Table 3 shows how LRP feeder cattle insurance contracts would have performed for steers weight 1 from 2019-2022 under the varying premium subsidies in effect. Source: Livestock Marketing Information Center (LMIC) Table 2: Chicago Mercantile Exchange (CME) October Feeder Cattle Contract, $/cwt.ĬME Oct Feeder Cattle Futures (Apr 24-26)ĬME Feeder Cattle Cash Settlement Index (Oct 23-25) LRP insurance is a tool that might help producers manage potentially unfulfilled price expectations at an affordable cost. However, in any particular year, it may not be that great of a prediction of where prices will end up. How accurate is this forecast for October feeder cattle prices? Table 2 would suggest that, on average, it might be pretty good. The expected ending value for steers weight 1 (< 600 lbs.) for the same coverage period was 10% higher, at $256.995. This translated into an expected ending value of $233.632 for LRP feeder cattle insurance on steers weight 2 (600-900 lbs.), with an ending date of October 23 (26-week policy period), taken out overnight from April 24 into April 25. For example, the April 24 CME feeder cattle futures price for October closed at $233.65 per hundredweight (cwt.). Why is this important? LRP insurance is an easy-to-understand tool that livestock producers can use to manage the risk of potential downward movements in the national market price expectation while still allowing themselves to potentially benefit from upward movements in the market price. These recent changes are designed to make LRP insurance more accessible to livestock producers. Table 1: Livestock Risk Protection Feeder Cattle Insurance (LRP-Feeder Cattle) Usage in Nebraska 2012-2023. These include increases in the premium subsidy rates, moving the premium due date from the beginning to the end of the coverage period, expanded limits on how many head can be insured, and several changes expanding the availability. Several enhancements and improvements to the LRP insurance program for cattle producers have taken place over the last four years. This insurance is available for cattle and swine producers to protect against downward movements in the national market price. One of the price protection tools Nebraska cow-calf producers are increasingly using is Livestock Risk Protection (LRP) insurance (Table 1). An unprotected, overly optimistic price forecast can hurt your bottom line just as easily as a downward trend that suddenly gets worse. Protecting price should be just as much - maybe more - of a priority when the price outlook is optimistic, as it is in a downward trend. Price trends can suddenly turn and quite often expectations may not be met. However, a lot can happen between now and marketing time. Protecting market price may become a secondary priority.
Expansion may come to mind and effort is often put forth to improve production output.
When profit margins are strong, livestock owners have a natural tendency to relax a bit and enjoy the business of producing animals. That would project a 2023 October price for 5-weight steers in Nebraska somewhere around $275 per cwt. The Nebraska basis for 500-600 pound steers to the CME Feeder Cattle Futures price in October is often in that $20-$30 range per hundred weight. A better indicator of what prices might be like this fall is the October futures contract price for feeder cattle, which is currently trading in mid-$230’s. These prices have cow-calf producers optimistic about profits in 2023 despite challenges with forage availability and input costs.
Current prices for 600-pound calves in Nebraska are in the mid-$200 range.
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