As of April 1, the LPI-Fed settlement index will not include any cash prices that are outside +/- 5% of the average weekly mean. Previously, the LPI-Fed settlement index did not include any cash prices that were $4/CWT above or below the average weekly mean.
Producers will continue to settle policies as usual. The data collected for calculating the settlement index is not affected by this change, only the analysis of data to include in our index.
In rare cases, the $4/cwt rule caused settlement blackout weeks. For example, in late 2022, the LPI-Fed settlement index excluded a larger-than-usual number of outliers (31 per cent within four out of five weeks) and the $4/cwt rule resulted in a blackout week. If the +/-5% rule had been in place, a blackout week would not have been necessary.
The rule modification accommodates current and future changes to the Livestock Price Insurance (LPI) settlement index, ensures price data producers reasonably consider part of the cash market is incorporated into the index, and maintains producer confidence in the Fed product.
LPI–Cattle settlement indexes are calculated on a weekly basis and outlier rules are incorporated into the calculation to automatically exclude data outside of LPI’s parameters. These outlier rules exist to ensure that correct data is included in the settlement indexes and eliminate human error.
The LPI-Fed product relies on cash data reported to Canfax weekly. Without cash data, the program does not exist. With ongoing issues sourcing weekly cash data, this change will help mitigate the risk of not having enough data to publish an index.
If you have questions or would like more information, please contact your provincial Livestock Price Insurance office.