Page 12 - MWC 10-26-2023s
P. 12

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
      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
   7   8   9   10   11   12   13   14   15   16   17