The U.S. beef herd is in its second year of distinct contraction as part of the usually around eight-year broader cattle cycle. That’s normally a good sign for cattle prices, but disruptions like the COVID-19 pandemic and now rocketing feed costs can throw a wrench into the cycle’s normal function. That makes risk management important, and Livestock Risk Protection (LRP) insurance is one of the tools producers have at their disposal to protect themselves from downside market price risk. While LRP doesn’t establish a cash feeder cattle price, it essentially provides a price floor based on national CME Group feeder cattle futures prices for a specific ending date. It enables producers to still take advantage of market price rises by selling at the higher price. By locking in an LRP price, a producer may be eligible for a payment in marketing owned cattle if prices dip below the established levels. One of the changes made to the policy last year was the government subsidy on premiums increased, depending upon coverage level. Advantages of LRP are that it carries no brokerage fee or margin, it doesn’t make the producer susceptible to losses because of swings in the market, like with futures and options, and a smaller number of cattle can be insured. Basis risk is still a factor for producers using LRP, and there’s a 12,000-head maximum for animals covered by the policy. See more about LRP.