MANHATTAN, Kan. (DTN) -- Livestock Risk Protection has become a mainstream cattle risk-management tool as producers focus on protecting their investment in high-priced feeder cattle.

Economists at Kansas State University highlighted how producers in major cattle-producing states are relying more on USDA's Livestock Risk Protection (LRP) policies, especially to protect feeder cattle prices. The research was presented at the K-State Risk and Profit Conference last week.

Among the findings:

-- LRP is more heavily used for feeder cattle than fed cattle with feeder-cattle coverage rising sharply in recent years and reaching 6.11 million head in 2025.

-- Roughly half of the feeder-cattle LRP policies are concentrated in just five states: Nebraska, South Dakota, Texas, Kansas and Oklahoma. They accounted for 49.6% of feeder cattle covered under LRP in 2025. The most common coverage involves 600- to 1,000-pound steers and heifers, while 13 weeks is the most common endorsement length.

-- Most LRP is purchased at the highest coverage levels, nearly 100% of the expected price, giving producers a strong price floor.

LRP sets a price floor for producers to protect against downside risk in the market. Unlike a futures contract, there's no risk of a margin call and premiums are not due until the end of the policy contract.

FEWER POLICIES, FEWER HEAD, HIGHER LIABILITY

In 2025, producers bought 61,060 feeder-cattle LRP policies covering 6.11 million feeder cattle with a total liability, or value, of $12.47 billion.

For 2026, through Aug. 24, RMA data show 56,498 policies sold covering 5.54 million head, but total liability has climbed to $13.54 billion.

That means producers have insured roughly 570,000 fewer feeder cattle this year, yet the value protected by those policies is more than $1 billion higher.

The average liability per insured feeder animal increased from about $2,040 per head in 2025 to $2,440 so far in 2026, an increase of nearly 20%. That reflects how many more dollars producers have at risk on each animal.

"It's looking like the number of head covered will be lower than '25, but in terms of value of animals covered, it's going to be a higher value," said Brian Coffey, an agricultural economics professor at K-State.

LRP OFFERS CASH-FLOW ADVANTAGE

One advantage of LRP is that producers don't face margin calls like they would when directly hedging with futures. Another is they don't actually pay the LRP premium until the end of the endorsement period.

Higher cattle values also increase the amount of working capital producers have at risk, making the way they hedge those cattle more important.

Ryan Engle, a commercial lending officer at Frontier Farm Credit, said some producers who used futures to hedge cattle over the past couple of years locked in a couple hundred dollars per head in profit, but then faced $400-$500 per-head margin calls as cattle prices continued higher.

While those producers still had profitable hedges, the margin calls tied up money they needed to buy replacement cattle, Engle said. LRP avoids that cash-flow problem because producers don't face margin calls and don't pay the insurance premium until the end of the endorsement period.

Feeder cattle have been trending lower on CME contracts since June. Monday's close at $324 per cwt for the September feeder cattle contract was the lowest closing price since last December. The September contract has dropped $25 per cwt this month.

WEIGHTS PROTECTED

LRP's feeder-cattle policies can cover both steers and heifers in two weight categories: 100-599 pounds and 600-1,000 pounds. Producers can also insure unborn calves.

The main category of coverage is 600-1,000-pound steers and heifers. That weight class accounts for just under 65% of all feeder cattle covered by LRP this year.

More than 22,000 policies have been sold this year covering 2.57 million steers weighing 600-1,000 pounds, and another 11,000 policies covering just under 995,000 heifers in that weight class.

Another growing coverage category is unborn calves. This year, producers have bought 9,597 policies covering 831,362 unborn calves. That's more than the number of policies covering 100--599-pound calves.

Buying policies for unborn calves allows a producer who expects to wean calves and sell them at 500 or 600 pounds to lock in a price level for that calf crop.

"You don't have to wait around until the calf's on the ground and see how prices might move between now and then. It just gives the producer a little bit more flexibility to go ahead and establish a price floor," Coffey said.

COVERAGE LEVELS

Most feeder-cattle LRP coverage is being purchased at very high coverage levels -- near 100% of the expected price. RMA data show 4.59 million feeder cattle are covered at 100% coverage levels this year.

Essentially, producers are choosing a strong price floor rather than dropping to lower coverage levels simply to obtain cheaper subsidized protection, K-State's analysis highlighted.

That pattern holds in the top five states for feeder cattle policies. The overwhelming percentage of policies are bought at the highest coverage level.

The premium subsidy at 100% coverage falls to 35%, though the dollar figure is higher in absolute terms.

"It's a graduated scale so it goes down in percentage as the coverage level goes up," Coffey said.

CONTRACT LENGTHS

Producers choose both coverage levels and the length of those contracts, which shows how far ahead producers are protecting their expected sale prices or marketing plans.

Looking at 2025 and 2026 data, the most common LRP feeder-cattle policy lengths are 13 weeks and 21 weeks. Those two policy lengths amounted to roughly 32% of feeder-cattle policies over the last two years.

As K-State's analysis stated, "This suggests many producers buy protection closer to expected marketing."

This year, however, some producers have stretched out the length of coverage. In 2025, just 7,071 feeder cattle were covered in a 52-week policy, or just .1% of all policies sold. This year, that 52-week feeder-cattle policy has jumped to cover 309,444 head, or 5.6% of all policies sold.

K-State's analysis also showed a bump in 52-week policies this year in each of the top five states for LRP use.

FEEDER ENDORSEMENT SIZE

Looking at the top five states for LRP feeder-cattle policies, producers in Texas and Nebraska have been more prone over the past three years to buying larger policies that cover 250 head or more. Producers in South Dakota, Kansas and Oklahoma have been more likely to purchase medium contracts covering 71-250 head, or smaller policies covering 70 head or less.

So far in 2026, Texas also has the most feeder cattle covered at 622,573 head, followed by 528,226 head in Nebraska and Kansas at 519,364.

FED CATTLE POLICIES

Fed-cattle LRP is used significantly less than feeder-cattle coverage but continues to cover more than 1 million head annually.

RMA data show 9,786 fed-cattle policies sold in 2026 covering 1.49 million head with roughly $5 billion in liability. That's up from 1.39 million head covered in 2025, though producers insured 1.57 million head under the fed-cattle policies in 2024.

Kansas tops the country in fed-cattle policies this year at 273,476 head covered, followed by Nebraska at 243,648 head. Texas, Iowa and Colorado round out the top five states for fed cattle covered.

EFFECT ON FUTURES UNCLEAR

One unanswered question about LRP usage is whether it has changed the use of futures contracts on the CME or had a measurable effect on the feeder cattle futures.

"One thing that makes it hard is there was already a trend, at least in live cattle and feeder cattle, that more options were being used, so that was on an upward trend," Coffey said. "I couldn't say if LRP has brought more people into the futures market or caused less use of futures or options."

Chris Clayton can be reached at Chris.Clayton@dtn.com

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