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Consider Livestock Price Insurance

By Travis Peardon, AAg, Regional Livestock Specialist, Outlook

May 2017

Marketing livestock is hardly straight-forward and only through hindsight do we actually know whether the pricing decision we made (or didn’t make) on a particular day was good, bad or ugly. The Western Livestock Price Insurance Program (WLPIP) has helped alleviate some of the risk of marketing cattle into what is often a volatile and uncertain market.

In the last two years, WLPIP has provided $12 million to Saskatchewan cattle producers.  In particular, producers who purchased calf price insurance in 2015 and 2016 received payments when the market declined from the spring to the fall.  In 2015, calf price insurance claims totalled $5.1 million and in 2016, producers accessed over $6 million in calf price insurance claims.

Predicting where the cattle market will be in the fall is not easy.  The last two years have proven that even the most experienced livestock marketers don’t know how the market is going to unfold.  Between the futures and cash markets, supply and demand, currency, and grain prices, it is no wonder the many moving parts of livestock pricing make marketing an emotional and financial roller-coaster. WLPIP provides an effective option to protect against the unpredictability of the cattle market.

WLPIP is a market-driven program that provides livestock producers with the option of purchasing protection against an unpredictable downward move in the average local cash market.  For a premium, producers can purchase an insured index, or floor price, for cattle approximately three to nine months out into the future. As the policy enters its final four weeks, cattle producers have the flexibility of submitting a claim. Settlement is based on an index of the current local cash price – compiled using weekly sales data from Canfax and auction yards across Western Canada.  If the settlement index is lower than the price insured for, the difference will be paid to the producer.

Half of the risk-management battle is knowing the price at which you wish to establish that protection. Having a target for the coverage you want to purchase can make your decisions easier and faster. This way, you can take a quick glance at the daily premium and carry on with your day.

Coverage is available for purchase Tuesday, Wednesday and Thursday from 2 p.m. to 5:30 p.m. MST. Set a reminder through your email, an alarm on your phone, or even write on a sticky note to help you to remember to look at the premium tables. You can also sign up to receive daily emails when the premium and coverage information is released.

May 31, 2017, is the last day price protection can be purchased for spring born calves that are traditionally marketed in the fall.  Price insurance for the feeder cattle, finished cattle and hogs can be purchased year-round. 

Price insurance is purchased through an online process.  If a producer does not have an online account and is interested in purchasing calf price insurance before the May 31 deadline, they need to contact their local Crop Insurance office to start the application process.  SCIC can also provide more information on how livestock price insurance works, the sign-up process and how to purchase policies.

For more information regarding the Western Livestock Price Insurance Program, visit www.saskcropinsurance.com/wlpip, call 1-888-935-0000 or contact your local Crop Insurance Office.

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