LIVESTOCK RISK PROTECTION COVERAGE APPROVED FOR LAMB
Shirley Pugh (202) 690-0437
WASHINGTON, Oct 25, 2006 - The Livestock Risk Protection (LRP) plan of insurance
for lamb, approved by the
Federal Crop Insurance Corporation Board at its September 28 meeting, will provide price insurance coverage
to lamb producers in 27 states. There is currently no
type of price insurance, exchanges offering futures, or derivative contracts on lamb prices for lamb producers.
LRP-Lamb was originally submitted by Applied Analytics Group, Inc., the Livestock Market Information Center
and the American Sheep Industry Association. The product was developed in response to needs voiced by producers and agri-businesses in the sheep and lamb industry.
LRP Lamb is similar in concept to LRP for swine and cattle, offering protection against declines in slaughter
lamb prices. Producers are offered coverage prices based on a statistical model that uses various industry data,
such as cutout, slaughter, weight, and pelt information, to forecast cash prices at the policy end date. As policies
mature, producers receive insurance payments if the cash index, a figure based on actual
Agricultural Marketing Service market information, is below the coverage price purchased.
LRP-Lamb will be available in all counties in 27 states: Arizona, California, Colorado, Idaho, Indiana, Illinois, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, New Mexico, Nevada, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota, Texas, Utah, Virginia, West Virginia, Wisconsin, and Wyoming.
The LRP Lamb policy will contain provisions, known as “circuit breakers,” which allow RMA to suspend sales when
certain restrictions in the policy are triggered. LRP-Lamb coverage may be offered on a limited basis or not
offered at all during a sale period if:
- The actuarial model prediction of price for the current day exceeds a preset tolerance level. Specific tolerance
levels will apply to the 13-, 26-, and 39-week insurance periods. If a tolerance level is exceeded, any one or more of the insurance periods may not be offered for sale.
- The USDA Secretary determines an adverse event has occurred which the model does not reflect in its rating.
- Rating information is unavailable.
- Any other basis RMA determines appropriate.
LRP-Lamb will be offered weekly with sales beginning on a Friday, after rates are received, validated, and released
by RMA, and ending at 12:00 PM central time the following Monday. Coverage will be offered for 13-, 26-, and 39-week periods. The pilot contains limits on sales at $250,000 in premium per day, and an annual limit of 1 million head insured.
Detailed program information will be released in spring 2007, with sales expected to begin early summer 2007.