Protecting peace of mind

The decision to get livestock insurance was simple for Grand River, Iowa, cattle producer Hayden Hostetler. When the cattle market reached its high this March, he wanted to take advantage of the peak price, even though he hadn’t planned to sell his calves until May.

Livestock Risk Protection gave him that opportunity. Hostetler insured 11 of his 33 head of cattle through the policy offered by his local MFA Agri Services, and he said the decision gave him peace of mind knowing that he didn’t have to constantly worry about the markets.

“For pasture insurance, there has to be a disaster for it to work,” Hostetler said. “With livestock insurance, it doesn’t have to be a disaster. If the market goes down 5 cents, you still get your 5 cents back.”

MFA entered the crop insurance business in 2017, but its livestock insurance component is still unknown to many producers, said Principal Agent Mike Smith. The policy creates a safety net to cover input expenses of livestock production, including cattle, swine and lambs. Seventeen certified agents across MFA’s trade territory sell livestock risk protection along with crop insurance.

“It is natural for people to do business with people they already know,” Smith said. “I think that is the biggest selling point for us.”

To handle the risk management, underwriting and claims, MFA works with AmTrust Ag of Leawood, Kan., a well-established financial services company with a division specializing in multi-peril and crop hail insurance policies.

Similar to Hostetler, Lloyd Bruns and his son, Chad, knew they had to make a change in their Centralia, Mo., livestock operation when the market crashed two years ago. Feed lots in the area were full, leaving them without many options. After purchasing livestock insurance through their local MFA for 75 head of cattle, they were able to hold the calves longer and put more weight on them. The cattlemen said they wouldn’t have been able to do this without livestock risk protection.

“It made us more relaxed. We weren’t worried about the markets collapsing,” Lloyd said. “When the markets went back up, it kept us from losing money.”
Livestock risk protection sets a floor price so producers know what the insurance cost will be. It gives them the option of protecting their price rather than taking their cattle to the sale barn and hoping for the best, explained Tanner Vantress, Centralia MFA Agri Services’ crop insurance agent.

“This is just a way for producers to sleep better at night,” Vantress said.

There is no blanket coverage through the policy. The insurance only covers the market price with no minimum on how many head are insured, so it protects even small-scale producers. It does not, however, cover the death or loss of animals. Whether a producer insures one or 50 head of cattle, the price for the risk protection will always stay the same once they sign up for the policy.

Mike John, director of Health Track Operations at MFA, said that the markets have been more volatile in the past several years, a trend he thinks is here to stay.

“Producers who are serious about livestock production will have to start considering some type of risk protection,” John said. “We are seeing more and more people using these tools.”

Farmers are price-takers in livestock production, John added. They can’t change input costs and don’t have much control over their price in the market. Livestock risk protection gives them back some control by allowing them to lock in a price. Because the risk protection is based on the futures market, however, it is important for producers to check the markets regularly and pay attention to the price offered versus the protection, he said.

While the concept of livestock insurance is relatively new to farmers, the federal Livestock Risk Protection program has been around since 2002. Many producers just don’t know of its existence or haven’t had it explained to them, Smith said. One reason is that livestock insurance cannot be sold during business hours. It has to be sold after 4:30 p.m. and before 9 a.m. the next business day. At 4:30 p.m., the market closes and there is a set price for the insurance, so the price varies from day to day. The policy also has to be paid up front, whereas crop insurance can be paid at any time depending on the crop and county.

The Livestock Risk Protection program is subsidized by the USDA, Vantress added.

“Many producers don’t know what they can purchase and what is available to them as far as government subsidies and how livestock insurance can help them make a profit,” he said.

Chuck Clark, crop insurance agent from MFA Agri Services’ Iowa group, said he believes better awareness will encourage more producers to use this tool as part of their farm management practices.

“At MFA, we’re doing our best to promote livestock risk protection through educating producers,” he said. “MFA Crop Insurance hosts producer meetings to get the word out and talk about the ins and outs of livestock risk protection. With proper education for producers, I think the program has the potential to become more popular in the future.”

These producer meetings help MFA build on previous relationships with farmers, Vantress said. MFA already offers expertise in farm inputs and services, he pointed out, and providing crop and livestock insurance adds another resource for customers.

“We are selling insurance, but at the end of the day, we are providing products that could keep the family farming for generations to come if there is some sort of disaster,” Vantress said. “That is why I love what we are doing at MFA and what we are trying to promote with livestock insurance.”