Subsidy Rate Changes on Livestock Risk Protection for Feeder Cattle

We determine the impact the 2020 Livestock Risk Protection (LRP) subsidy rate structure has on the probability of LRP having a higher price than the actual cash price. Monthly logit models were estimated to determine these probabilities with the previous and new subsidy rate. The preferred coverage lengths and levels vary across months as does LRP’s effectiveness in managing price risk. The new subsidy structure increases LRP’s effectiveness as a risk management tool in some months. Results show the LRP contract that provides the best protection by sell month and the impact of the new subsidy rates.