Hedging Cattle with an LRP Policy
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Livestock producers have always had to manage in uncertain environments. Price uncertainty is as common an issue as uncertain rainfall patterns for Texas cattle producers. Livestock Risk Protection (LRP) policies were introduced by the Risk Management Agency (RMA) of USDA to provide single peril, price risk insurance. Policies can be purchased for feeder cattle, fed cattle and lambs, though here we will discuss only the two cattle policies. In many ways LRP policies are similar to Chicago Mercantile Exchange (CME) put options. LRP policies can be effective hedging tools for livestock producers
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Thompson, William; Bevers, Stan; Peña, Jose (2008). Hedging Cattle with an LRP Policy. AgriLife Extension, Texas A&M University System; Texas A&M University. Libraries. Available electronically from https : / /hdl .handle .net /1969 .1 /200547.