ORIGINALLY WRITTEN BRADLEY GOERING
Agricultural producers are relieved that the grain prices have gained strength over the past few months. The livestock industry has felt the impact as well. They know it costs more to feed their animals-both hay and grain, as the drought cycle has continued in most areas.
We have the opportunity in agriculture to protect our crops for the down years with crop insurance. About a year ago, a pilot project in Iowa was approved to demonstrate what the affects might be if the same thing were offered to livestock producers.
Until the Agriculture Risk Protection Act of 2000, federally backed insurance plans for livestock protection was unlawful. We are waiting to see what the outcomes of the two implemented pilot programs in Iowa may have to offer producers.
The first program approved is the Livestock Gross Margin. The program provides coverage to swine producers from price risks for six months up to 15,000 hogs per period.
This plan protects the gross margin between the value of the hogs and the cost of corn and soybean meal. The prices are based on hog futures and feed futures.
LGM protects producers from the decline of hog prices and the increase cost of feed. Coverage levels will range from 85 to 100 percent.
A second program in the pilot project is the Livestock Risk Protection. This particular program protects declining hog prices for periods of 90, 120, 150 or 180 days to 32,000 hogs per year. Producers can sign up for the pilot program at any time during the year. When hog prices decline against the specified price index in the policy, the producer is protected and the insurance makes up the difference.
Coverage levels of LRP range from 70 to 95 percent of the daily hog prices.
The LRP was offered to 30 Iowa counties in April 2002, while the LGM insurance began selling July 2002 for the Aug. 1 to Jan. 31 insurance period. The length of these two pilot insurance programs will depend on the number of participating farms.
If the program reaches fruition, livestock producers will have another option available to them in their risk-management toolbox.
Bradley Goering can be reached by telephone at 620-327-4941 or by e-mail at bgoering@thecsb.com.
