West considers shared livestock price insurance plan

While still well back from the study stage, Canada’s four western provinces are thinking out loud about sharing or standardizing a price insurance plan for cattle and hog producers.

Alberta, which in the last two years has set up its own Cattle Price Insurance (CPIP) and Hog Price Insurance (HPIP) programs, has said it’s interested in helping develop and deliver such a program for the West.

"Prior to proceeding, (the governments of British Columbia), Saskatchewan and Manitoba wish to undertake a study to determine the feasibility of extending the CPIP and HPIP, or similar model, within the western provinces," the governments said in a request for proposals (RFP) published last week.

The provinces’ RFP calls for a study of the "implications and feasibility of implementing and delivering a regional livestock price insurance program in Western Canada, as well as determining the best delivery approach."

Manitoba Agricultural Services Corp., the Crown ag insurance delivery agency in Manitoba, is co-ordinating the RFP on the provinces’ behalf.

Such a study would "inform the province of the preferred option and implications," should they decide to move on such a model, the RFP said.

In other words, a study would look at whether a western-wide plan is feasible to run, Paul Bonnet, MASC’s vice-president of research and program development, said Friday.

Floor price

Alberta’s CPIP, first launched for fed cattle in September 2009 and extended to backgrounders and calves in 2010 and this spring respectively, is meant to insure producers against unpredicted price declines.

The province, which runs the livestock price insurance programs through its Agriculture Financial Services Corp. (AFSC), rolled out HPIP in July this year.

CPIP-Fed offers feedlot operators options for full price insurance — covering futures price risk, currency exchange risk and basis risk — and for basis-only insurance, to protect against the difference between U.S. and Canadian cattle prices. CPIP-Feeder uses a forecasted price to insure cattle being prepared for market. Both CPIP-Fed and CPIP-Feeder are available for purchase year-round.

CPIP-Calf policies, meanwhile, are offered from February to May each year, expiring for settlement in the fall calf run from September to December.

HPIP also aims to provide producers with a "floor" price for hogs without limiting producers’ ability to sell at a higher price. HPIP settlement is meant to reflect the monthly average Alberta hog price.


MASC has also filed an RFP on behalf of the federal government and other provinces for a consultant to study the potential for pooled reinsurance for the federal-provincial AgriInsurance program.

AgriInsurance, which in 2011 covered about 67 million acres for a total liability of $14.5 billion, is part of the Growing Forward ag policy funding framework.

In a reinsurance plan, an insurance provider covers itself against its own potential losses by buying a policy through another insurer, or reinsurer.

Several provinces’ crop insurance agencies already use reinsurance to manage their own risk. Prairie grain companies in the past decade have also bought coverage from reinsurance firms, against the chances of a drop in grain handle due to a poor harvest.

According to MASC, which provides AgriInsurance in Manitoba, recent studies show that, given the variations in climate from coast to coast, the provinces might be able to offset their individual crop insurance losses by pooling their reinsurance.

That, in turn, could save the provinces money because less total reinsurance would be needed, MASC said.

Among possible options, MASC said, the federal government could serve as the stop-loss reinsurance provider, or the provinces could form a mutual company to provide stop-loss reinsurance.

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