Reevaluating livestock risk management tools

Before the pandemic began, USDA was already searching for ways to update risk management tools for livestock producers. By the summer, they’ll have a new program to help you reduce volatility on the farm.

After the Holcomb, Kansas plant firesent cattle prices into a free fall, USDA opened an investigation into price volatility and marketing practices, USDA Undersecretary Greg Ibach explains what they were looking for.

According to Ibach, “As we did an initial dive into the situation, we wanted to make sure we looked at price discovery, competition, and transparency to make sure that those tools were active and those features were available to producers.”

The report found no indication of wrong-doing, but it did recommend USDA reevaluate livestock risk management tools to make them more effective.

“To make adjustments to those, to make them better understood by producers, and help producers embrace them,” Ibach states. “Grain farmers embrace risk management tools provided by USDA each and every day, and our livestock producers don’t do that at the same level.”

According to USDA, 80 percent of major crop acres are enrolled in federal crop insurance programs, while only 0.17 percent of total cattle inventory use any sort of USDA risk management. Because of low participation, USDA is making a few changes to livestock risk management and the Livestock Gross Margin Programs.

“Both of those programs were allowing greater sized operators to be part of those programs in the future... We are also increasing the subsidy with regular crop insurance that a person buys for their corn or soybeans or other crops out there...,” Bill Northey, USDA Farm Production and Conservation Undersecretary, states.

Another change for 2021 will allow livestock producers to pay after the cattle are sold, instead of up front.

Brandon Willis, a former administrator for USDA’s Risk Management Agency, says that producers interested in learning more should start by finding a good agent.

“There are not a lot of agents that want to focus on LRP. Historically it has not been a food product, now it is a good product,” Willis explains. “You have to do special training as an agent to sell it. The best thing to do is if you look at USDA’s website, they have an agent finder tool and you can click on the button that says ‘find an agent that sells livestock.’”

USDA also has a comment period open until December 21st for feedback on the Pasture, Rangeland, and Forage Program.


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