LRP-Lamb Market Report 16 September 2013

The LRP-Lamb price index ended last week at $115.21 per cwt. This is down $0.50 from the index of $115.71 on September 9, 2013.

LRP-Lamb insurance price forecasts expiring September 16, 2013 were as follows:

Date Offered

Policy

Expected Ending Value

Actual % of Expected

6/17/2013

13-week

$96.56

119.3%

4/29/2013

20-week

$88.60

130.0%

3/18/2013

26-week

$87.91

131.1%

12/17/2012

39-week

$127.56

90.3%

The effective floor prices offered by LRP-Lamb coverage for policies expiring September 16, 2013 were as follows:

     

Effective Floor Price (Coverage Price – Producer Premium)

     

(Producer Premium per cwt.)

Date Offered

Policy

Expected Ending Value

95%

90%

85%

80%

6/17/2013

13-week

$96.56

$89.759

$86.161

$81.846

$77.186

     

(1.971)

(0.739)

(0.234)

(0.064)

4/29/2013

20-week

$88.60

81.395

78.421

74.758

70.676

     

(2.775)

(1.319)

(0.556)

(0.204)

3/18/2013

26-week

$87.91

80.584

77.561

73.966

69.995

     

(2.926)

(1.559)

(0.754)

(0.335)

12/17/2012

39-week

$127.56

115.248

111.151

106.318

100.896

     

(5.932)

(3.649)

(2.112)

(1.154)

Only the 39-week expiring insurance coverage will pay any indemnity and it will pay an indemnity at the 95 % coverage level only. However, the net effective floor price at that coverage level was only $115.25 per cwt. indicating that the indemnity was large enough to cover the premium costs but only by $0.04 per cwt. The premium at that level was $6.818 per cwt. with the producer share (87%) equating to $5.932 per cwt. The coverage price at the 95% coverage level was $121.18 per cwt. After the fact, the best a person could have done was to insure at the 95% level on December 17, 2012 for lambs delivered on or about September 16, 2013. However, the net benefit of doing so was only $0.04 per cwt. versus not insuring at all. As always, one should consider the protection the insurance provides in terms of risk management versus whether or not it pays off for any one period.

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