Payout Analysis of Livestock Risk Protection Insurance for Feeder Cattle

Monte-Carlo simulation was used to examine net payouts, defined as indemnities received minus premiums paid, to producers purchasing Livestock Risk Protection (LRP) Insurance for Feeder Cattle. Actual policies were utilized that included various purchase dates, coverage levels, and premiums from fall 2007 to spring 2013. Net payouts were estimated for time periods typical of both summer grazing and winter backgrounding at various expected price risk levels. Results suggest that expected net payouts generally became positive when producers perceived a 10 percent chance of a $15 per cwt price decrease. Results also suggested expected net payouts were higher for insurance purchased in the fall than in the spring.

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Journal Article
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Journal of the ASFMRA (American Society of Farm Managers and Rural Appraisers), 2014
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 Record created 2017-04-01, last modified 2019-08-30

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