Livestock price insurance pilot to cover West

Livestock producers in the four western provinces can expect details in March on a four-year pilot program to insure against unexpected price declines.

Speaking Friday at the Canadian Bull Congress at Camrose, Alta., federal Agriculture Minister Gerry Ritz and three of the four provincial governments announced a rollout this spring for a pilot of the Western Livestock Price Insurance Program (WLPIP).

The pilot program will be “actuarially sound and self-sustaining, with premiums fully funded by producers” and deficit financing by the federal government. The federal and provincial governments will cover program administration and delivery through the “administrative capacity building” arm of Growing Forward 2’s (GF2) AgriRisk initiatives.

The WLPIP, a regional expansion of a program the Alberta government has introduced for various classes of cattle and hog production since 2009, “gives more producers access to a solid tool to manage price and basis risk, one of the more unpredictable aspects of managing an operation,” Canadian Cattlemen’s Association president Martin Unrau said in the governments’ release.

Market-based risk management, he said, “is key to better managing volatility.”

Unlike crop producers, who have access to production insurance under the AgriInsurance program, livestock producers have fewer risk management options available to them, the governments noted.

Under the WLPIP, producers would buy insurance on an insured price they select from available policy options and coverage levels. Participation in the program will be voluntary.

Indemnity payments would be paid to insured producers in cases where a settlement price is less than the insured price, while producers would still be able to take advantage of favourable market conditions if livestock prices should rise.

Cattle price insurance is expected to reflect price in the producer’s local market, and coverage options are designed to reflect differences in localized prices and risk for different commodities, the governments said.

Cattle producers will be able to opt to insure their calves, feeders or fed cattle under one of three separate programs, or to select only basis protection for fed cattle. A settlement index will be created to represent western regional markets for feeders and calves, the governments said.

Hog price insurance, meanwhile, will offer coverage based on current Western Canadian market conditions for both farrow-to-wean and finishing operations, the governments said.

Producers would decide on a level of coverage, policy length and amount of weight to insure. WLPIP would act as a floor against the market being lower than the insured price at the end of the period for which the insurance was bought.

Settlement is to be based on the monthly average price of hogs sold in “several” western Canadian markets.

Alberta’s Agriculture Financial Services Corp. (AFSC) will be the central administrative body for WLPIP, to “maximize administrative efficiencies.” Alberta producers can continue to buy coverage under the Alberta-only CPIP and HPIP until the new program takes effect this spring.

Saskatchewan Crop Insurance Corp., meanwhile, is to be the lead customer service delivery agent for WLPIP in Saskatchewan.

Near the end of the four-year pilot, the governments said, they’ll review its operations and management and “consider its potential beyond the GF2 ag policy funding framework.”

Manitoba blackout

Friday’s announcement didn’t mention Manitoba, due to a blackout on provincial government announcements in the period leading up to two provincial byelections on Tuesday (Jan. 28).

Manitoba Beef Producers, in a separate release Friday, said the group “is confident that beef producers in Manitoba will have the same access to the new program that producers in the other western provinces will have” and “eagerly anticipates the announcement of details applicable to Manitoba.”

MBP said it’s scheduled a breakout session at its upcoming annual meeting, Feb. 4-5 in Brandon, to discuss new insurance programs. — AGCanada.com Network

Related stories:
West considers shared livestock price insurance plan, Nov. 27, 2011
Alta. to launch cattle price insurance, Dec. 4, 2008