Producer

Producer Creates Safety Net
Against Market Risks with LRP and LGM

How an Anonymous Producer takes control over his marketing decisions

and protects his operation with LRP and LGM.

Anonymous Producer at a Glance

His operation is located in Southeast Iowa. Founded in 2013, his cow-calf operation has approximately 400 head, as well as a 600 head feedlot.

"Being a young producer, I don’t have the cushion to lose money. I have to make everything work"

Problem: Navigating today's volatile market

Today’s market is volatile, and can change drastically on a daily basis. If national market prices drop unexpectedly before he brings his herd to market, he will suffer an overall loss, which will negatively impact his operation’s financial stability. In a worst-case scenario, he may have to sell portions of his farm, or be unable to continue farming entirely.

“Being a young producer, I don’t have the cushion to lose money. I have to make everything work,” he said. “I don’t have anything to fall back on if I lose money, so I have to make everything work. When the market drops, I could lose the only profit I could be making.”

Stockguard’s solution: Create a safety net

He worked with Stockguard to create LRP and LGM coverage plans that will help ensure that he gets the best possible price for his livestock. Using our portal, he customized a policy that meets his operation’s specific needs. “The portal is the key ingredient,” he said. “I can customize a policy that works for me, and there’s great availability. Even if I come from the fields in the middle of the night, I have the information right at my fingertips or can contact an agent, no matter the time. It fits my schedule and what I need.”

He has a group of cattle hedged with LGM at $166/cwt for December. Under his policy, if market changes cause a rise in the cost of feeder cattle or feed, or if live cattle prices drop, LGM secures his investment with its gross margin guarantee. “I’m hoping that the market will improve before I consider a packer contract. Otherwise, I’ll be able to wait and play the basis when December comes,” he said.

In addition, he has other groups of feeder cattle covered against market price drops with LRP contracts for January and March.

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I had an LRP policy for two loads of cattle for October, but I took advantage of a market rally to sell them for almost the same price as my coverage value at a 200-pound weight difference!

His LRP and LGM policies create safety nets against unexpected market risks. His customized policies offer a layer of protection, so that he’ll receive an indemnity if his ending value is below his covered price when he goes to market. But, there’s no ceiling that prevents him from taking advantage of upsides. “I had an LRP policy for two loads of cattle for October, but I took advantage of a market rally to sell them for almost the same price as my coverage value at a 200-pound weight difference!” he said.

The result: Take control over your marketing decisions

Both LRP and LGM insure livestock against unexpected market decisions. His minimum profit is secured against today’s volatile market, but he benefits in cases when prices are up. When the time comes to sell his livestock, LRP and LGM give him the agency to decide the best course of action for his herd, without feeling the pressure of financial risks. “It puts confidence behind you whenever you have to make any marketing decisions,” he said. “When you don’t know what the market is going to do, it’s hard to buy more cattle. But, with risk protection, it’s so much easier to purchase with confidence.”