1 cattle outlook & risk management james mintert, ph.d. professor & extension state leader...

Cattle Outlook & Risk ManagementCattle Outlook & Risk Management

James Mintert, Ph.D.James Mintert, Ph.D.Professor & Extension State Leader Professor & Extension State Leader

Department of Agricultural EconomicsDepartment of Agricultural EconomicsKansas State UniversityKansas State University

Nevada Cattlemen’s Association ConventionNevada Cattlemen’s Association ConventionElko, NevadaElko, Nevada

November 17, 2006November 17, 2006

www.agmanager.info/livestock/marketingwww.agmanager.info/livestock/marketing

[email protected]@ksu.edu

mailto:[email protected]

U.S. Cattle InventoryJ anuary 1, 1975-2006

50

60

70

80

90

100

110

120

130

140

75 80 85 90 95 00 05Year

Million

Head

Source: USDA & K-State Research & ExtensionKSU Dept. of Ag Econwww.agmanager.info

A Shrinking IndustryA Shrinking IndustryResponding to a Lack of Profitability Responding to a Lack of Profitability

Current inventory is about 26% Current inventory is about 26% smaller than in 1975smaller than in 1975

Rising Productivity Is Partially ResponsibleRising Productivity Is Partially Responsible

Dressed Beef Production . Per Cow Per Year .

200

250

300

350

400

450

500

550

600

650

700

50 55 60 65 70 75 80 85 90 95 00 05 10

Year

Po

un

ds

Beef Production Per Cow

30 Year Trend

Source: USDA & K-State Research & Extension .

But Weaker Demand Was Key But Weaker Demand Was Key Beef Demand 1980-1998Beef Demand 1980-1998

Annual Retail Choice Beef Demand Index

88 86 8379 76

70 6966 65 62 59 58 56 55 53 51

94

50

0

10

20

30

40

50

60

70

80

90

100

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98Year

Ind

ex V

alu

e

Source: USDA, Dept. of Commerce & K- State Research & Extension Price Deflated By CPI, 1980 =100 for Beef Demand Index

KSU Dept. of Ag. Econ. www.agmanager.info


52 54 56 5559

63

50

0

10

20

30

40

50

60

70

80

90

100

98 99 00 01 02 03 04Year

Inde

x V

alue



Measuring Changes In Beef DemandMeasuring Changes In Beef Demand1998-20041998-2004

Demand in ’04 Was Up About 25% from 1998 Level

Measuring Changes In Beef DemandMeasuring Changes In Beef Demand1998-20051998-2005


52 54 56 5559

63 61

50

0

10

20

30

40

50

60

70

80

90

100

98 99 00 01 02 03 04 05Year

Ind

ex V

alu

e



Beef Demand During All of ’05 Decreased About 4%But Demand in ’05 Was Still Up About 21% from 1998 Level

Demand Improved Steadily from ’98 through ’04Demand Improved Steadily from ’98 through ’04Downward Blip in ’02 Following 9/11Downward Blip in ’02 Following 9/11

Annual Retail Choice Beef Demand Index% Change From Prior Year

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

Year

% C

ha

ng

e F

rom

Pri

or

Ye

ar

.

Source: USDA, Dept. of Commerce & K-State Ag. Econ.

Downturn Got Underway in mid-2005Downturn Got Underway in mid-2005

Quarterly Retail Choice Beef Demand Index% Change From Prior Year

-15%

-10%

-5%

0%

5%

10%

15%

98.1 99.1 00.1 01.1 02.1 03.1 04.1 05.1 06.1Year & Quarter

% C

ha

ng

e fro

m P

rio

r Y

ea

r

Source: USDA, Dept. of Commerce, & K-State Ag. Econ.

Beef Demand ShiftersBeef Demand ShiftersWhat’s been taking place recently?What’s been taking place recently?

Demand index does not indicate why shifts occurDemand index does not indicate why shifts occur

• Possible reasons for recent downturnPossible reasons for recent downturn

– Low carb diet effect has worn offLow carb diet effect has worn off

– Larger chicken suppliesLarger chicken supplies

– Consumer’s disposable income growth slowingConsumer’s disposable income growth slowing

• Expect more domestic demand weaknessExpect more domestic demand weakness

• How do we turn this around?How do we turn this around?

International Trade Outlook International Trade Outlook

Net Exports of U.S. Cattle, Beef, & By-Products1979-2005

-2.00

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

79 81 83 85 87 89 91 93 95 97 99 01 03 05

Year

Bil

lio

n $

Source: U.S. Dept. of Commerce & LMIC Net Exports = Exports - Imports

U.S. Was A Net Exporter From 1981-2003U.S. Was A Net Exporter From 1981-2003

Top 5 Importers Top 5 Importers Accounted for 91% of U.S. ExportsAccounted for 91% of U.S. Exports

Top 10 Importers of U.S. BeefRanked by Value of Imports in 2003

Other Category Consists of All Other Destinations

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

Japan Mexico S. Korea Canada HongKong

Taiwan Russia China Kuwait Egypt Other

Destination

Va

lue

(T

ho

us

an

d $

)

.

.

Source: USDA-FAS .

U.S. needs to U.S. needs to recapture these recapture these markets to regain markets to regain $’s and volume$’s and volume

Annual Cattle Imports From Canada .

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06

Year

Millio

n H

ea

d .

Source: USDA & LMIC, 2006 Projected

Cattle Imports from Canada Are IncreasingCattle Imports from Canada Are Increasing But Remain Well Below 2002’s Record LevelBut Remain Well Below 2002’s Record Level

Jan-July 2006 imports Jan-July 2006 imports 32% below 2002’s and 32% below 2002’s and 21% below 2001’s21% below 2001’s

Beef Imports From Canada DeclineBeef Imports From Canada Decline

Annual Beef Imports From Canada .

0.0

0.2

0.4

0.6

0.8

1.0

1.2

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

Year

Billio

n P

ou

nd

s .

Source: USDA & LMIC, 2006 Projected

Result: U.S. Imports Falling Below 2005’sResult: U.S. Imports Falling Below 2005’s

Annual U.S. Beef Imports

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Year

Bil

lio

n L

bs.

Source: USDA & LMIC, 2006-2008 Forecasts

Where Are We Headed?Where Are We Headed?TradeTrade

• Other countries may have comparative advantage Other countries may have comparative advantage in cow-calf productionin cow-calf production

• U.S. strength is in high quality beef productsU.S. strength is in high quality beef products

• Exports to Pacific Rim increasing in ’07Exports to Pacific Rim increasing in ’07

• Regaining market share will take several yearsRegaining market share will take several years

– Market access is keyMarket access is key

• Consumer incomes in importing countries are key Consumer incomes in importing countries are key to long-run growth in exportsto long-run growth in exports

Long, Slow Road to Export RecoveryLong, Slow Road to Export Recovery

Annual U.S. Beef Exports

0.0

0.5

1.0

1.5

2.0

2.5

3.0

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Year

Bil

lio

n L

bs.


Export Recovery Means Net Beef Export Recovery Means Net Beef Imports in 2007 Could Be 1/2 2004’sImports in 2007 Could Be 1/2 2004’s

Annual U.S. Net Beef Imports

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Year

Bil

lio

n L

bs.


Supply Side in the U.S. Supply Side in the U.S.

Mid-Year Inventory Was Above 2005’s, And…Mid-Year Inventory Was Above 2005’s, And…

U.S. All Cattle & Calves Inventory J uly 1 Inventory

100

105

110

115

120

125

130

135

140

145

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year

Mill

ion

Hea

d

Source: USDA & LMI C

J uly 1 Inventory = 105.7 Million Head 1.1% Above J uly 1, 2005 Inventory & 6.5% Below J uly 1, 1995 Inventory

Strong Profitability Encouraging Expansion, But…Strong Profitability Encouraging Expansion, But…

Estimated Kansas Cow-Calf Returns .

-100

-50

0

50

100

150

200

250

300

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05

Year

$'s

Per

Co

w

.

Source: KS State Farm Mgmt. Assoc. Returns Above Variable Costs

US RANGE AND PASTURE CONDITIONPercent Poor and Very Poor, Weekly

0

10

20

30

40

50

60

May Jul Sep

Percent

Avg.2000-04

2005

2006

Livestock Marketing Information Center

Data Source: USDA/NASS

Poor Pasture Conditions Poor Pasture Conditions Could Be Holding Back ExpansionCould Be Holding Back Expansion

U.S. Beef Cow Slaughter Up 17% vs. 2005 U.S. Beef Cow Slaughter Up 17% vs. 2005

Weekly F.I . Beef Cow Slaughter

30

35

40

45

50

55

60

65

70

75

01/07 02/25 04/15 06/03 07/22 09/09 10/28 12/16

Week Ending

Th

ou

san

d H

ead

2005 2006 5 Yr Avg

Source: USDA & K-State Research & Extension

KSU Dept. of Ag Econwww.agmanager.info

But Producers Have Been Holding Back HeifersBut Producers Have Been Holding Back Heifers

Cow & Heifer Slaughter vs. Cattle Herd Growth Rate .

70

80

90

100

110

120

130

50 55 60 65 70 75 80 85 90 95 00 05Year .

Fe

ma

le S

ltr.

% o

f S

tee

rs

.

-6%

-4%

-2%

0%

2%

4%

6%

He

rd G

row

th R

ate

.

Female % of Steer SlaughterHerd Growth Rate

Source: USDA & K-State Research & Extension2006 estimated through September 2006


Slaughter Is Expected To Rise ModestlySlaughter Is Expected To Rise Modestly

Annual U.S. Commercial Cattle Slaughter

31323334353637383940414243

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Million

Head

Source: USDA & K-State Research & Extension 2006 partially estimated, LMIC Forecast for 2007-2008

Year

Long Term Trend Toward Higher WeightsLong Term Trend Toward Higher WeightsBut Will Rising Grain Prices Hold Weights Down?But Will Rising Grain Prices Hold Weights Down?

Commercial Cattle Carcass Weights .

550

575

600

625

650

675

700

725

750

775

800

70 75 80 85 90 95 00 05

Year

Dre

ssed

Wt.

/H

ead

(Lb

s.)

.

Trend

Source: USDA, LMI C, & KSU

And Beef Production Will Rise CyclicallyAnd Beef Production Will Rise Cyclically

Commercial Beef Production

20

21

22

23

24

25

26

27

28

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Year

Bill

ion

Pou

nd

s

Source: USDA & K-State Research & Extension 2006 partially estimated & LMIC forecasts for 2007-2008


Prices Near Record High in ’06 & Again in ‘07Prices Near Record High in ’06 & Again in ‘07

Kansas Direct Slaughter Steer Prices .

60

65

70

75

80

85

90

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

Year

Pri

ce

($

/cw

t.)

Source: AMS-USDA, Dodge City, KS, 2006 & 2007 forecast

But Higher Corn Prices Lead To Lower Bids for FeedersBut Higher Corn Prices Lead To Lower Bids for Feeders

Kansas Combined Auction (Dodge City, Pratt, Salina) Weekly Weighted Average 700-800 Lb. Steer Prices

85

90

95

100

105

110

115

120

125

01/06 02/17 03/31 05/12 06/23 08/04 09/15 10/27 12/08Week Ending Date

Pri

ce (

$/c

wt.

)

2005

2006

5 Yr Avg

Source: AMS-USDA, Dodge City, KS & K-State Research & Extension


Cattle Feeders Will Adjust Bids Based Upon Higher Feed CostsCattle Feeders Will Adjust Bids Based Upon Higher Feed CostsPrices in ’07 Headed LowerPrices in ’07 Headed Lower

Dodge City, KS 700-800 Lb. Steer Prices .

60

65

70

75

80

85

90

95

100

105

110

115

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

Year

Pri

ce (

$/c

wt.

)

Source: AMS-USDA, Dodge City, KS & KSU, 2006 & 2007 forecast

Rising Corn Prices Pushing Prices LowerRising Corn Prices Pushing Prices Lower

Kansas Combined Auction (Dodge City, Pratt, & Salina) Weekly Weighted Average 500-600 Lb. Steer Prices

95

100

105

110

115

120

125

130

135

140

145

01/06 02/17 03/31 05/12 06/23 08/04 09/15 10/27 12/08

Week Ending Date

Pri

ce (

$/c

wt.

)

2005 2006 5 Yr Avg

Source: AMS-USDA, Dodge City, KS &K-State Research & Extension


Higher Feed Costs Mean Lower Prices Are AheadHigher Feed Costs Mean Lower Prices Are AheadCycle Peak in ’05 & ‘06Cycle Peak in ’05 & ‘06

Dodge City, KS 500-600 Lb. Steer Prices .

6065707580859095

100105110115120125130135

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

Year

Pri

ce

($

/cw

t.)

Source: AMS-USDA, Dodge City, KS & KSU, 2006 & 2007 Forecast .

Ethanol, Corn Prices, & Cattle Ethanol, Corn Prices, & Cattle

3 Largest Corn Crops On Record3 Largest Corn Crops On Record

Total U.S. Corn Production

3

4

5

6

7

8

9

10

11

12

13

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05

Year

Pro

du

ctio

n (

Bill

ion

Bu

.)

.

Source: USDA WASDE Report: 11.09.06


But Corn Usage Has Been Growing RapidlyBut Corn Usage Has Been Growing Rapidly

U.S. Total Corn Usage

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year

Billion

Bu

.

.

Domestic Corn Usage

Trendline

Source: USDAWASDE Report: 11.09.06


Ethanol Usage Growing RapidlyEthanol Usage Growing RapidlyFood, Alcohol, & Industrial Corn Usage

% of U.S. Production

0%

5%

10%

15%

20%

25%

30%

35%

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year

Perc

en

t of

Pro

du

ctio

n

Source: USDA & KSUWASDE Report: 11.09.06

2006 Estimate


U.S. Will Need More Corn AcresU.S. Will Need More Corn AcresHow Do We Get Them?How Do We Get Them?

U.S. Corn Planted Acreage

60

65

70

75

80

85

90

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06Year

Million

Acr

es

.



It Will Take Higher PricesIt Will Take Higher Prices To Push Acreage Higher To Push Acreage Higher

U.S. Average Corn Price .

$1.50

$1.70

$1.90

$2.10

$2.30

$2.50

$2.70

$2.90

$3.10

$3.30

$3.50

73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05Year

Avg

. Farm

Pri

ce (

$/B

U.)

.



Average Prices Average Prices Will Be Higher Will Be Higher and Frequency and Frequency of Price Spikes of Price Spikes Could IncreaseCould Increase

Where Are Corn Prices Headed?Where Are Corn Prices Headed?Higher Corn Prices Spell Trouble for Livestock ProducersHigher Corn Prices Spell Trouble for Livestock Producers

Kansas Monthly Corn Prices

1.251.501.752.002.252.502.753.003.253.503.754.004.254.504.755.00

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05

Year

Co

rn P

rice

($/

bu

.)

Source: USDA-Kansas Agricultural Statistics & K-State Research & Extension

1985-1989 Average = $2.23/bu.1990-1994 Average = $2.40/bu. 1995-1999 Average = $2.65/bu.2000-2004 Average = $2.23/bu.2004 Average=$2.59/bu.2005 Average=$2.02/bu.

Ethanol increases the Ethanol increases the likelihood of price likelihood of price spikesspikes

Increasing Market Volatility Means Managing Increasing Market Volatility Means Managing Risk Will Be More Important In The FutureRisk Will Be More Important In The Future

Livestock Risk Protection Insurance: Livestock Risk Protection Insurance: How Does It Work?How Does It Work?

LRP-What Is It?LRP-What Is It?

• Livestock Risk Protection (LRP) InsuranceLivestock Risk Protection (LRP) Insurance

• LRP for feeder cattle available in NevadaLRP for feeder cattle available in Nevada

– Provides protection against a decline in CME Feeder Provides protection against a decline in CME Feeder Cattle Price Index while you own cattleCattle Price Index while you own cattle

• CME Feeder Cattle Price Index is a 7 day weighted average CME Feeder Cattle Price Index is a 7 day weighted average of cash feeder cattle prices across the U.S.of cash feeder cattle prices across the U.S.

How Does LRP Work?How Does LRP Work?

To use LRP to protect against a price To use LRP to protect against a price decline, decline,

– you would purchase LRP insurance for a you would purchase LRP insurance for a particular set of cattle (# of hd. & ending wt.)particular set of cattle (# of hd. & ending wt.)

– you must choose you must choose – Coverage Price (this is similar to an option’s Coverage Price (this is similar to an option’s Strike PriceStrike Price))

– End Date (e.g., the date coverage ends)End Date (e.g., the date coverage ends)

– Price you pay is known as LRP premiumPrice you pay is known as LRP premium

DefinitionsDefinitions Expected End ValueExpected End Value

A forecast of the CME Feeder Price Index on the A forecast of the CME Feeder Price Index on the insurance policy’s end date insurance policy’s end date

Coverage LevelCoverage Level

The % of the expected end value covered by the The % of the expected end value covered by the policypolicy

DefinitionsDefinitions Coverage PriceCoverage Price

Level of protection provided by policy in $/cwt.Level of protection provided by policy in $/cwt.

Expected End Value X Coverage Level = Coverage PriceExpected End Value X Coverage Level = Coverage Price

End DateEnd Date

The date that coverage period ends for each contractThe date that coverage period ends for each contract

You selects weeks of coverage desired You selects weeks of coverage desired (within limits set by RMA-usually 13 to 39 weeks)(within limits set by RMA-usually 13 to 39 weeks)

LRP Feeder Cattle PremiumLRP Feeder Cattle Premium

To calculate actual LRP premium you must knowTo calculate actual LRP premium you must know

Number of cattle ready for market (weighing Number of cattle ready for market (weighing less than 9.0 cwt) on End Dateless than 9.0 cwt) on End Date

Target Weight per headTarget Weight per head

Ownership share in cattleOwnership share in cattle

LRP Feeder Cattle PremiumLRP Feeder Cattle Premium

Insured Value EqualsInsured Value Equals

# of Head x Target Weight (cwt) x Coverage Price # of Head x Target Weight (cwt) x Coverage Price x Ownership Share (%)x Ownership Share (%)

Total Premium EqualsTotal Premium Equals

Insured Value x RateInsured Value x Rate

Producer Premium EqualsProducer Premium Equals

Total Premium minus USDA SubsidyTotal Premium minus USDA Subsidy

USDA Subsidy = 13% of Total PremiumUSDA Subsidy = 13% of Total Premium

LRP Premium Calculation ExampleLRP Premium Calculation Example

An operation has 100 head of feeder cattle on An operation has 100 head of feeder cattle on Aug. 16Aug. 16

Expects to market the feeder cattle at a target Expects to market the feeder cattle at a target weight of 7.00 cwt each in mid-Novemberweight of 7.00 cwt each in mid-November

Insured share is 100 percentInsured share is 100 percent

Assume Expected End Value (updated daily Assume Expected End Value (updated daily by RMA on its website) is $116.45 per live cwtby RMA on its website) is $116.45 per live cwt

Premium Calculation ExamplePremium Calculation Example

Producer selects a coverage price which is a % of Producer selects a coverage price which is a % of the Expected End Value published by RMAthe Expected End Value published by RMA

Assume producer selects $110 per cwt. coverage Assume producer selects $110 per cwt. coverage price (e.g., 94% of RMA’s Expected End Value)price (e.g., 94% of RMA’s Expected End Value)

For this coverage price, the rate is 0.6773%For this coverage price, the rate is 0.6773%

The premium subsidy is 13 percent The premium subsidy is 13 percent


100 head * 7 cwt = 700 cwt.100 head * 7 cwt = 700 cwt.

700 cwt. * coverage price ($110) = $77,000700 cwt. * coverage price ($110) = $77,000

$77,000 * insured share (1.00) $77,000 * insured share (1.00) = $77,000 Insured = $77,000 Insured

ValueValue


$77,000 * rate of 0.006773 = $521.52 Total Premium$77,000 * rate of 0.006773 = $521.52 Total Premium

$521.52 * .13 (subsidy) = $67.80 subsidy$521.52 * .13 (subsidy) = $67.80 subsidy

$521.52 (total premium) minus $67.80 subsidy$521.52 (total premium) minus $67.80 subsidy

= producer premium of $453.72= producer premium of $453.72

= $0.65/cwt. producer paid = $0.65/cwt. producer paid

premium premium

Calculating IndemnityCalculating Indemnity

Indemnity is payable if actual ending price is Indemnity is payable if actual ending price is less than coverage priceless than coverage price

Calculate indemnity by:Calculate indemnity by:

Multiplying number of head by target weight (in Multiplying number of head by target weight (in live cwt.)live cwt.)

Subtract actual ending value from coverage priceSubtract actual ending value from coverage price

Multiplying total weight by difference between Multiplying total weight by difference between actual ending value & coverage priceactual ending value & coverage price

Indemnity Calculation ExampleIndemnity Calculation Example

Expected End Value for 13 weeks of Expected End Value for 13 weeks of coverage is $116.45 per live cwt.coverage is $116.45 per live cwt.

Producer selects a coverage price of $110 Producer selects a coverage price of $110 per cwt. (e.g., 94% of Exp. End Value)per cwt. (e.g., 94% of Exp. End Value)

Actual End Value is $97.77 per cwt. (e.g., Actual End Value is $97.77 per cwt. (e.g., CME Feeder Cattle Index = $97.77 on CME Feeder Cattle Index = $97.77 on End Date)End Date)


100 head * 7.00 cwt = 700 cwt.100 head * 7.00 cwt = 700 cwt.

Subtracting actual ending price of $97.77 from Subtracting actual ending price of $97.77 from the coverage price of $110 = $12.23/cwt.the coverage price of $110 = $12.23/cwt.

Multiplying 700 cwt. by $12.23/cwt = $8,561Multiplying 700 cwt. by $12.23/cwt = $8,561

Multiplying $8,561 by insured share of 1.00 = Multiplying $8,561 by insured share of 1.00 = gross indemnity payment of $8,561gross indemnity payment of $8,561

Net indemnity payment = $8,107.30Net indemnity payment = $8,107.30


What happens if CME Feeder Index on End What happens if CME Feeder Index on End date = $112?date = $112?

Subtracting actual ending price of $112 from Subtracting actual ending price of $112 from the coverage price of $110 = neg. $2/cwt.the coverage price of $110 = neg. $2/cwt.

Therefore, no indemnity payment is made to Therefore, no indemnity payment is made to producerproducer

This is analogous to a feeder cattle put option This is analogous to a feeder cattle put option that that expires worthlessexpires worthless

LRP Coverage Prices & LevelsLRP Coverage Prices & Levels

• Price guarantees change dailyPrice guarantees change daily

• Premiums change dailyPremiums change daily

• Coverage available ranges fromCoverage available ranges from

– 70% to about 95% of Expected End Price, 70% to about 95% of Expected End Price,

– Max guarantee generally less than 95%Max guarantee generally less than 95%

PremiumPremium Premium quotes via RMA’s Premium Calculator Premium quotes via RMA’s Premium Calculator

available on USDA-RMA’s web siteavailable on USDA-RMA’s web site

Premium must be paid on day LRP insurance is Premium must be paid on day LRP insurance is purchased for coverage to be providedpurchased for coverage to be provided

Rates available atRates available at

http://www.rma.usda.gov/toolshttp://www.rma.usda.gov/tools

Under livestock reportsUnder livestock reports

Or use link on AgManagerOr use link on AgManager


LRP SummaryLRP SummaryLRP protects against a decline in LRP protects against a decline in

Feeder cattle price level as measured by CME Feeder Feeder cattle price level as measured by CME Feeder Cattle Price IndexCattle Price Index

LRP does NOT guarantee the basisLRP does NOT guarantee the basis

LRP does not guarantee a cash priceLRP does not guarantee a cash price

Policy does not cover any other perilPolicy does not cover any other peril

LRP SummaryLRP Summary

Insure the exact number of head that you chooseInsure the exact number of head that you choose

Flexible contract size matches “small” operations vs. Flexible contract size matches “small” operations vs.

Feeder cattle futures that represents about 67 steers Feeder cattle futures that represents about 67 steers weighing 750 poundsweighing 750 pounds

Live cattle futures that represents about 33 steers Live cattle futures that represents about 33 steers weighing 1200 pounds weighing 1200 pounds

Can incrementally minimum price a few head at a Can incrementally minimum price a few head at a timetime

1 cattle outlook & risk management james mintert, ph.d. professor & extension state leader...

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