The Risk Management Agency (RMA) issued a press release announcing the enhancements to the Dairy Revenue Protection (DRP), Livestock Risk Protection (LRP), and the Livestock Gross Margin (LGM) programs effective in July 1, 2019, which means the 2020 policy. RMA has removed the previous $20 million capacity limitation that applied to all livestock programs.
The LRP improvements include expanded coverage for swine, fed cattle, and feeder cattle to all states; increasing the premium subsidy from 13 to 20-35 percent based on coverage level; updated Chicago Mercantile Exchange trading requirement to allow for differing endorsement lengths, increasing the per head and annual head limits – for fed and feeder cattle 3,000 head per endorsement, 6,000 head annually and for swine 20,000 per endorsement and 75,000 annually and modified the price adjustment factor for predominantly dairy cattle to more accurately reflect market prices.
The DRP improvements included reducing the minimum declared butterfat from 3.5 to 3.25 pounds so the range is now from 3.25 – 5 pounds, and expanding the protein range from 2.75 – 4 pounds, removing the declared butterfat test and instead uses a declared protein test ratio, and removed the 70 and 75 percent coverage levels. RMA also issued a Product Management Bulletin PM-19-022 that stated that the FCIC Board of directors approved the revisions to the DRP plan of insurance on November 15, 2018.
ANALYSIS – LRP and LGM have been available for sale since 2003. LRP provides coverage against price declines. LGM provides coverage against loss of gross margin, which is the market value of the livestock minus feed costs. Since their inception, they have been expanded to cover LRP Feeder Cattle, LRP Fed Cattle, LRP Lamb, LRP Swine, LGM Cattle, LGM Dairy, and LGM Swine. Sales of these policies was constrained by the $20 million cap on livestock expenditures in the Federal Crop Insurance Act. There have also limits on the number of head covered.
DRP is the most recent offering for livestock. DRP covers a decline in revenue caused by either reductions in price or production on the milk produced in a quarterly basis.
These changes will hopefully expand participation in the livestock programs. The contract change date is April 30, 2019 for policies effective on July 1, 2019. The policy documents effective for 2020 can be found at https://www.rma.usda.gov/Topics/Livestock.
All statements made are opinions of the author and are not intended to provide legal opinions or legal advice.