Livestock Risk Protection, or LRP, insurance has emerged as a modern and effective risk management tool available to cattle producers.
LRP coverage has grown in use as a risk management solution to offset financial exposure in an increasingly volatile cattle market. It is an alternative to traditional futures markets, allowing cattle raisers to hedge the actual number of cattle in their herd, rather than being tied to standardized feeder cattle futures contracts that may not align with herd size or marketing timelines.
This tool is designed to be practical and producer driven. Understanding how the program works — and where its value lies — helps explain why more cattle raisers are incorporating LRP into marketing strategies.
Feeder cattle LRP settlements are based on the feeder cattle index on the specific date chosen when the policy is purchased, meaning producers face reduced basis risk. The ability to proactively manage price risk allows producers to help themselves rather than relying on reactive assistance, offering a more sustainable approach than giveaway-style programs.
Another key advantage of LRP is its premium structure. Premiums are not due until coverage expires. If the market price remains above the insured level, policyholders pay the premium. If price falls below, the policyholder receives an indemnity payment.
This makes LRP protection for cattle raisers with capital constraints more accessible and cost-effective, saving interest for those accessing lines of credit. As the U.S. cattle industry faces all-time inventory lows, having a financial risk tool in place that supports a longterm investment is vital to rebuilding and sustaining the nation’s cow herd. Effective risk management is
foundational for future expansion and industry stability.
Texas & Southwestern Cattle Raisers Association supports the expansion of risk management tools. During our last policy conference in September 2025, the marketing and transportation committee introduced and adopted a new policy supporting LRP insurance. The policy calls for a comprehensive program review to ensure it continues to serve the industry, and supports expanding the program to include bred heifer and cow price protection.
In addition to this effort, Texas & Southwestern Cattle Raisers Association, alongside Nebraska Cattlemen and other partners, recently brought policy before National Cattlemen’s Beef Association in February to ensure cattlemen and women nationwide have a meaningful voice in how LRP program expansion is implemented. Producer input is essential to getting this right.
While there is widespread support for LRP among Texas & Southwestern Cattle Raisers Association members, thoughtful oversight is needed as the program grows. One area that warrants attention is the auditing process, particularly during major market breaks when large claims occur. In these instances, cattle raisers face heightened scrutiny, making clear guidance, consistent standards and transparent auditing protocols critical to ensure eligible applications are not unfairly disqualified.
Current LRP rules trigger an audit any time an indemnity is more than $200,000. This requires an individual to provide records to substantiate cattle ownership, and the program application is also inspected for accuracy. This underscores the importance of carefully completing the application, which must be filled out by the same entity that owns and sells the cattle.
Price adjustment factors, which are used to accurately reflect the actual cattle market — especially for feeder cattle — also merit consideration. Since feeder cattle LRP products are based on the feeder cattle index, price adjustment factors are used to protect different weights and classes of cattle. The program’s effectiveness relies on those factors mirroring the actual price movement of the protected class of cattle. While it is impossible to eliminate any variance between price adjustment factors and the actual cash market, the program should be vigilant about evaluating and adjusting when necessary.
Texas & Southwestern Cattle Raisers Association remains cautious about the long-term impacts of LRP on the feeder cattle futures market. When writing LRP indemnities, one of the ways underwriters offset their risk is by selling the corresponding CME Feeder Cattlefutures. Since LRP is a short-only program, there are no corresponding long positions, which raises concern about downward pressure being placed on the feeder cattle market over time. This imbalance could contribute to unnecessary volatility and downward pressure on feeder cattle futures, impacting cow-calf producers.
One thing is certain: We do not want to create the same problem we are trying to avoid by unintentionally adding risk to an already cantankerous market. As the potential for LRP expansion is discussed, our association will support efforts where alternate well-reported pricing metrics are considered.
If implemented properly, LRP has the potential for real longevity and continued widespread use among cattle raisers. As an industry, we have an opportunity to learn from other commodity insurance programs and ensure LRP remains viable during both high and low market cycles. As expansion talks evolve, it is imperative that our eyes remain on the end goal: a producer-friendly, sustainable price risk management tool.
Texas & Southwestern Cattle Raisers Association is committed to ensuring viable and effective risk management tools are available for small and large producers alike.
