Well..... LRP is entirely based on the futures and has nothing to do with the cash market. Now the two are definitely related but how closely? It is insuring against a large drop in the futures market. Looking back 2015 this would have paid like a slot machine. 2013 and 2014 it would have cost money. The question becomes how stable do the markets look today.
One example he talked about was a producer with a good size herd. His coverage was to late March. In January it was looking like he would be writing a big check. Then the Russians invaded and a few other things which cause the futures to drop. So instead of having to write a $10,000 check they gave him a $40,000 check.
There is different time lines and % of coverage. The closer you are the the LRP closing date and the lower the % is the cheaper the coverage is. He put me on an email list that give the information every day.
Example steer 600-1000 pounds with an end date of 3/31 (the shortest coverage available today)
The expected value is $1.8640 The lowest rate of coverage is $1.66 which means the futures market and some other figures calculated out for a value would have to drop below $1.66 for you to get paid. With that coverage your premium is $1 per head
The other extreme. Steer 600-1,000 end date of 10/27 (longest coverage they list today)
The expected value is $207.34. The highest % coverage rate is $2.079. The premium is $51 per steer.
The way I see it is if you figure when you plan to sell and what your except able break even is counting the premium. So you are insured against a serious down turn which would put you in to a loss situation. It was not what I was thinking it was. I don't know that I will do it but I don't know that I won't do it either. But it is certainly worth looking at. And you can do as many or as few head as you want. So it might be worthwhile to do a few head just to check the water.