The Benefit of an LRP Price Floor

Many challenges can negatively impact the current market, and predicting tomorrow’s livestock prices is impossible. Geopolitical events, natural disasters, drought, poor crop yield, and disease outbreaks are only a few factors that can drastically change national market prices.

When you neglect to put proper protections in place to safeguard your investment, you can lose out on profits necessary to keeping your farm running for another season. If prices take a sudden downturn when you’re ready to sell, you may feel like the rug’s been pulled out from under you.

Today’s volatile market is stressful for many producers, but it doesn’t need to be. With livestock insurance, you can take proactive steps to protect your bottom line so you can rest easier at night and focus on what’s important. Let’s briefly examine what Livestock Risk Protection (LRP) is and how its price floor can help you manage risks.

What is LRP?

Livestock Risk Protection (LRP) is a livestock risk management program administered by the USDA to help producers protect their operations against volatile market prices. Unlike other insurance programs, LRP puts producers in the driver’s seat and gives you control. LRP’s flexible coverage options can be tailored to fit your needs, regardless of your operation’s size and stage in the production cycle. Market risks impact all producers, making LRP a viable option for farmers across the board. When you use LRP, you’re creating a price floor. This means you’re guaranteed to receive a minimum price for your livestock when you take your cattle to market. Now that we’ve covered the basics of LRP let’s look deeper into how LRP’s price floor can benefit your operation.

Create Your Price Floor

Hearing the term “lock in your price floor” can sound intimidating, but LRP’s price floor protects you when market prices drop without warning.

If market prices are down and you sell your cattle for less than your covered price, you’ll receive an indemnity that covers the difference between your insured value and the end value at the market. When you choose LRP, you can stop worrying about market volatility and ensure your bottom line is secured.

It’s important to note that your price floor covers your low end, but the topside remains wide open. This means that you’ll still benefit when prices are high but receive the peace of mind that you’ll receive an indemnity if market prices take a turn for the worst.

Let’s look at a brief example of how LRP’s price floor works: Imagine that a cattle producer purchases an LRP policy with an insured value of $100,000 and a $1,000. However, when the producer is ready to sell his cattle, he receives an end value of only $95,000. Because his end value dropped below his insured price, he’ll receive an indemnity that covers the difference minus the premium. His net indemnity is $4,000.

Managing risks can often feel difficult, but it doesn’t have to be. LRP’s price floor puts you back in control of your marketing decisions without worrying about being locked into a singular price.

Getting Started With LRP

You work hard to prepare your cattle for market, so you shouldn’t have to settle for less. Thankfully, LRP with Stockguard makes it easier than ever to create your price floor with a customizable policy.

Don’t wait any longer. Visit portal.stockguard.io to get started today!