Protecting Your Profits With Price Insurance

With the value of cattle continuing to rise, the amount of risk tied up in each animal in the pasture and the feedlot also increases. Risk management tools are available to producers to help mitigate the effects of the cattle cycle and volatility in the market.

Cash cattle prices have risen for the last seven weeks. The spread between futures and cash is really wide with multiple issues affecting the spread.

Fifth generation rancher, Jared Brackett, Filer, Idaho, runs a cow-calf and backgrounding operation with his family. Brackett began purchasing Livestock Risk Protection (LRP) on his cattle four years ago as it was cheaper and easier than using futures and options for hedging.

“I tell people we’re not trying to find the top of the market with price insurance, we’re trying to protect what you have,” Brackett says. “You don’t buy fire insurance for your house when it’s on fire. You buy it before, hoping you never have to use it. It’s the same concept with price insurance. You buy it hoping you have to pay your premium because then all your cattle are worth more.”