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.