How does it work?
Producers pay a premium to receive forward price coverage; if the market price falls below the coverage price, in the time frame selected, the producer receives a payment. These programs are flexible and market-driven. They take into account price risk, currency risk and basis risk.
Price Insurance Steps:
- The producer will purchase insurance based on the expected sale weight.
- The producer will match the policy length to the time period they expect to sell.
- The producer will choose their coverage and pay the premium.
- The producer now has a protected floor price.
- In the Calf, Feeder and Fed programs, if the cash market is below the selected coverage during the last four weeks of a policy, the producer can make a claim.
- In the Hog program, the policy expires automatically at the end of the insured month. If the average cash price for that month is below the selected coverage, the producer will be sent a payment.
- There is no obligation to sell livestock at the time of policies expiration.