USDA Approves New Livestock Insurance Plans

Risk Management Agency Program Announcement

Contact: Nelson Maurice (816) 926-7914
Nelson.Maurice@rma.usda.gov

Washington, DC, November 21, 2001 – The U.S. Department of Agriculture's Federal Crop Insurance Corporation (FCIC) approved two pilot insurance programs for Iowa swine producers to protect them from lower hog prices. The new programs, which will begin in 2002, were authorized under the Agriculture Risk Protection Act of 2000 (ARPA).

Until ARPA, federally-backed insurance plans providing livestock protection were prohibited by law. These types of livestock insurance programs, if successful, will provide livestock producers risk management tools for reducing their price risks. Livestock products represent about one-half of the total farm cash receipts.

The two programs approved are:

The Livestock Gross Margin (LGM) pilot, submitted by Iowa Agricultural Insurance Innovations, provides coverage to swine producers from price risks for six months and up to 15,000 hogs per period. The product protects the gross margin between the value of the hogs and the cost of corn and soybean meal. Prices are based on hog futures contracts and feed futures contracts. LGM protects producers if feed costs increase and/or hog prices decline, and depend on the coverage level selected by the producer. Coverage levels range from 85-100 percent.

The Livestock Risk Protection (LRP) pilot, submitted by the American Agri-Business Insurance Company, protects against a drop in hog prices. Swine, can be insured for 90, 120, 150, or 180 days, and up to a total of 32,000 animals per year. Unlike traditional crop insurance policies which have a single sales closing date each year, LRP will be priced and available for sale continuously throughout the year. The policy LRP protects producers against declining hog prices if the price index specified in the policy drops below the producer's selected coverage price. Coverage levels range from approximately 70-95 percent of the daily hog prices.

During the next six months, program materials will be developed and agents will be trained. The LRP sales are scheduled to begin in April 2002. LGM insurance product is scheduled for sale in July 2002 for the August 1- January 31 insurance period. Both products will be available from private insurance agents. The length of the pilot programs will be determined by farmer participation, and the financial performance of the programs.

Item	Livestock Gross Margin (LGM)	Livestock Risk Protection (LRP)
Contacts	Barry Cleaveland, Iowa Agricultural Insurance Innovations (IAII) (712) 325-5721	Rex Runyon, American Feed Industry Association, (703) 558-3579
Who's Eligible?	Swine producers in all Iowa counties feeding hogs for at least 30 days	Swine producers in all Iowa counties
What Do the Products Do?	LGM protects the margin between the hog price and feed costs if feed costs increase or hog prices decline, depending on coverage level selected by producer	LRP protects against declining hog prices if the price index, as specified in the policy, drops below the producer's selected coverage price
Where Are the Policies Offered?	All Iowa counties	All Iowa counties
When?	Sales closing dates will be January 31 and July 31. The product will first be available in July 2002	Continuous sales beginning in April, 2002
Insurance Periods	August 1 - January 31 February 1 - July 31	For 90, 120, 150, or 180 days, with sales throughout the year, within certain restrictions as specified in the policy


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