Calf price insurance is available annually from the start of February to the end of May and during that period coverage can be purchased every Tuesday, Wednesday and Thursday.
Things to consider:
When evaluating whether to purchase calf price insurance, it is important to keep a few things in mind:
- Know your unit cost of production – This will help as you review coverages and determine if it provides the protection you need.
- Know what you’re investing by purchasing a policy – Each coverage level has an associated premium. The premiums reflect the length of time the coverage is for and the volatility of the market.
- What is the market risk during the policy period? – Calf price insurance policies can be purchased for 16 to 36 weeks.
- What is your risk tolerance? – A major factor in selecting your coverage level and associated premium.
Calf Price Insurance Coverage Factors
The coverage offered is a market-driven forward price that takes into account the main risk factors for cow-calf producers.
- Feeder Forecasts – The feeder cattle futures market is used to calculate a forward price.
- Canadian Dollar - Forward currency exchange data is used to convert the forward U.S. price into Canadian currency.
- Basis - The Canadian valued forward price is then adjusted for basis which involves the historical, current and future market conditions.
- Feeder to Calf Spread – Current and historical spreads between the feeder price and calf price.
- Barley Price – The current price of barley is compared to the five year average price of barley.
Steers or heifers can be insured using calf price insurance. The coverage and pricing is based on an average 600 pound steer at the end of the policy; however, cattle insured using this option do not need to have an exact weight of 600 pounds.
Whether you insure steers or heifers, the coverage is based on the total weight of the livestock when the policy expires:
The producer now has a ‘floor’ price of $1.92 per pound and knows if the market average price for a 600 pound steer goes below the floor price during the November claim window, a claim can be submitted and the price insurance will provide a benefit.
How it's Calculated
The claim window is the final four weeks of the price insurance policy. Each Monday the settlement prices for the week are published. If the settlement price is below the producer’s insured price the producer is in a claim position. The producer may claim a portion or all of their insured weight on any Monday during the claim window. During the last week of the claim window, the producer does not need to take any action as the policy will automatically be calculated. The settlement price for that week will be compared to the producer’s insured price. If it is lower a claim will be made for any weight that has not already been claimed in the previous three weeks.
*There is no requirement to sell livestock at the time the policy expires.