Ag economist says livestock producers should look closely at tools to manage risk

A livestock economist says there is a lot of uncertainty facing cattle producers in 2023 and they should take steps to protect their operations.

University of Missouri’s Scott Brown tells Brownfield risk management doesn’t necessarily mean maximizing the price they are going to receive for their cattle. “It is all about cutting downside risk, as cheaply as I can, to make sure my operation stays in business over the long term,” he says.  “What kind of insurance premium, am I willing to pay to put a floor on the prices?”

He says a program like Livestock Risk Protection is a tool that can work for producers of all sizes.  “For small producers, you can insure one head,” he says.  “So it is for small producers. If I wanted to go get a put option straight off the CME I have to purchase the entire put option.  So I might be overinsured.”  The maximum head of fed cattle that can be insured is 12,000.

Brown says producers shouldn’t let the details of the program deter them from enrolling.  “Your crop insurance agent can sell you an LRP contract,” he says.  “They can tell you what your coverage is, what your premiums going to be.  It’s very straightforward. So don’t let all the new terms make you not want to go find somebody to tell you LRP.”

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