Cattle price insurance

Who's got the beef?

The Manitoba Cattle Producers Association is working with the provincial government on a cattle price insurance program. Alberta has one in place since September 2009 for fed cattle. It helps to control price risk. It also brings some stability to the cattle industry. This program can be a useful tool in certain market conditions. The program that Manitoba is considering will offer up to 80% coverage, based on the costs of production.

Saskatchewan is also working on a cattle price insurance program. The U.S.A. has a cattle price program. The program that is being looked at does not cover the cost of production for producers. What is being considered is a voluntary program with the cattle producers monitoring insurable prices for calves and yearlings and the premiums for a decision as when to act.

This is not a simple task. The insured price is found by using forward prices from the American futures markets. There is an adjustment done for the Canadian exchange rate and the basis. This is the difference between the American futures price and Canadian cash price. There are just too many variables for an individual producer to use the American futures market. Canada does not have a futures market.

Turner's Tips found an example of how this is done. It goes like this:

  • A producer will look at locking in mid-October pricing at $1.04 per pound for 600 pound steers at four cents a pound. This is done in the Spring. If the weekly average price for 600 pound steer calves ends up being lower then the price of $1.04 then you would collect the difference - this is the insurance payout. If the locked-in price is $1.04 or higher in October then there is no payout.

Saskatchewan has a crop insurance program wherein the government does some cost sharing in the premiums paid. This is what the cattle producers would like to see implemented with a new program.

It will be interesting to see how this will proceed. Saskatchewan would likely join in under the Alberta program. Will the Saskatchewan government cost share in an effort to help their cattle industry? We will have to wait and see.