LRP covers the risk of price declines for feeder cattle, fed cattle and swine. It provides producers an indemnity if a regional or national cash price index falls below an insured coverage price. Similar to a put option, the LRP policy is price insurance only, providing single-peril price risk protection for the future sale of insured livestock.
LGM offers protection against a decline in the feeding margin for cattle and swine. An indemnity is paid if the insured gross margin is greater than the total actual gross margin at the end of the insurance period.
Both LRP and LGM policies are available through the federal crop insurance program. Neither guarantees a cash price received as the producer’s actual cash market selling price is not used to determine indemnities. LRP and LGM Insurance programs allow producers to customize these products to their individual needs and efficiently manage price risk without the use of the futures market.