative
To learn more about
feedlots marketed 25.9 mil- to using put options. industry-leading stayability,
lion head of finished cattle. The LRP subsidy is the visit RedAngus.org
With the sharp increases highest for the lowest levels
in head covered, the liabili- of coverage. Before the sub-
ty (or insured amount) has sidy increase the ratio of the