Beef Buzz News
Dakota Moss Says Cattle Producers Can Benefit from Utilizing a LRP Program
Wed, 20 Apr 2022 09:46:04 CDT
Dakota Moss discusses the opportunity for cattle producers to buy into risk management. With a Livestock Risk Services, a company he has established, Moss is able to offer risk management products to producers.
"USDA has the livestock risk protection program, and it is a very versatile, flexible tool that can fit any size cow producer whether they are cow/calf or stocker/feeder," Moss said. "There is an avenue in the program for almost any operation."
Moss said the USDA created this program to give the producer peace of mind knowing that their downside risk is protected, yet the top side of the market is still wide-open. If the market goes up, Moss said producers can still go get that price.
"Whether it is a cow/calf producer selling cattle this fall and they want to lock in a price for their calf crop to guarantee that cash flow giving them some risk protection, they can do that," Moss said. "Or, if they are out buying calves right now to run as summer stockers on grass till this fall, we can work with both those types of producers to give them some guarantees to protect their bottom line and really be sure of their operation where they know that when they go to the sale barn this fall, they are not just hoping for the best."
While this program has been around for a few years, it has gained popularity recently.
"It is a really old program that kind of got re-tooled after Covid hit and we saw that huge need for a much better risk management tool for cattle producers," Moss said. "When covid hit, USDA's risk management agency rolled out a wave of changes for this program where they increased the subsidies greatly to make it much more economical than it ever was and then also opened up the head limits in the program where it fits almost any size producer."
Moss said a price can be locked in up to 6,000 head on a single contract with a current maximum of 12,000 head per producer, per year. The program is open for any size producer to utilize, he added.
The first step to enrolling in the program, Moss said, is finding a Livestock Risk Services agent, located in the Oklahoma City Stockyards.
"The first thing we would have to do is just sit down and discuss what they do on their operation that way we know on our side, how they do business and how they market cattle so we could let them know how this could work for them," Moss said.
Then, Moss said there would be an application to complete in order to get the producer's name in the system so that when they see a floor price that fits them, they can close on that to secure their bottom line.
"We are just locking in the floor price," Moss said. "We are locking in the futures price, and we don't settle on the futures like a hedge would."
We settle on what's called the cattle feeder cash index, Moss said, which is a 12-state regional average that is the sales data from the sale barns or reports from USDA.
"You can lock in that futures price, but you settle on the cash average, so it helps line up more of what might actually be happening on their actual cattle," Moss said.
Moss said the program does not account for how the cattle actually sell but is strictly just protection against the market. A producer still has that opportunity to sell his cattle however he wants to and maximize his profit potential for his set of cattle in a way that best fits him, he added.
Unlike value added programs, Moss said livestock risk protection does not have anything to do with how people sell their cattle. The LRP simply goes back to what the market is doing at that time, he said.
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