With applications now available, Western Canada’s cattle and hog producers are being encouraged to consider the new federal/provincial livestock price insurance plan as a risk management tool against unexpected price drops.
The Western Livestock Price Insurance Program (WLPIP), announced in January, is an insurance policy product offering protection against an unexpected drop in prices of cattle or hogs over a defined period of time. [Related story]
The program’s Western Cattle Price Insurance component is set up to help reduce producers’ exposure to price and basis risk, the governments said in a release Wednesday. Cattle producers have the option of insuring calves, feeders, or fed cattle, as well as selecting only basis protection for fed cattle.
WLPIP’s Western Hog Price Insurance component, meanwhile, is designed to offer coverage based on “current western Canadian market conditions.”
“This programming puts beef production on a more level playing field when compared with other commodities and we encourage producers to investigate how this tool can work for their operations,” Heinz Reimer, president of Manitoba Beef Producers, said in a separate release Wednesday.
WLPIP’s calf insurance component is designed for the cow-calf producer to purchase coverage from February to May each year — this year’s purchase period ends May 29 — with policies expiring during the fall calf run from September to December. Policy lengths range from 16 to 36 weeks.
The fed cattle price insurance plan, meanwhile, will offer politics continuously throughout the year, with policy lengths between 12 and 36 weeks. The plan is to be based on the western Canadian market with three main risk components: U.S. prices (Chicago Mercantile Exchange live cattle futures), the Canadian/U.S. currency exchange rate and the cash-to-futures basis.
The feeder cattle plan is set up to insure feeder cattle using a forecast “market-driven” price. Eligible producers can expect to see insured indices and premium per hundredweight (cwt) for policy lengths ranging from 12 to 36 weeks.
In the hog program, producers would buy an insurance policy based on a forecast hog price, and when the policy expires the coverage purchased is compared to a settlement price that reflects the monthly average price of market hogs. If the settlement price is below the insured price, a payment of the difference is made.
Hog policies can also be bought year-round, giving producers “the flexibility to match coverage in relation to their own hog operation and anticipated marketings.” Policy lengths are offered monthly and producers would select policies that cover forward prices from two to 10 months.
Cattle and hog producers in each province can contact their provincial AgriInsurance agency for information on how to enroll. Alberta’s Agriculture Financial Services Corp. (AFSC) is the central administrative body for the program, for which administration costs are covered through the Growing Forward 2 (GF2) ag policy funding framework. WLPIP premiums are to be fully funded by producers.
“This insurance means cattle and hog producers can be prepared for price fluctuations and is something all ranchers should give serious thought to including in their business plans,” B.C. Agriculture Minister Pat Pimm said in the governments’ release Wednesday. — AGCanada.com Network