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- LRP Insurance and Put Options: Farmer-Feeder Considerations
- Other RightRisk News
- Highlighted Recording: Drought Contingency Plan Webinar
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LIVESTOCK RISK PROTECTION (LRP) insurance is a single-peril crop insurance product available from the USDA Risk Management Agency (RMA) to protect cattle and swine producers against unexpected down swings in the national market price. LRP insurance functions like a put option creating a floor on the national selling price at a future point in time, while allowing the producer to benefit from price increases. Several questions naturally materialize when considering the implications for price risk management. One is, “How has the LRP fed cattle insurance program performed in the past?” Another is, “Does it make sense to always insure at the highest coverage price available?” A third question is, “How does the LRP insurance compare to a put option on the CME in terms of cost and functionality?” . . .
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