DENVER, Colo. – A sheep industry endorsement for a "Livestock Risk Protection" (LRP) pilot project request, called LRP-Lamb, was submitted this week to the U.S. Department of Agriculture’s Risk Management Agency (RMA). The market-based insurance price policy is similar in concept to the LRP for swine, fed cattle and feeder cattle. 

LRP-Lamb was developed in response to the needs voiced by producers and agri-businesses in the sheep industry. It is being widely supported by industry leaders and the U.S. Senate. Fifteen U.S. senators submitted on Oct. 1, 2004, a letter to Federal Crop Insurance Corporation Chairman Dr. Keith Collins in which they voiced their strong support for an LRP program for the United States’ 64,000 farms and ranches that raise 6.4 million head of sheep and lambs.

“It is envisioned that a successful LRP for lamb will provide sheep producers a much needed risk management option and will strengthen the entire industry with a measure of protection against price volatility,” wrote the senators.

Signatories included Sens. Larry Craig (R-ID); Tom Daschle (D-SD); Conrad Burns (R-MT); Arlen Specter (R-PA); Byron Dorgan (D-ND); Michael Enzi (R-WY); Jeff Bingaman (D-NM); Ron Wyden (D-OR); Mike Crapo (R-ID); Craig Thomas (R-WY); Rick Santorum (R-PA); Wayne Allard (R-CO); Tim Johnson (D-SD); Max Baucus (D-MT) and Orrin Hatch (R-UT).

In addition, 27 individuals and state sheep associations have sent letters of support to USDA.

The goal of LRP-Lamb is to offer sheep and lamb producers a user-friendly, easily understandable risk-management tool that efficiently and effectively protects against price downswings. The tool would allow producers to simultaneously price their lambs over an extended time frame, with continuous protection, for all time periods during the year. As an insurance product, agricultural lenders and creditors would acknowledge the existence of a risk management program, allowing for defined and more favorable lending terms. The LRP-Lamb product would therefore offer lamb producers risk protection as well as economic efficiency.

“Managing price volatility of lambs is a real need in the sheep industry … the industry currently has very few tools available for managing risk,” says American Sheep Industry Association (ASI) Executive Board member and Idaho sheep producer Margaret Soulen-Hinson, who has served as a key point person on the LRP-Lamb project. “Providing this proposal for lamb to USDA is an exciting first … and an important step for lamb producers and feeders.”

LRP-Lamb, a joint proposal by ASI and Applied Analytics Group (AAG), Inc., was submitted to USDA’s RMA according to RMA-established guidelines for pilot project submissions. ASI and AAG have been working jointly with economists and insurance experts for more than a year and a half to build an economically and financially sound model from which to base an insurance product. The pilot proposal covers a large share of the geographic sheep production in the United States in both the western and eastern regions. 

It is anticipated that RMA will begin evaluating the proposal immediately and will likely schedule an expert review of the submission. ASI hopes to hear from RMA on whether the proposal was accepted by the end of the year. If accepted, the pilot program will likely take three to six months to implement and begin offering lamb price-risk insurance to producers on a pilot basis.

ASI is a national organization supported by 41 state sheep associations, benefiting the interests of nearly 64,000 sheep producers.

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Source: American Sheep Industry Association (ASI)
October 6, 2004

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