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Three tools to reduce livestock price risk

Insurance, hedging, and retained ownership can be intimidating to use, but the basic concepts are simple

Navigating through different components of marketing can make one feel as though they are speaking a foreign language.

Ryan Copithorne of Cows In Control marketing group talks about the pros and cons of common marketing tools.

WLPIP 
(Western Livestock Price Insurance Program)

“Price insurance is a good program,” said Copithorne because it allows you to lock in a floor price and that price is guaranteed by the government. However, that floor price may be low or the premiums expensive.

“It’s one tool in an arsenal of many. I find the price insurance a very safe way to guarantee a price and for those who don’t want to try the more risky ways of hedging it’s a good tool.”

Retained ownership

In recent years, it’s paid to sell calves early, but Copithorne expects to see an increase in retained ownership.

“We have cheap feed, low interest rates, and a cattle market that I think is bottoming out, so it might be some good profitability to hang on to your cattle.”

Hedging locks in a final price and what a producer needs to ask, said Copithorne is, ‘Can I feed them cheaper to get them to that end point?’

Hedging

“People get intimidated by the word, ‘hedging,’ because there’s lots of complication and fear,” Copithorne said.

The key question is whether you can produce an animal for that price.

“If you can lock in an end price that gives you a profit, then you can rest easy until that day comes,” he said. “Unless your cattle fall over dead or something, you are locked in.”

But because hedging is complicated, he recommends getting professional help when starting out.

About the author

Contributor

Jill Burkhardt, her husband, Kelly, and their two children, own and operate a mixed farm near Gwynne, Alberta. Originally hailing from Montana, she has a degree in Range Management from Montana State University. Jill’s agricultural passions are cattle and range management but she enjoys writing and learning more about all aspects of farming.

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