LRP-Lamb Contracts Honored on Current Conditions
June 3, 2020
COVID-19 has impacted the industry on nearly every front, but the U.S. Department of Agriculture – acting on guidance from the American Sheep Industry Association and the Sheep Venture Company – has found one way to blunt a small portion of that damage.
USDA will now use the National Weekly Slaughter Sheep Report comprehensive price – when the formula price is not available to due confidentiality requirements – to determine Actual Ending Values on LRP-Lamb policies purchased prior to the COVID-19 impact.
“The Agricultural Marketing Service has suspended reporting of the National Weekly Slaughter Sheep Review (LM_LM352) formula price to comply with confidentiality requirements,” wrote USDA Risk Management Agency Administrator Martin R. Barbre in a bulletin to insurance providers and RMA field offices this week. “Without the formula price being released by AMS, the Risk Management Agency is unable to publish Actual Ending Values on any active LRP-Lamb endorsements in a manner that reflects current market conditions to appropriately compensate insureds for the coverage purchased prior to the market impacts of COVID-19, which ultimately led the discontinuance of the National Weekly Slaughter Sheep Review formula price.”
“On May 21, 2020, the Federal Crop Insurance Corporation Board of Directors suspended sales of the Livestock Risk Protection for Lamb due to data being unavailable to make offers and settle existing insurance contracts. Effective immediately, RMA will publish AEVs for active endorsements by replacing the National Weekly Slaughter Sheep Review formula price with the comprehensive price when the formula price is not available. The comprehensive price includes formula price transactions in addition to negotiated prices and is designed by AMS to allow price reporting to continue during periods when the formula price report is suspended. Because the comprehensive price includes formula price transactions, it closely follows the formula price.
“For any active LRP-Lamb endorsements, when AMS has not published the formula price for the ending date of the endorsement and the previous four weeks, RMA will use the National Weekly Slaughter Sheep Review comprehensive price to calculate the actual ending value instead of the formula price. RMA will continue to use the formula price to determine the AEVs, as outlined in the policy, if AMS publishes the formula price on the ending date of the endorsement and the previous four weeks.”
ASI Executive Director/SVC Secretary-Treasurer Peter Orwick extends the sheep industry’s appreciation to USDA for finding a work around to the serious issue of not being able to accurately settle insurance contracts due to lack of price reporting because of recent plant shutdowns and changes in purchase of lambs. The industry spent two months providing alternatives, and is pleased that USDA found one that works.