Work

Subsidy Capture in Livestock Risk Protection Insurance: Assessing Prevalence and Program Exposure

Year: 2025

Type: article

Abstract: ABSTRACT This study evaluates the potential for subsidy capture within the USDA's Livestock Risk Protection (LRP) insurance program. We show that contracts with expiration dates aligning with CME option expiration dates are purchased at elevated rates, particularly in feeder cattle and swine. The scale and timing of these purchases are consistent with subsidy capturing trading behavior. In contrast, we find no significant evidence of subsidy capture in fed cattle. Estimated maximum subsidy captures for 2024 reach $10 million in feeder cattle and $29.3 million in swine. Policy reforms targeting contract timing and pricing mechanisms are recommended to protect program integrity. JEL Classification: Q18, Q10, Q19

Source: Applied Economic Perspectives and Policy

DOI: 10.1002/aepp.70046

Author: Ryan Feuz

Institution: Utah State University

Language: English

Topic: Agricultural risk and resilience

Subfield: Soil Science

Field: Agricultural and Biological Sciences

Domain: Life Sciences

SDG: Zero hunger

Open Access status: bronze

Funder: Utah Agricultural Experiment Station