Lamb producers used to have to take whatever the market price was on sale day.  The cattle industry has price protection availability with the futures market through hedging and options.  In addition, cattle have Livestock Risk Protection for protecting market prices. Recently, Livestock Risk Protection for Lambs (Lamb LRP) has become available.

Lamb LRP is a revenue insurance program that is reinsured and subsidized by the Federal Crop Insurance Corporation.  Lamb LRP was first available in 2007 but was later discontinued.  On April 24, 2017, Lamb LRP was again available for sale through participating crop insurance agents.  A list of approved agents is at http://prodwebnlb.rma.usda.gov/apps/AgentLocator.

Newborn spring 2017 lambs.

A Lamb producer must submit a one-time application. Then a specific coverage endorsement (SCE) may be purchased for any number of lambs between 1 and 2000. 

Multiple SCEs can be purchased as long as the total number of lambs price protected doesn’t exceed the number of lambs that you own.  You also cannot sell the lambs any earlier than 30 days before the SCE matures or the SCE will be invalid. Also, once the SCE has matured you can purchase another SCE on the same lambs if applicable.

Lamb LRP is available every Monday between 10 a.m. – 7 p.m. CST except when Monday is a federal holiday, then it’s available on Tuesday.  Lamb LRP is sold for 3 different maturity dates - 13, 26, and 39 weeks. 

LRP coverage prices can be located at https://www.rma.usda.gov/tools/livestock.html. Lamb LRP prices are only found on Monday’s report. Lamb LRP are priced at 80, 85, 90, or 95% of the expected end value price. The premium amount increases as the coverage increases.

The LRP coverage price is subsided by Risk Management Agency to decrease the cost to the lamb producer.

For example: 

• A producer has 45 lambs are to be marketed in November 2017.  A Lamb LRP could have been purchased on May 22, 2017 for November 20, 2017.  The lamb producer can sell the lamb any time after October 21, 2017.

• The expected end price for November 20, 2017 was $173.43.   That date had four pricing options:  95% coverage at $164.759 for $7.119 per CWT, 90% at $156.087 for $4.166, 85% at $147.416 for $2.244 or 80% at $138.744 for $1.10.

• The 95% coverage was selected for lambs weighing 110#.  The unsubsidized premium cost would be 110# at 7.119 per CWT or $7.83 per lamb.  The 26 week subsidy is 35%.  The net cost of the Lamb LRP is $5.09 per head.

• Lamb value is then set at $181.23 per head.  If the market declines a payment will be made based off national prices and not the producer’s actual selling price.

Why consider lamb price protection? The Lamb LRP 95% coverage price on April 24, 2017 was $141.97 and on May 22, 2017 was $164.76. The lamb market rallied $22.79 per CWT. 

Karl Hoppe, PhD
Karl.Hoppe@ndsu.edu
Area Extension Livestock Specialist