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Frequently Asked Questions
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.
Producers that know their cost of production can confidently make timely decisions when purchasing coverage. Becoming familiar with the premium tables and how they fluctuate day-to-day will assist in purchasing decisions.
When a producer purchases a LPI insurance policy, it protects the producer’s investment on calves, feeders, fed cattle and hogs. This program allows producers to retain the increase in the market price while still having peace of mind of protection from a potential market downturn.
Premiums are strongly influenced by market volatility. Premiums are most economical when market volatility is relatively low.
LPI offers a wide range of coverage, which allows producers to tailor their level of protection to the risk they want to insure and the premium within their budget.
No. If you wish to cancel and forfeit your premium to buy again, contact your local LPI office.
In the event of a border closure, pandemic, or other market disruption, policies already in effect will be honoured. There may be a delay in calculating the indemnity until such time when sufficient data is received to calculate a settlement index. (Some policies may be settled retroactively). The ability to purchase further policies will be assessed by the Insurers at time of event.
If insured cattle or hogs die, there is no adjustment made to a producer’s policy. LPI advises producers when calculating their weight for a policy to account for potential death loss during the policy. All LPI policies are subject to random audit by their Insurer. Producers may want to consider calculating a weight variance to insure below their total target weight to ensure audit compliance is met in the case of unforeseen death loss or overestimated weight gain on insured animals.
LPI is not designed to insure mature breeding stock. The available insurance products do not represent the value or market price of breeding stock.
No, unlike other crop insurance programs, there is no government cost-sharing of LPI premium or indemnity. The program is solely producer funded. LPI is designed to comply with trade agreements; therefore, over the long-term, the premiums collected will fund the indemnities paid. However, the federal government funds program development and administration costs, as well as provide deficit financing.
If the fund goes into a deficit position, the Government of Canada and indemnity from a reinsurance policy will cover the program. Existing policies will be honoured even in the case of a border closure or similar catastrophic market event.
The policy choice is tailored around the weight of calf, feeder or fed cattle the producer plans to sell. Producers should choose an expiry date which is the closest match to the expected sales date; however, it should always be after the expected selling timeframe. For example, if a producer plans to sell March 15 and policy expiry dates on the premium table are available for March 1 and March 29, it is better to choose March 29 because this will encompass the expected sales date and not expire prior to your planned sale date.
Absolutely. For example, a producer could overlap a feeder policy on a calf policy, or a fed policy could overlap a feeder policy on the same cattle as long as expiry dates were reasonably distanced between the two policies to allow for expected weight gain.
LPI Feeder and Calf policies are settled based on the average price of electronic and auction mart sales, not on the sale of the livestock covered by producer LPI policy.
As a Canadian program, regional differences in market price across the four western provinces are recognized. To best accommodate regional needs and offer insurance in a consistent manner, the area for data collection needed to be large enough to allow for reputable coverage setting and settlements, therefore the solution to offer an Alberta Index and a Saskatchewan/Manitoba Index for both LPI-Calf and LPI-Feeder was chosen.
Although producers can choose to insure under either coverage option (AB or SK/MB), they are encouraged to select the option which best reflects the market in which they will sell their cattle. This best insures the market risk they face. For example, a Saskatchewan producer that operates in close proximity to the Alberta border, and markets cattle at an Alberta auction market, may choose to insure his feeder cattle using the Alberta LPI-Feeder option rather than that of Saskatchewan/Manitoba. If a producer chooses to insure under an index outside of the province they will sell their livestock in, the producer may not receive the indemnity that best relates to the cash market decline experienced while selling cattle (leaving himself open to additional market risk).
Selling livestock outside of the claim window for the policy does not alter or void the contract. The program is not meant to change marketing decisions for the insured, only to offset risk. If the insured livestock cannot be marketed in the claim window, there is no adjustment made to the producer’s LPI policy. The producer can make a claim if it pays to do so but is also encouraged to match the claim to the time the insured cattle will be marketed. Producers must ensure they meet the eligibility requirements to be in compliance with their Contract of Insurance (60 continuous days of ownership for Feeder and Calf policies, and four weeks prior to the claim window for Fed policies).
The program does not allow producers to knowingly over-insure. On the other hand, there are no minimum purchase amounts on the insurance so it is acceptable for a producer to under-insure (even just insuring one head or hundred-weight) if they choose.
All cattle policies have a claim window ahead of the expiry date listed on the policy to enable policy holders to claim on a settlement index published during that week. The standard claim window is the three consecutive weeks leading up to the expiry date. Some policies may have a shortened claim window if they are expiring near the end of a program settlement blackout. All policyholders are encouraged to reference the LPI Calendar of Insurance for blackout and settlement dates.
Heifers can be insured under any of the cattle products-. However, coverage and settlement of the Feeder and Calf programs are based on average weekly steer prices. Indemnity is based on a comparison between the published steer settlement price and the producer’s chosen level of insured coverage. The difference determines if there was a decline in projected cattle prices from the time the producer purchased the policy.
Historically, the volume of calves sold outside of the September to February time frame has been too low to provide accurate market data that is needed to generate coverage and premium levels. Calf policies are available to purchase from February to June.
Yes, breeding heifers can be insured under LPI-Feeder program. Coverage and settlement are based on the average weekly price of an 850 lb feeder steer. It is not a price guarantee for the producer’s heifers. The indemnity will be based on the published settlement price, not the producer’s sale price.
If a producer is purchasing light feeder calves in the fall, with the intent of growing them on grass in the upcoming year, there won’t be a policy length long enough to insure the desired sale time. LPI – Feeder only offers up to 36-week policies. These calves could be insured with a spring-settling LPI-Feeder policy and then re-insured for the fall, as long as the producer insures the weight the cattle are expected to be at each policy expiration. It is important to remember the correlation between the light feeder cattle in the spring and the 850 lb Feeder settlement index will potentially be less and the producer will be paying two sets of premiums on the same cattle.
The slide used for the LPI-Feeder program changes with movement in the market. From the auction market data obtained each day, the slide for feeder steers (750 to 950 pound steers) is determined and applied to bring all prices to an 850 pound steer. These daily prices are aggregated to generate the weekly Feeder settlement index. The weekly slide can be found on the Market Information section.
There is no claim window for hogs for two reasons: First, because of the continuous production flow associated with pigs, it is acceptable to offer monthly coverage and still provide effective protection against market price risk. Second, the hog market is more volatile by nature and thus has higher premiums associated with coverage. Averaging the daily prices into one monthly settlement index lowered those premiums on the hog coverage. This program feature was developed in consultation with industry.
Similar to the additional indices available on the feeder and calf programs, there are three geographically-based indices available under LPI for hog. Hog data is formula-driven off of U.S. hog pricing data and while more indices could be provided, it was felt three would be sufficient at this time.
Producers can choose to insure under any coverage option. They are encouraged to select an option which best reflects the market where they will sell their hogs, as this best insures the market-risk they face. If a producer selects an option not reflective of the market where the hogs are sold, the indemnity which best reflects the cash market decline experienced may not be received. Each index geographically represents select slaughter plants where producers choose to sell. The three indices are: Olymel – Red Deer, Maple Leaf / Signature 4 – Brandon and Maple Leaf / Signature 3 – Brandon.