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Manitoba launches livestock price insurance for cattle, hogs

The program based on Western Canada prices offers better protection than CME futures hedging

A new price insurance scheme for Manitoba livestock producers has officially been launched, but whether there will be a stampede through the gate remains to be seen.

Applications for the Western Livestock Price Insurance Program (WLPIP), a new tool to manage risk and withstand market volatility, were unveiled last week by Food and Rural Development Minister Ron Kostyshyn.

“Price protection is a new tool for the livestock sector and I encourage producers to start the application process today,” said Kostyshyn.

Producers can purchase price insurance options for feeder cattle, fed cattle and hogs, year round, and each spring before May 29 for calves.

Based on the amount of premium they are willing to pay, applicants create a “floor” price for their animals. If the market price falls below the coverage price they’ve selected, they receive a payment. Premiums are fully funded by producers.

Levelling

Jason Dobbin, a livestock price insurance co-ordinator for Manitoba Agricultural Services Corporation (MASC), said that the program goes a long way towards “levelling the playing field” between grain farming and livestock production.

“What’s unique about this program is you have a lot more options than even on the grain side,” said Dobbin.

“It’s going to make it easier to get credit because you can go to your bank and tell them that you have a guaranteed floor price,” he added.

Because the program is based on prices in Western Canada and in Canadian dollars, it offers more protection from a BSE-style border closure and currency fluctuations than traditional hedging strategies based on the Chicago Mercantile Exchange futures market.

More from the Manitoba Co-operator website: Livestock price insurance plan now taking applications

Uptake of price insurance in other provinces has been brisk, said Dobbin.

Heinz Reimer, president of Manitoba Beef Producers urged his members to give it a try.

“The combination of livestock price insurance and forage insurance will give beef producers a strong and bankable risk management package,” said Reimer.

But Tilston-area rancher Brian Sterling said that he expects Manitoba’s cow-calf producers will benefit the least from the program — and end up paying most of its costs.

That’s because backgrounders and feeders will simply deduct the cost of insurance from the prices they are willing to pay to the cow-calf producer in the form of lower bids on their calves.

Historic highs

Right now, with prices at historic highs and bidding competition intense, evidence of that would be hard to spot, he admitted. But as soon as the supply-demand situation in the cattle industry returns to historical norms, Sterling expects the cow-calf sector to bear the brunt of the cost.

“I’ve asked guys who are quite knowledgeable in the feeder industry and nobody denies that,” said Sterling.

Also, if a BSE-style incident were to occur again, price insurance for calves would essentially only protect the cow-calf producer for one year’s calf crop because cow-calf producers face fairly “static” expenses over the long term.

“You can protect yourself for only as long as calf prices are at reasonable levels,” said Sterling. “Instead of locking in somewhere near break-even, you might be $300 below the break-even price.”

More information is available online at www.wlpip.ca or by calling 1-844-782-5747.

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