The Western Livestock Price Insurance Program should become a valuable addition to a livestock producer’s tool chest.
The program’s original scope, when it was developed in 2009 for Alberta’s fed cattle market, was broadened to include Alberta’s calf and feeder market and has recently been expanded.
Producers from British Columbia to Manitoba now have access to a product that can reduce market price risk for fed cattle, feeders, calves and hogs.
The insurance provides a price floor for predetermined sale dates in the fall.
Indicators point toward a continuation of the strong livestock market, but various factors can wreak havoc on the best-laid plans, such as an unexpected spike in the September corn market, the Canadian dollar or trade infringement actions such as mandatory country-of-origin labelling.
WLPIP is designed to insure against just such a situation.
As part of Growing Forward 2, WLPIP has been launched as a pilot project designed to be actuarially sound and self-sustaining. Premiums paid by producers will fund the pool for program claims.
The federal and provincial governments will cover administrative costs and in the event of a project deficit, the federal government will backstop the program.
However, the timing of the program launch is ideal for the growth of the premium pool. If the livestock market maintains its upward trend, claims on the WLPIP will be minimal, thus allowing a large premium pool to accumulate and reduce or eliminate the need for any potential federal top-up.
The WLPIP appears to be a well-designed price insurance program, but it is not intended to remove all risk. Producers must understand their cost of gain, transportation costs, marketing fees, death loss, shrinkage and the potential for the insured class of animal to hit a target end weight.
The program will be valuable for producers who know their costs and meet their production goals and should reduce fears of a sudden upsurge in feed markets or a stock market crash.
The WLPIP provides a simple hedge against market disruptions.
Industry groups that support WLPIP and the agricultural departments involved in its development should be applauded for their efforts.
Effective industry lobbying and the resulting co-ordination among provincial governments in Western Canada speaks to the program’s relevance in today’s cattle production environment.
For livestock producers who plan to be in business four years from now, I suspect that the renewal of the WLPIP will be recognized as even more important than the launch is perceived today.
Ross Macdonald, M.Sc., P.Ag., ranches in southern Saskatchewan.