Menu
Forums
New posts
Search forums
What's new
New posts
New media
New media comments
New profile posts
Latest activity
Media
New media
New comments
Search media
Members
Current visitors
New profile posts
Search profile posts
Log in
Register
What's new
Search
Search
Search titles and first posts only
Search titles only
By:
New posts
Search forums
Menu
Log in
Register
Forums
Non-Cattle Specific Topics
Coffee Shop
Livestock Risk Protection
JavaScript is disabled. For a better experience, please enable JavaScript in your browser before proceeding.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an
alternative browser
.
Reply to thread
Help Support CattleToday:
Message
<blockquote data-quote="JMJ Farms" data-source="post: 1307130" data-attributes="member: 24583"><p>I had a LRP policy in the last quarter of last year. And it was a very beneficial decision. It returned me $7 for every $1 I spent on the premium. In 13 weeks. Bought it in Sept. Expired Dec 15. Couldn't have hit it any better. With that being said..... Here's the short of it. </p><p></p><p>It's a gamble. But I guess any type of farming/ranching is also. Just pay close attention to the adjustment factor. This was never mentioned when I bought the policy. It was however provided when the policy arrived in the mail. I was told that whatever the CME futures closed at on Dec 15 (which was the day my policy matured) vs. the price I had locked in would be how the potential indemnity would be calculated. I bought a policy on "steers weight 1" Example. I locked in a price of 2.0032 on steers weighing less than 600 pounds. Futures closed at 1.55 on Dec 15. That's 0.45 per pound insured. Use 50000 pounds. That's $22500. Wrong. The "actual ending value" can be found on CME website. I think it's called the "daily feeder cattle price index". The "actual ending value" can also be calculated by taking the CME futures ending price and multiplying it by the adjustment factor. The adjustment factor was on my policy. Not sure if it's on the LRP website. </p><p></p><p>Adjustment factor of 110% on "steers weight 1". So here's the calculation. 1.55 x 110% = 1.705. Lock in price of 2.0032 - 1.705 = 0.30 x 50000 pounds = $15000. Still a good investment.</p><p></p><p></p><p> I told this whole story to point out the key factor. Prices basically have to fall 10% before you realize any benefit. If they fall 8% you only lose your premium which you could have saved. If they fall 10% you will probably recoup your investment. If they fall 22% like they did on mine you'll be glad you bought it. I bought a $1200 policy and got a check for right at $9k. But I had a really strong feeling they were headed south and headed fast. I just happened to be right (usually that's not the case). I could have lied and insured more than I actually had a made a lot of easy money. But I like sleeping at home. </p><p></p><p>So here's the bottom line. As far as risk protection I think it's a good thing. In a stable, sideways, or rising market I don't think it's beneficial, unless it helps you sleep at night. Just keep in mind that the feeder cattle futures price has to drop 10% between the purchase date of the policy and the ending date for the insured to recoup their premium. That's a somewhat substantial drop and doesn't happen often in a short period (at least historically). This may be the new norm. IDK? Also, the USDA is the one figuring these "projected" prices and they are pretty sharp. I'm no expert but I have studied these LRP policies pretty extensively and if I can help I'd be glad to.</p><p></p><p>Hope this is not too confusing.</p></blockquote><p></p>
[QUOTE="JMJ Farms, post: 1307130, member: 24583"] I had a LRP policy in the last quarter of last year. And it was a very beneficial decision. It returned me $7 for every $1 I spent on the premium. In 13 weeks. Bought it in Sept. Expired Dec 15. Couldn't have hit it any better. With that being said..... Here's the short of it. It's a gamble. But I guess any type of farming/ranching is also. Just pay close attention to the adjustment factor. This was never mentioned when I bought the policy. It was however provided when the policy arrived in the mail. I was told that whatever the CME futures closed at on Dec 15 (which was the day my policy matured) vs. the price I had locked in would be how the potential indemnity would be calculated. I bought a policy on "steers weight 1" Example. I locked in a price of 2.0032 on steers weighing less than 600 pounds. Futures closed at 1.55 on Dec 15. That's 0.45 per pound insured. Use 50000 pounds. That's $22500. Wrong. The "actual ending value" can be found on CME website. I think it's called the "daily feeder cattle price index". The "actual ending value" can also be calculated by taking the CME futures ending price and multiplying it by the adjustment factor. The adjustment factor was on my policy. Not sure if it's on the LRP website. Adjustment factor of 110% on "steers weight 1". So here's the calculation. 1.55 x 110% = 1.705. Lock in price of 2.0032 - 1.705 = 0.30 x 50000 pounds = $15000. Still a good investment. I told this whole story to point out the key factor. Prices basically have to fall 10% before you realize any benefit. If they fall 8% you only lose your premium which you could have saved. If they fall 10% you will probably recoup your investment. If they fall 22% like they did on mine you'll be glad you bought it. I bought a $1200 policy and got a check for right at $9k. But I had a really strong feeling they were headed south and headed fast. I just happened to be right (usually that's not the case). I could have lied and insured more than I actually had a made a lot of easy money. But I like sleeping at home. So here's the bottom line. As far as risk protection I think it's a good thing. In a stable, sideways, or rising market I don't think it's beneficial, unless it helps you sleep at night. Just keep in mind that the feeder cattle futures price has to drop 10% between the purchase date of the policy and the ending date for the insured to recoup their premium. That's a somewhat substantial drop and doesn't happen often in a short period (at least historically). This may be the new norm. IDK? Also, the USDA is the one figuring these "projected" prices and they are pretty sharp. I'm no expert but I have studied these LRP policies pretty extensively and if I can help I'd be glad to. Hope this is not too confusing. [/QUOTE]
Insert quotes…
Verification
Post reply
Forums
Non-Cattle Specific Topics
Coffee Shop
Livestock Risk Protection
Top