Mitigating Livestock Risk Protection and Addressing Uncertainties in Forage Production

August 31, 2023 | AgFocus-Ag Focus

We hope your summer has gone well so far and you have found ways to beat the heat we recently experienced! We feel fortunate that crops in the area are looking significantly better than this time a year ago. We know cattle have been doing well with greener pastures, and the cattle market has been strong. This month we want to point out some information for our cow/calf producers that might be of interest in this current market environment.

 

 

Tools for Livestock Risk Protection and Forage Production Risk

By: Lee Potts, Vice President/Senior Credit Officer

 

In late June, some of our lenders attended a producer seminar put on byUNL in Wayne with a lot of information about Livestock Risk Protection(LRP) and forage insurance. Elliott Dennis and Jay Parsons presentedexcellent information about these programs, how they work, and what benefits they provide toproducers. Also, as part of this seminar, Jim Jansen talked about land values and flex leasesspecifically as it pertains to grazing land to round out the day that included an excellent andvery fitting roast beef lunch.

As we know, cattle markets in recent monthshave been strong, especially on the feedercattle side. This has created a lot of optimismand opportunity for this coming fall whencalves will be weaned and sold.

In an article published by Jay Parsons in May2023, he says, “When profit margins are strong,livestock owners have a natural tendency torelax a bit and enjoy the business of producinganimals. Expansion may come to mind andeffort is often put forth to improve productionoutput. Protecting market price may become asecondary priority. However, a lot can happenbetween now and marketing time. Pricetrends can suddenly turn and quite oftenexpectations may not be met. Protecting priceshould be just as much — maybe more — of apriority when the price outlook is optimistic,as it is in a downward trend. An unprotected,overly optimistic price forecast can hurt yourbottom line just as easily as a downward trendthat suddenly gets worse.” This was alsomentioned by Dr. Parsons at the seminar inJune, and there can be a lot of truth to it.When profitable opportunities exist, toolssuch as LRP may be a prudent way to protectsuch opportunities.

Likewise, when producers are heavilydependent on various forage sourcesthroughout the year, there are tools forprotecting that as well via the Annual ForageInsurance Program. In short, this programcovers forage methods such as grazing,haying, grazing/haying, grain/grazing, greenchop, grazing/green chop, or silage. Usage ofthis program has dramatically increased inNebraska in the past few years also.

We encourage producers to reach out to theirinsurance agents to find out more about theseprograms, as usage in Nebraska has increasedsignificantly, especially with improved subsidystructure in the past few years. Improvedsubsidies have made the cost more attractive.Scanning the QR code below will take you thefull presentation with Audio that will explainthings in more detail, provide additional linksto further information, and include contactinformation for both UNL presenters shouldthere be questions.