Posted 4/7/2021 23:23 (#8939072 - in reply to #8938941) Subject: RE: LRP Questions
The ending weight matters because that is how the dollar amount of coverage is figured. You pick an ending date and on that day, if the index is below your coverage level, you receive an indemnity. You have to own the cattle at least 60 days before the ending date. Owning the cattle after the ending date doesn’t matter. But then you are assuming market risk again. Realize, this coverage does nothing to guarantee what you get for your cattle cash price.
I’ve said this several times here and I will repeat it. If you try to use LRP insurance as a speculative tool, you will be disappointed. It’s insurance against a big market swing, such as last years Covid scare or a Mad Cow outbreak. Too many times, producers wait to buy this insurance at what they believe is a market top, only to watch the market tank. Then they panic and buy in at the bottom or do nothing and suffer through the cash market with no protection. That’s why I recommend not spending at lot per head. I do recommend covering your feed costs and the purchase price of the cattle. This usually falls in that $20 per head cost or less.
You insure your farm against theft and fire, you insure your crop against drought and flood plus price. This is a tool to have similar type protection for your livestock.