What is Livestock Price Insurance?
Livestock Price Insurance (LPI) is a risk-management tool which allows producers to purchase price protection on cattle and hogs in the form of an insurance policy. The program is available in British Columbia, Alberta, Saskatchewan, and Manitoba and provides producers with protection against an unexpected drop in prices over a defined period of time.
Check out the detailed information about the Livestock Price Insurance program in our program guide..
How did Livestock Price Insurance begin?
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.
Why use Livestock Price Insurance?
Currently, there are few risk-management instruments which allow Canadian livestock producers to effectively manage their risk. Cattle and hog producers in Canada face volatile market prices. LPI is designed to be a market-driven program which reflects the risks Canadian producers face.
LPI offers protection from the following risks:
|
Livestock producers are often forced to be “price takers.” There are many market-driven factors which impact price fluctuations. Livestock Price Insurance is available to help producers protect themselves against market volatility and be more profitable in their operation.
How does it work?
Producers pay a premium to receive forward price coverage. If the market price falls below the coverage price in the time frame selected, the producer receives a payment. These programs are flexible and market-driven. They take into account price risk, currency risk and basis risk.
Price Insurance Steps
- The producer purchases insurance based on the expected sale weight.
- The producer matches the policy length to the time period when the sale of the insured cattle is expected.
- The producer chooses coverage and pays the premium.
- 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.
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:
|
Purchase and Claims Hours
Cattle | Hogs | |
Purchase | Tuesday, Wednesday, Thursday 2 p.m. to 11 p.m. MT – Alberta |
Tuesday, Wednesday, Thursday 2 p.m. to 11 p.m. MT – Alberta |
Claim | Monday 2 p.m. to 11 p.m. MT – Alberta |
N/A – Claims are automatically triggered |
Calendar of Insurance
The Calendar of Insurance provides a schedule of purchase and claim days by program for the entire year.