Livestock Risk Protection (LRP) for Lambs Back »

LRP-Lamb can be an important risk management tool for producers.
Shannon Sand, SDSU Extension


Livestock Risk Protection-Lamb (LRP-Lamb) much like LRP for cattle is a management tool to insure against unforeseen declines in prices. Sheep producers can choose from several different coverage prices and insurance periods corresponding to general feeding, production, and marketing practices. LRP-Lamb is available weekly throughout the year, with the exception of government holidays1.

How to purchase LRP-Lamb

LRP-Lamb can be purchased from any Risk Management Agency (RMA) approved livestock insurance agent. Producers can choose their coverage level, generally ranging from 80-95% of the expected ending value. If at the end of the insurance period the actual ending value is below the coverage price, a producer may receive a payment.

In order for producers to get LRP-Lamb coverage they must submit a one-time application for coverage, and once approved a producer may choose their coverage level. There are some limitations for LRP-Lamb coverage, such as: the maximum number of lambs that can be insured under a specific coverage level is limited to 2,000 head and an annual limit of 28,000 head per producer for each insurance year2.

Why purchase LRP-Lamb?

LRP-Lamb can be an important risk management tool for producers. This tool allows the creation of a price floor to help insure against severe price drops. This coverage can be used in conjunction with other risk management tools or by itself. LRP-Lamb can help insure a producer’s long term viability by helping insulate them from market price risk.

Choosing coverage

Table 1 shows how producers can decide what level of coverage they want for their lambs. Table 1 shows the state (South Dakota) variables for the LRP program. The table also shows the commodity and the type (in this case, lamb). The table also displays the expected ending value, the coverage price, coverage level, rate, and cost per hundred weight, as well as the end date of the policy.

Table 1. Livestock Risk Protection for Lamb, Prices, Rates and Coverage Levels.*

Coverage Length
(Weeks)
Commodity
Exp. End Value
Coverage Price
Coverage Level
Rate
Cost Per CWT
End Date
13
0804 Lamb
141.26
$134.20
0.95
0.02082
2.794
8/24/15
13
0804 Lamb
141.26
$127.13
0.9
0.0087
1.106
8/24/15
13
0804 Lamb
141.26
$120.07
0.85
0.00299
0.359
8/24/15
13
0804 Lamb
141.26
$113.01
0.8
0.00083
0.094
8/24/15
26
0804 Lamb
143.82
$136.63
0.95
0.04526
6.184
11/23/15
26
0804 Lamb
143.82
$129.44
0.9
0.02846
3.684
11/23/15
26
0804 Lamb
143.82
$122.25
0.85
0.0166
2.029
11/23/15
26
0804 Lamb
143.82
$115.06
0.8
0.00889
1.023
11/23/15
39
0804 Lamb
140.11
$133.11
0.95
0.05787
7.703
2/22/16
39
0804 Lamb
140.11
$126.10
0.9
0.03964
4.999
2/22/16
39
0804 Lamb
140.11
$119.09
0.85
0.02561
3.05
2/22/16
39
0804 Lamb
140.11
$112.09
0.8
0.01549
1.736
2/22/16
*46 South Dakota, Crop Year 2015. Table modified from RMA.
 

For example if a producer has 100 head and plans to market them in November of 2015. The producer knows the average weight of his lambs should be 140 lbs. The producer also knows the break-even price for their lambs are $1.20/lb3.  Looking at Table 1 the producer is able to see they need a 26 week contract ending in November with an 85% coverage level or a coverage price of $122.25/ cwt. that costs $2.029 per cwt. In this example the producers total cost for 100 head would be $284.064 and would ensure a price floor or minimum.

This example meets the producer’s minimum required breakeven, and it demonstrates the importance for producers to be as accurate as possible when estimating market weight and breakeven prices. LRP is an insurance tool which helps create a price floor for producers and can provide additional options for those producers interested in limiting their risk. For some producers LRP can be an excellent tool to manage risk. It is an affordable option, allows producers to pick their desired level of coverage, and creates a price floor, increasing the producer’s ability to meet their breakeven requirements.


  1. LRP for cattle is available daily with the exception of government holidays
  2. The insurance year for LRP-Lamb runs from July to June 20
  3. To figure out the breakeven price on a per hundred weight basis the producer multiplies $1.20X100 lbs.=$120/cwt.
  4. In this example the estimated average is 140 lbs. per head with 100 head thus 140X100/100=140. (here we multiply average weight times the number of head divided by 100 lbs to get the number of hundered weight)then take 140X$2.029=$284.06

Disclaimer: The information in this article is believed to be reliable and correct. However, no guarantee or warranty is provided for its accuracy or completeness. This information is provided exclusively for educational purposes and any action or inaction or decisions made as the result of reading this material is solely the responsibility of readers. The author(s) and South Dakota State University disclaim any responsibility for loss associated with the use of this information. 

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