34 NEBRASKA CATTLEMAN June/July 2025 PEERS NCIG IS LIVESTOCK RISK PROTECTION IN YOUR TOOLBOX? BEN RAND |THE HOME AGENCY, A DIVISION OF FNIC Marketing is arguably the most disliked and put off task within the farming, ranching and cattle feeding community. It is complex and daunting; the options feel endless and horror stories abound about getting backwards on a position and “sending Chicago a check.” In many cases, producers and operators have turned to professional marketers for either advisory services or an all-out “white glove” approach to marketing and risk management. No market has demonstrated its volatility over the past five years more than the cattle complex. In October 2020, fat cattle were selling into some locations at sub $100 per hundredweight live. The USDA 5-Area Weekly Weighted Average Direct Slaughter Cattle Report for the week of Nov. 2, 2020, posted an average $104.24 live trade on 20,626 head. Compare that to the week this article was written in late April 2025 where the average live trade was $211.14 per hundredweight on 23,574 head, down from weeks earlier where some segments averaged $214. At the same time, the feeder index is setting records at $291.95. The risk for the cattleman, quite simply, is unprecedented. Within five years the market has doubled the value of a herd, pen or calf. In some cash markets it has more than doubled it. At no time in the history of the cattle trade has your herd, pen or feedlot been worth what it is right now. So how do we approach this risk? What are our options? First, this price risk is transferable. This means you can shift that risk to someone else in exchange for a margin or premium. There are numerous ways to transfer the risk, including forward contracting, private treaties, active hedging with outright futures or options and Livestock Risk Protection (LRP). The LRP program has been around for many years, but in crop years 2021 and 2022 it underwent a major overhaul, making it much more attractive to American cattle producers. It has become a widely used product, evidenced by the fact that in 2017, there were approximately 71,000 head covered but, by October 2023, that number had swollen to 5.2 million head. That represents a nearly 4,000 percent increase in liability. LRP offers coverage on a variety of animals, from unborn calves to fat cattle, with feeder weights as high as 1,000 pounds and fat weights as high as 1,600 pounds. It is federally subsidized and, when compared to a corresponding put at the same strike, it is about 35 percent cheaper at the high end of coverage levels. At out-of-the-money levels, it can be much more highly discounted, as the subsidy increases when the coverage level is lowered. It sets a coverage level based off the board price and settles against Cash Indexes. For feeders that is the CME Feeder Index and for fed cattle that is the “>80 percent Choice” Series in the “Steers: Live FOB” on the USDA CONTINUED ON PAGE 36 Denton 1,440 sq ft 3 BR 2 Baths & Office You Deserve a 1-888-927-3272 1230 E 9th Minden, NE 614 Maple Clay Center, KS Click for a Price Quote at wardcraft.com Wardcraft Home! Inventory Homes Built and Ready to Move! • New! Quartz Countertops • Custom Build • 2x6 Construction • 6,100 Homes Built Scottsbluff #5994 1,923 sq ft 3 BR 2.5 Baths & Office Fullerton III #6049 1,860 sq ft 2 BR 2 Baths & Office
RkJQdWJsaXNoZXIy NTMxNTA5