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What is Livestock Price Insurance?

Livestock Price Insurance (LPI) is a business risk-management program where producers purchase price protection on livestock in the form of an insurance policy. LPI is available in British Columbia, Alberta, Saskatchewan, and Manitoba and provides producers with protection against unexpected drops in prices over a defined period of time.

Check out the detailed information about the Livestock Price Insurance program in our program guide.

Why use Livestock Price Insurance?

LPI allows livestock producers in Western Canada to effectively manage their risk. Cattle and hog producers in Western Canada face volatile market prices. LPI is designed to be market-driven to reflect the risks these producers face.

LPI offers protection from the following risks:
  1. Price
  2. Currency
  3. Basis

LPI is the only tool available in Canada that covers all three price risks producers face, in one package. Protection against unknown market fluctuations gives producers peace of mind.

How does it work?

Producers pay a premium to receive forward price coverage. If the market price falls below the insured index (coverage price) in the time frame selected, the producer receives a payment. When a producer purchases coverage, a floor price within the market is established. In the final four weeks of the policy, if the market falls below the insured index (coverage price) purchases, LPI will pay the difference. If the market is above the insured index (coverage price) purchased, producers can benefit by selling livestock into the higher regional market.

 

Price Insurance Steps

    1. The producer purchases insurance based on the expected sale weight.
    2. The producer matches the policy length to the time period when the sale of the insured cattle is expected.
    3. The producer chooses coverage and pays the premium.
    4. The producer now has a protected floor price.

In the Calf, Feeder and Fed programs, if the cash market is below the selected coverage during the last four weeks of a policy, the producer can make a claim.

In the Hog program, if the cash market is below the selected coverage at the expiration of a policy, the producer can make a claim.

There is no obligation to sell livestock when the policy expires.

Available Products

Who is eligible?

Participation is voluntary and is available to cattle and hog producers in western Canada.

General Eligibility Requirements

In order to be eligible for LPI, producers must meet the following criteria:

  1. File farm income taxes in British Columbia, Alberta, Saskatchewan, or Manitoba; or if one of these provinces is the province for which the greatest amount of income would be reportable under the Income Tax Act (Canada) for Eligible Livestock.
  2. Be the owner of the livestock.
  3. Be the age of majority.

Frequently Asked Questions

What is the best way to utilize Livestock Price Insurance?

A: Monitoring the LPI premium tables is a prudent strategy to making sound business decisions. As the markets fluctuate, producers are able to capitalize on coverage advantageous to their operation. Additionally, purchasing multiple policies over a period of time distributes risk, as opposed to buying coverage for all animals at once.

Insuring animals with different policy expiry dates can be a beneficial way to split marketing and price risk, particularly if producers sell animals over a few weeks of time.

LPI began as a producer-driven initiative initially developed under the guidance of Alberta Beef Producers, with the aim of enhancing Alberta cattle producers’ ability to manage their price and basis risk.

The program was introduced in 2009 as the first of its kind in Canada, providing producers with a range of coverage and policy options to help manage price risk by providing an insurable ‘floor’ price on cattle. This caught the attention of producers in the western provinces. Realizing the support a westernized program would have, governments began discussions to expand Alberta’s program to more provinces in 2012.