An agent asked me a question this morning:

I had a dairy that we work with call in this am. He is getting close to writing a contract with LRP. He had another dairyman tell him that you cant use LRP if they currently contract the sale of the calves?

Is that correct?

Short answer: Dairy producers who have contracted for the sale of their calves can still use LRP if they own cows to which such covered calves are born to.

Long answer:

Section 6(a)(3) in LRP Basic Provisions provides guardrails for selling livestock ‘too early’:

(3) If you dispose of or sell your covered livestock more than 60 days prior to the SCE end date, you will not be considered to have an ownership interest in the disposed of or sold livestock.

So is it a problem if calves are contracted to buyers more than 60 days prior to the SCE end date?

LRP Basic Provisions define when livestock is considered sold:

Sold – Livestock transferred to another person through a valid bill of sale or through a livestock purchase
agreement. Livestock is considered sold:

(1) For livestock born to cows or sows in which you have an ownership interest, at your option, on the date
when you enter into a livestock purchase agreement as a seller, or the date the buyer takes possession of
the livestock; and

(2) For previously purchased livestock, on the date the buyer takes physical possession of the livestock or, if
earlier, when you enter into a livestock purchase agreement as a seller

For dairy farmers who own the pregnant cows, option (1) in the definition of Sold applies. Therefore, they can choose to have their calves considered sold at the time when they are physically delivered to buyers. If the calves are physically delivered to buyers less than 60 days prior to the SCE end date, then the requirement in 6(a)(3) is met.

Note that other conditions still do apply. If dairy farmers are covering beef-on-dairy calves using Unborn Calves type, they do have to provide marketing records to receive an indemnity, and sale to the buyer (physical delivery in this scenario) has to happen within 2 weeks of birth and 30 days of the SCE end date. In case of Unborn Dairy type (dairy-on-dairy calves), they may retain ownership and still be eligible for an indemnity.