Canada launches price risk hedging tool for beef producers

Jon Condon, 04/02/2014


At a time when Eastern Australian cattle producers are struggling with extreme livestock price volatility due to drought, the Canadian Government and livestock industries are launching a new price insurance program to help producers manage risk.

The Western Livestock Price Insurance Program (WLPIP) will allow cattle and pork producers in Canada’s western provinces to buy insurance on an insured price selected by the producer, from available coverage levels. Producers will fully fund the premiums.

The North American Meat Association said the risk management product was first offered pm a pilot basis in 2009 to livestock producers in the province of Alberta.  The program will now open to producers in British Columbia and Saskatchewan.

Canada’s Federal and Provincial governments will cover administration and delivery costs for the WLPIP project, while the Federal government will also provide deficit financing for the first stage.

The program, designed to service the interests of cow-calf operators, backgrounders and lotfeeders was launched on January 24.

Each WLPIP product is designed to be market-driven and will closely reflect the market in which a producer is selling. Settlement indices will be calculated weekly for each cattle program, and are designed to reflect current Western Canadian prices.

This will ensure that the program is responding to market conditions producers are actually facing in their home market, the program website says.

The original Western Livestock Price Insurance Program  pilot was a unique collaborative arrangement between the Federal and western province governments to enhance risk management options available to the livestock industry, a launch statement said.

Alberta’s Agriculture Financial Services Corporation will act as the central administrative body for the program to maximise administrative efficiencies.

"This historic initiative is a great example of collaboration among federal and provincial governments and industry to strengthen risk management options for producers," Canada’s Federal agriculture minister Gerry Ritz said.

"Our government will continue to work closely with the provinces and industry to ensure producers have access to the tools they need to grow their businesses and our overall economy."

"We have been committed to working with the industry to provide price insurance for our cattle and pork producers to help them better manage risk and grow their industries," he said.

"This has been a top priority for our government and I am pleased to partner with the provincial governments and the western provinces to offer the facility."

Expanding the insurance option to other provinces would help the western Canadian livestock industry protect itself from significant price downturns, while also ensuring the program was delivered efficiently.

Providing predictable and cost-effective insurance products would help Canada’s cattle and pork producers manage their businesses and focus on longer-term operations, Mr Ritz said.

"This program gives more producers access to a solid tool to manage price and basis risk, one of the more unpredictable aspects of managing a livestock operation," Canadian Cattlemen's Association president Martin Unrau said.

"Market-based risk management is key to better managing volatility," he said.

  • View more information on Canada’s WLPIP program here.




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