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Cullom, Illinois | If your 700# steer cost $3.75, that’s $2,625/hd. I can protect that for $6/hd. You never gave me your feed costs, but I’ll guess around $600. Add that to the steer price and you’ve got a $3225 total. That would cost you $32/hd. So for about the cost of a shot of name brand Draxxin, you can protect your purchase cost and your feed cost. The rest is on you. LRP was never intended to insure you a profit. Buy the coverage the day you buy the cattle. Then your bottom is set. Now, going forward, if you want to forward contract, go ahead. It has no bearing on the LRP policy. You just have to own the cattle for the allotted time in the endorsement. If you want to keep feeding the cattle after the endorsement has expired, go ahead. Again, it has no bearing. You just need to keep the sale date of your cattle and the end date of the LRP endorsement close, or the market can move and nullify any gain.
As for if put/calls are better, time value will eat away at the price. So don’t pretend that you’ll magically get out seven months later with all your money. It just doesn’t happen. Puts/calls do not run even money to futures, so they are going to cost you no matter what. And no one has any idea when the top is, so you’ll either get out too soon. Or you’ll ride it all the way to expiration, hoping for it too reverse.
As for futures, they work great, if you can stand the margin calls. With 50,000# contracts and these almost limit up and down moves, it will make a man out of you in a hurry. Again, you have no idea the top or bottom, so you bail out too soon. Emotion gets you every time. LRP is locked in, so you just have to live with it and therefore, the emotional side isn’t there.
I’m a cattle guy that sells insurance. Not the other way around. Is LRP for everyone? Of course not. Does it protect your ass when the next mad cow, packer fire, screw worm, Argentina beef event hit? You bet.
I’ll end with this. LRP can be hard to understand. So sit down with someone who understands it and spend a little time going over how it works. Then if your not sure, try it on ten head. Won’t cost much and you’ll learn the ropes. Most of my guys, once they’ve done it a time or two, seem to get the hang of it better.
Edited by roo 5/23/2026 22:11
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Garvo’s $2.28 hedges?
