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LRP Questions
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Lb94
Posted 4/7/2021 12:04 (#8938043)
Subject: LRP Questions


West Central Illinois
Have considered this before and inquired with a local company that offers this but wasn't thrilled with the explanation and still don't really understand it.

I would be trying to manage some of my risk for selling backgrounded yearling heifers that I started on feed this winter and run out on grass all summer selling around 700-800 lb by August. From what little info. I was given on the product it would establish a floor price with upside potential. So in theory if I set this up for Aug. 31 end date I would pay $5.79/cwt. for coverage at $1.43/cwt. on the calves which at first glance looks really good.

My gut reaction is what seems too good to be true generally is, what else is factored into this like basis, location, grade of cattle, etc. Let's say my calves get ran through the ring at Palmyra in August and bring $1.30, would I then collect or would there be other things to factor in? These aren't the best calves that ever walked but 90% uniform pretty much all black with a couple red and some bwf mixed in. Does anybody else that runs stockers use this insurance or is there other things to consider? Stupid questions I know but futures, hedging etc. is definitely not a language I speak much so all this is foreign to me.
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