Late October brought pain to an otherwise strong cattle market. Producers who were proactive with risk management were insulated from the stress of the extreme volatility that followed headlines about importing beef from Argentina to lower beef prices for U.S. consumers.
Landon Nelson, vice president of livestock insurance at our associations, explains that risk management introduces discipline and structure during chaotic markets. “It was a very different conversation with producers who had Livestock Risk Protection (LRP) or Livestock Gross Margin (LGM) positions in place before the market dropped, compared to those who didn’t,” Nelson notes. “Having a plan prevents emotion-based marketing mistakes, like panic selling. It gives producers the confidence to execute their strategy rather than reacting to price noise in the market. Risk management helps turn chaos into structure.”
During the string of limit down moves in October, LRP sales became unavailable. It’s important to understand that LRP will not be available when the market is locked due to a limit price movement.
Proactive Price Protection Critical in Today’s Market
According to Nelson, proactive price protection is especially important now because high prices mean high downside risk. “Protection locks in current profitability and shields producers from volatility in feed, imports, and consumer demand,” he says. “It strengthens a producer’s cash flow by helping to define profit windows early.” Nelson adds that financial stability and planning confidence come with this approach, well ahead of sale time.
Peace of Mind
Good risk management, Nelson emphasizes, removes the daily stress from a cattle operation. “Producers can focus on family and production instead of watching the markets,” he says. “With risk management in place ahead of time, uncertainty becomes clarity, keeping operations on a steady path. In the big picture, this is about protecting the legacy they’ve built—not just the next sale.”
Reach out to your AgCountry Farm Credit Services insurance officer for more information.
