A producer places high quality genetic embryos in leased cows. The producer owns the embryos, has control of the cows through gestation, lactation and beyond. He also is subject to all of the mortality and price risk associated with the unborn bulls and heifers they are producing. Question: can the producer use LRP-Feeder Cattle with “Unborn Bulls & Heifers” type to cover price risk on unborn livestock that will be born to cows the producer is leasing?
Short answer: Yes, if the producer is proper owner of covered unborn livestock, and the unborn livestock is intended to be sold as feeder cattle, not breeding stock.
Analysis:
LRP Basic Provisions, 6(a)(1), states:
(a) This policy only covers livestock in which you have an ownership interest during the insurance period under the applicable SCE and which are marketable by the end date.
(1) Such ownership interest may include:
[…] (ii) Unborn livestock, provided that you have:
(A) An ownership interest in pregnant cows or sows to which unborn livestock will be born; or […]
So the question comes down to this – if the producer has leased breeding cows, does that constitute ‘ownership interest’ for the purpose of LRP?
The definition of “Ownership interest”:
Ownership interest – Your insurable interest as an owner in the covered livestock during the insurance period.
‘Covered livestock’ is a defined term as well:
Covered livestock – The livestock insured under an SCE.
Ownership interest is defined through the term covered livestock, and it is not pregnant cows that are covered livestock in this case, but unborn bulls & heifers to be born to such cows.
The most honest answer is thus that the policy term ‘ownership interest’ is legacy language from the days before LRP provided coverage for unborn livestock and forward priced livestock. Internal inconsistency and ambiguity arise because this term was extended beyond the original purpose. In other FCIC products, instead of ownership interest, the operative term is “insurable interest’. For example, in Common Crop Insurance Policy, 2026 Basic Provisions:
Insurable interest – Your percentage of the insured crop that is at financial risk.
The producer in this example has production and financial risk on unborn livestock that is indistinguishable from risk they would face if he owned, rather than leased the cows. He is able to demonstrate he is not over-insuring, by providing pregnancy records, just as he would be able to if he owned the cows. Therefore the ambiguity that arises due to the use of term ‘covered livestock’ in the definition of ‘ownership interest’ must be resolved in favor of the producer, and the producer is able to use LRP to cover unborn livestock to be born to leased cows.
Note also that LRP does not at present time offer any coverage for replacement animals. If the producer is placing high quality genetic embryos with the intent to later sell such heifers as breeding stock, then it does not matter whether the producer owns or leases the cows – the coverage is not available in either case.
All 508(h) livestock insurance programs are offered under the Federal Crop Insurance Act and administered and regulated by the Risk Management Agency. Only the Risk Management Agency has the authority to provide the official interpretation of policy and procedures. If you have questions or concerns regarding livestock programs, they should be directed at your agent or Authorized Insurance Provider, who will then inquire about the issue with the Risk Management Agency. The information provided on this website is for general informational purposes only and should not be construed as professional advice. While Bozic LLC strives to ensure that all information presented on this site is accurate, up-to-date, and complete, there may be instances of errors, omissions, or inaccuracies. The content is provided ‘as is,’ without any guarantees of accuracy or completeness. Bozic LLC will not be liable for any errors or omissions in this information or any losses, injuries, or damages arising from this blog’s use. Any reliance you place on such information is strictly at your own risk.