Basis Risk Reduction with LRP Insurance

Authors

Rik R. Smith, University of Nebraska-Lincoln
Darrell R. Mark, University of Nebraska-LincolnFollow

Date of this Version

July 2005

Document Type

Newsletter Issue

Citation

Cornhusker Economics

Comments

Published in Cornhusker Economics, 07/27/2005. Produced by the Cooperative Extension, Institute of Agriculture and Natural Resources, Department of Agricultural Economics, University of Nebraska–Lincoln.
http://www.agecon.unl.edu/Cornhuskereconomics.html

Abstract

Livestock Risk Protection Insurance (LRP) is a pilot program from the USDA-Risk Management Agency (RMA) that provides minimum price protection for fed cattle, feeder cattle and swine producers. The program works like a put option in that a minimum price is established, but if prices increase producers can benefit from the increase. Producers pay a premium in exchange for this price insurance, which is available from licensed crop insurance agents.