2. Livestock Insurance: Overview Livestock Risk Protection (feeder cattle, feed cattle, same) Livestock Risk Protection (LRP) for swine The insurable types and weights of feeder cattle under livestock insurance Insurance against price changes Indemnity calculations

3. Livestock Insurance: LRP for Feeder Cattle Overview Livestock covered by LRP in Wyoming includes: – Feeder Cattle – Fed Cattle – Swine History of LRP offerings: – Feeder cattle coverage was first offered on 6-9-03 – Feeder cattle endorsement suspended by RMA on 12-24-03 after BSE case of previous day – Feeder cattle endorsement resumed on 9- 30-04

4. Livestock Insurance: LRP for Feeder Cattle Geographic Coverage The program has expanded by geographic coverage, type and weights of feeder cattle Now available in all counties of Wyoming and in all counties of 19 other states LRP for feeder cattle offerings and limitations Producers remain subject to basis price risk

5. Livestock Insurance: LRP for Feeder Cattle Basics of LRP Product Offered: Protection for producer against decline in cattle prices below the established coverage price Insurance Period: Offered for 13, 17, 21, 26, 30, 34, 39, 43, 47 or 52-week periods – The producer will choose a time closest to the time cattle will be marketed or time when cattle will reach the desired weight

6. Livestock Insurance: LRP for Feeder Cattle Basics of LRP (cont.) Application: An application is required to purchase insurance coverage Specific Coverage Endorsement: A producer must file a Specific Coverage Endorsement for each group of feeder cattle to be insured. Several endorsements may be filed under one application as long as beneficial interests are the same

7. Livestock Insurance: LRP for Feeder Cattle Types and Weights of Feeder Cattle Insurable Steer feeder cattle < 6.0 cwt for steers and bulls and steers only from 6.0 to 9.0 cwt Heifer feeder cattle < 6.0 cwt and heifer feeder cattle from 6.0 to 9.0 cwt Predominantly Brahman heifers, steers, and bulls < 6.0 cwt and predominantly Brahman heifers and steers from 6.0 cwt to 9.0 cwt Predominately dairy heifers, steers and bulls < 6.0 cwt and predominately dairy heifers and steers 6.0 to 9.0 cwt

8. “Crop” year: [June 1 to June 30] – Annual Policy Limits: The maximum number of head of feeder cattle that may be covered during a crop year is 2,000 head Endorsement Limits: – A limit of 1,000 head of feeder cattle may be insured under any one Specific Coverage Endorsement Livestock Insurance: LRP for Feeder Cattle Types and Weights of Feeder Cattle Insurable (cont.)

9. Livestock Insurance: LRP for Feeder Cattle Coverage Prices and Levels Coverage Prices Coverage Levels Price Adjustment Factors Use of Price Adjustment Factors Off-setting Transaction

10. Livestock Insurance: LRP for Feeder Cattle Actual and Expected End Value of Feeder Cattle Expected End Value – This is the expected prices at the end of an insurance period for each specific type and weight of feeder cattle announced daily on the RMA website Actual End Value – This is the value of the cash settled CME feeder cattle index on the end date of the insurance period, adjusted by RMA for feeder cattle type and weight Subsidy Level – RMA provides a 13% subsidy on LRP feeder cattle

11. Livestock Insurance: LRP for Feeder Cattle Example

13. Livestock Insurance: LRP for Feeder Cattle Indemnity Calculation: Example 1 Suppose a producer actually sells 1,000 800-pound steers on April 26 th for $85.00/cwt The CME-reported actual ending value is $85.00/cwt Would the producer receive an indemnity? Let’s look at the calculations

14. Livestock Insurance: LRP for Feeder Cattle Indemnity Calculation: Example 1

15. Livestock Insurance: LRP for Feeder Cattle Indemnity Calculation: Example 2 Suppose a producer actually sells 1,000 800-pound steers on April 26 for $82.00/cwt The CME-reported actual ending value is $85.00/cwt Will the producer receive an indemnity? Let’s look at the calculations

16. Livestock Insurance: LRP for Feeder Cattle Indemnity Calculation: Example 2

17. Livestock Insurance: LRP for Feeder Cattle Indemnity Calculation: Example 3 Suppose the producer actually sells 980 750-pound steer calves on April 26 – 2% death loss Reported within 72 hours – Lower sales weight – The producer sells the calves for $85.00/cwt The CME-report actual ending value is $85.00/cwt Will the producer receive an indemnity? Let’s look at the calculations

18. Livestock Insurance: LRP for Feeder Cattle Indemnity Calculation: Example 3

19. Livestock Insurance: LRP for Feeder Cattle

20. Livestock Insurance: LRP for Feeder Cattle Summary Livestock Risk Protection for feeder cattle The insurable types and weights of feeder cattle under livestock insurance Insurance against price changes Indemnities for transactions The difference between LRP insurance coverage and an options coverage

21. Livestock Insurance: LRP for Fed Cattle Overview History Geographic Coverage LRP-Fed Cattle Attributes Application Offsetting Transaction

22. Livestock Insurance: LRP for Fed Cattle Basics Target Weights Endorsement Length Expected Ending Value Coverage Prices Premium Rate Actual Ending Value Current and Archived Information

23. Livestock Insurance: LRP for Fed Cattle Example

24. Livestock Insurance: LRP for Fed Cattle Premium Calculations

25. Livestock Insurance: LRP for Fed Cattle Example When will a producer be indemnified for a decline in national fed cattle prices? Note that the price at which the producer sells his fed cattle does not enter this calculation How is the indemnity calculated? Indemnity = [Number of Head Insured x Target Weight, in hundredweight x (Coverage Price - Actual Ending Value)] x Insured Share

26. Livestock Insurance: LRP for Fed Cattle Example Larry actually marketed his 1,000 head of fed cattle on January 2 The actual ending value for the 13 week endorsement period he selected, posted on January 2, indicated an actual ending value of $93.890 for the fed cattle in which he 100 percent ownership share Will Larry receive an indemnity for his fed cattle? Let’s look at the calculations

27. Livestock Insurance: LRP for Fed Cattle Example

28. Livestock Insurance: LRP for Fed Cattle Summary Fed cattle producers may use LRP-Fed Cattle to protect against a decline in the national-level prices of fed cattle This product does not address other risks such as animal sickness, death loss, increases in feed costs, and price basis risk

29. Livestock Insurance: LRP for Swine Overview History Geographic Coverage LRP-Swine Attributes Application Offsetting Transaction

30. Livestock Insurance: LRP for Swine Basics Target Weights Endorsement Length Expected Ending Value Coverage Prices Premium Rate Actual Ending Value Current and Archived Information

31. Livestock Insurance: LRP for Swine Example

32. Livestock Insurance: LRP for Swine Premium Calculations

33. Livestock Insurance: LRP for Swine Example A producer will be paid an indemnity when the actual ending value of the market hogs (based on national cash prices) is less than the coverage price selected by the producer Note that the price at which the producer sells his market hogs does not enter this calculation Indemnity = [Number of Head Insured x Target Weight, in lean weight x (Coverage Price - Actual Ending Value)] x Insured Share

34. Livestock Insurance: LRP for Swine Example George actually marketed his 5,000 head of market hogs on January 2 The actual ending value for the 13 week endorsement period he selected, posted on January 5, indicated an actual ending value of $58.480 per hundredweight for the market hogs in which he 100 percent ownership share Will George receive an indemnity for his market hogs? Let’s look at the calculations

35. Livestock Insurance: LRP for Swine Example

36. Livestock Insurance: LRP for Swine Summary Swine producers may use LRP- Swine to protect against a decline in the national price of slaughter hogs This product does not address other risks such as animal sickness, death loss, increases in feed costs and price basis risk