USDA presents the RMA Livestock Roadshow
The U.S. Department of Agriculture (USDA) Risk Management Agency (RMA) launched its 2024 workshop and webinar series aimed to inform agricultural producers on updates and improvements.
Created in 1996, USDA RMA was created to serve agricultural producers through effective market-based risk management tools to strengthen the economic stability of rural communities.
From beef to dairy to pork, livestock producers face unique and complex challenges, and RMA wants to ensure producers know what options are available to best protect their operation.
To help livestock producers know what insurance resources are out there and answer any questions, RMA hosted a webinar on Jan. 8 for producers to learn about changes to several livestock risk management products, based on feedback from U.S. livestock producers.
During the recent RMA Livestock Roadshow webinar, various RMA experts discussed the ins and outs of livestock insurance and covered a variety of topics, including Livestock Risk Protection (LRP), Livestock Gross Margin (LGM) and Pasture, Rangeland and Forage (PRF).
LRP
Market prices can fluctuate, creating uncertainty for producers who are strategically buying and selling.
Selling today versus tomorrow can sometimes mean the difference between a profit and a loss, and USDA RMA Risk Management Specialist Cody McCann provided information on risk management tools available to protect against potential decreases in market prices.
“LRP insurance coverage should correspond to the timeframe when livestock would normally be marketed,” McCann stated.
He further noted LRP can be purchased for fed cattle, feeder cattle and swine and explained how premiums are calculated.
Livestock producers who engage in LRP insurance will receive indemnity payments when the actual ending value is below the coverage price, however, McCann mentioned utilizing the LRP program does not guarantee a profit.
According to RMA, “Producers may choose coverage prices ranging from 70 to 100 percent of the expected ending value. At the end of the insurance period, if the actual ending value is below the coverage price, producers will be paid an indemnity for the difference between the coverage price and actual ending value.”
LGM
Cody Lovercamp, USDA RMA risk management specialist, provided an overview of LGM and pointed out it protects against the loss of gross margin – the market value of livestock minus feed costs on livestock.
He continued, “LGM for cattle has two key features. Producers can sign up for LGM for cattle coverage every Thursday and insure all of the cattle they expect to market over a rolling 11-month insurance period.The indemnity at the end of the 11-month insurance period is the difference, if positive, between the gross margin guarantee and the actual gross margin.”
“The producer does not have to decide on the mix of options to purchase, the strike price of the options or the date of entry, and the policy can be tailored to any farm size,” he added.
The LGM cattle policy uses futures prices to determine the expected gross margin and the actual gross margin, and prices for LGM cattle are based on simple averages of Chicago Mercantile Exchange Group futures contract daily settlement prices and are not based on the prices received at market.
He stressed, “An area which is often overlooked is the indemnity will be received if the actual total gross margin is less than the gross margin guarantee. The actual marketing must be at least 75 percent of target marketing for cattle.”
LGM policies are also available for swine producers operating farrow-to-finish, feeder pig finishing and segregated early weaning in every county across the U.S. and any producer who owns dairy cattle in any of the 50 states.
Lovercamp further explained Dairy Revenue Protection, which is designed to insure against unexpected declines in the quarterly revenue from milk sales relative to a guaranteed coverage level.
PRF
The last presenter during the recent RMA Livestock Roadshow was Doug Piney, who has worked for USDA for over 25 years and has been an instrumental player in RMA.
Piney provided listeners with updates and key information on PRF and the Rainfall Index (RI).
USDA has developed PRF to help protect a producer’s operation from the risks of forage loss due to the lack of precipitation. It is not designed to insure against ongoing or severe drought, as the coverage is based on precipitation expected during specific intervals only.
“PRF is available in the 48 contiguous states, as pasture, rangeland and forages cover approximately 55 percent of all U.S. land and forage grows differently in different areas, so it’s important for farmers and ranchers to know which types and techniques work best for their region,” he expressed.
Under the PRF program, coverage is based on a producer’s selection of coverage level, index intervals and productivity factor.
He continued, “The index interval represents a two-month period, and the period selected should be the one when precipitation is most important to a producer’s operation, but policyholders can select a coverage level from 70 to 90 percent.”
The PRF program utilizes the RI to determine precipitation for coverage purposes and does not measure production or loss of products themselves.
“The RI uses National Oceanic and Atmospheric Administration Climate Prediction Center data, which utilizes a grid system to determine precipitation amounts within an area,” he continued. “Each grid is 0.25 degrees in latitude by 0.25 degrees in longitude, which translates to approximately 17 by 17 miles at the equator.”
When the final grid index falls below the policyholder’s “trigger grid index” the producer may receive an indemnity.
The next virtual RMA Livestock Roadshow is set for Jan. 17. Keep an eye out for another Roadshow update in a future Wyoming Livestock Roundup edition.
Melissa Anderson is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.
