Livestock Risk Protection, usually called LRP, is a federally subsidized insurance policy that sets a price floor under your cattle or hogs: you lock in a coverage price when you buy, and if the market price on your end date comes in lower, the policy pays you the difference per head. The program is run by the USDA’s Risk Management Agency, sold in all 50 states through private insurance agents, and it covers one risk only, which is a decline in market price.1Risk Management Agency. Livestock Insurance Plans Unlike a futures contract, there’s no margin account, no physical delivery, and no minimum herd size.
Who Can Buy a Policy
LRP is open to anyone with a direct financial stake in fed cattle, feeder cattle, or swine raised for commercial sale. Operations of any size qualify. The core requirement is that you must stand to lose money if prices fall during the coverage period.
Everyone holding at least a 10 percent interest in the insured operation has to be listed on the policy with a Social Security number or Employer Identification Number.2Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook This substantial beneficial interest disclosure lets the Risk Management Agency verify ownership and enforce the annual head caps across related policies.
There’s one paperwork step worth getting right before you buy. To receive any federal premium subsidy, you must have a completed form AD-1026 on file with the Farm Service Agency certifying compliance with wetland conservation and highly erodible land provisions.3USDA. AD-1026 Highly Erodible Land Conservation and Wetland Conservation Certification You can buy a policy without it, but you’ll pay the full unsubsidized rate, which erases most of the point.
Choosing Your Coverage
You buy LRP through an Approved Insurance Provider, a private company authorized by the Federal Crop Insurance Corporation. Each contract is written on a Specific Coverage Endorsement, or SCE, and three decisions shape it:
- The type of livestock: fed cattle (steers, heifers, or dairy cull cows), feeder cattle, or swine.
- The coverage level, from 75 to 100 percent of the expected ending value, with finer increments on the upper end (87.5%, 92.5%, 95%, 96%, 97%, 98%, 99%, and 100%). Higher coverage means a stronger floor and a higher premium.4Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook 2026
- The endorsement length, which runs 13 to 52 weeks for cattle and tends to be shorter for swine. The end date is what gets compared to the market, so it should line up with when you’d actually market the animals.5USDA Risk Management Agency. Livestock Risk Protection Fed Cattle Fact Sheet
Market volatility also moves the premium you’ll be quoted. When the market is choppier, rates run higher because the insurer is more exposed.
How You Buy It
LRP runs on a daily sales cycle tied to commodity market hours. New coverage prices and premium rates post after the markets close each day, and the window to buy stays open until 8:25 a.m. Central Time the next morning.4Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook 2026 Your agent submits the SCE electronically inside that window, which locks in your coverage price.
You don’t pay the premium up front. Billing lands on the first day of the second month after your SCE end date.4Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook 2026 If your coverage ends March 15, the bill arrives around May 1. By then you already know whether an indemnity is coming, which often lands before the premium is due.
How a Payout Is Calculated
Whether you get paid depends on where the market lands on your SCE end date compared to the coverage price you locked in. The “actual ending value” isn’t chosen by your agent; it comes from published market data.
For feeder cattle, the actual ending value is pulled from the CME Feeder Cattle Cash Index, a seven-day weighted average of USDA-reported auction, video, and direct-trade prices across a 12-state region. That index is then multiplied by a price adjustment factor keyed to the type and weight class of feeder cattle you insured.6USDA Risk Management Agency. LRP Feeder Cattle Specific Coverage Endorsement
For swine, the ending value uses USDA Agricultural Marketing Service data, the same price series that settles CME lean hog futures. It’s a two-day weighted average of negotiated sales and pork market formula transactions.7USDA Risk Management Agency. LRP Swine Specific Coverage Endorsement If your end date hits a weekend or holiday, the calculation uses the most recent report day.
If the actual ending value falls below your coverage price, your indemnity equals the gap, multiplied by your head count and your ownership share.
Collecting on a Claim
There’s no traditional loss claim to file. If prices come in below your coverage price, your insurance provider sends you a claim form. You have 60 days from receiving it to complete and return the form.4Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook 2026 Miss that deadline and you forfeit the indemnity, even though the price decline was real. Payment follows soon after the provider verifies the claim.
What It Costs
Premiums reflect your coverage level, your endorsement length, and current market volatility. Federal subsidies cover a sizable share, and the subsidy percentage is higher at lower coverage levels:
- 75 to 80 percent coverage: roughly 55 percent subsidy
- 80 to 85 percent: roughly 50 percent
- 85 to 90 percent: roughly 45 percent
- 90 to 95 percent: roughly 40 percent
- 95 to 100 percent: roughly 35 percent
Even at the top coverage levels, the federal government is paying more than a third of the premium.8USDA Risk Management Agency. Livestock Risk Protection Insurance Policy 2026
Beginning and Veteran Producer Bonus
If you qualify as a beginning farmer or rancher (you’ve operated a farm for 10 consecutive years or fewer) or as a veteran farmer or rancher, your subsidy increases by 10 percentage points above the standard rate.8USDA Risk Management Agency. Livestock Risk Protection Insurance Policy 2026 A beginning producer at 95 percent coverage would get a 45 percent subsidy instead of 35 percent.
How the Subsidy Can Disappear
Two things strip the subsidy entirely. First, a USDA determination that you’ve violated the wetland conservation or highly erodible land conservation provisions. Second, failing to have form AD-1026 on file with the Farm Service Agency by the premium billing date.3USDA. AD-1026 Highly Erodible Land Conservation and Wetland Conservation Certification You then owe the full unsubsidized premium, which can run two to three times what you budgeted.
If Animals Die or You Sell Early
LRP coverage is tied to specific animals for a specific window. Disruptions have reporting rules, and ignoring them means losing the indemnity while still owing the premium.
If covered livestock die or become undeliverable because of disease, you must notify your insurance provider in writing within 72 hours of learning about the loss, with enough detail for the provider to verify what happened.4Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook 2026 Miss that 72-hour window and those animals lose coverage permanently; your head count is reduced, no indemnity is paid on them, and the full premium still applies.
Selling or disposing of covered livestock more than 60 days before your SCE end date means you no longer have an ownership interest in them, so no indemnity is paid, and the premium is still due.4Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook 2026 This catches producers who end up marketing earlier than planned. The workaround is a formal transfer: using the Transfer of Coverage and Right to an Indemnity form, you can shift coverage to the buyer if the buyer is LRP-eligible, provided it happens before the insurance period ends and the provider has satisfactory evidence of the sale. After a transfer, you and the buyer are jointly liable for any unpaid premium on the transferred share.
Head Limits Per Producer
LRP caps the number of animals one producer can insure per endorsement and per crop year:
- Fed cattle: 12,000 head per endorsement, 25,000 head per crop year.
- Feeder cattle: 12,000 head per endorsement, 25,000 head per crop year.
- Swine: 70,000 head per endorsement, 750,000 head per crop year.
The annual cap isn’t calculated from your policy alone. If another LRP policyholder has a substantial beneficial interest in your operation, their insured animals count toward your limit in proportion to their ownership share.4Risk Management Agency. Livestock Risk Protection Insurance Standards Handbook 2026 Once you hit the crop year maximum, your provider stops accepting new endorsements.
Taxes on an Indemnity
LRP payments are taxable income. The IRS treats them like crop insurance proceeds, reported on Schedule F (Form 1040).9Internal Revenue Service. Publication 225, Farmer’s Tax Guide
By default you report the payment in the year you receive it. If you use cash-method accounting and can show that under your normal business practice more than 50 percent of the income from the affected livestock would have been reported the following tax year, you can defer the indemnity. To do that, report the amount on Schedule F line 6a, leave line 6b blank, check the box on line 6c, and attach a statement explaining the deferral.9Internal Revenue Service. Publication 225, Farmer’s Tax Guide That option is most useful when a payout lands in a year that’s already heavy with other sales income.