LRP Basic Provisions for RY2026 substantively modified the definition of “Sold”:

RY 2025 definition:

Sold – Livestock transferred to another person through a valid bill of sale or auction. Livestock is considered sold on the date the buyer takes physical possession of the livestock.

RY2026 definition:

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.

The primary purpose of this change was to allow producers to cover livestock they have committed to buying under a forward contract, even before they take physical possession. And this makes sense – producers should be able to insure against price risk as soon as they have price risk.

Often overlook aspect of the change is how this definition interacts with Sect 6(a)(3):

(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.

If a producer enters into a forward contract as a seller and removes price risk on their covered livestock more than 60 days prior to the endorsement end date, they will not be eligible to receive an indemnity on covered livestock.

Let’s consider a Fed Cattle endorsement with an end date of March 1, 2026, and assume that the insured has purchased cattle they covered under LRP. I’ve highlighted new rights and responsibilities.

For endorsements purchased in RY2025, i.e. before July 1, 2025:

• Producer must have taken possession of livestock before buying the endorsement.
• Producer must physically deliver covered livestock to the buyer not earlier than December 31, 2025 or later than April 30, 2026. 
• Producer is free to enter into a forward contract as a seller at any time before or after they purchased the endorsement.

For endorsements purchased in RY2026, i.e. on or after July 1, 2025:

• Producer can buy an endorsement at any time up to 13 weeks prior to March 1, 2026 after taking physical possession of the livestock or a livestock purchase agreement, i.e. buying livestock on a forward contract, even before they took physical possession.
• Producer must not deliver cover livestock to the buyer earlier than December 31, 2025. 
• Producer must not enter into a forward contract as a seller or covered livestock prior to December 31, 2025, regardless of the delivery date/period stated in the forward contract.
• Provided that the producer has entered into a forward contract with a buyer prior to April 30, 2026, covered livestock may still be in the insured’s possession as of April 30, 2026.

It is also important to emphasize that LRP policy provides for additional flexibility for producers who own cows or sows to which covered livestock is born. Going back to the definition of sold for RY2026:

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.

This flexibility applies to all three LRP commodities: feeder cattle, fed cattle and swine.

In the example listed above, if the producer purchased Fed Cattle endorsement on homegrown livestock, i.e. not purchased from other parties, then they would be able to enter into a forward contract as a seller prior to December 31, 2025, provided that the livestock is physically delivered to the buyer by April 30, 2026.

I fully appreciate that some producers and agents will not like new restrictions. Here’s from a recent email by one agent:

How or why did we end up at the decision to not allow LRP and Forward Contracting (60 days before SCE) to be utilized together?  The team feels that this change has limited our clients ability to utilize various forms of risk management strategies in combination to provide as much coverage as possible. 

My answer to this agent (slightly edited):

If a corn producer enters into a forward contract in e.g. May, for delivery in September, they still have production risk, which is why MPCI coverage is allowed even if the producer forward contracts his crop. In case of livestock, at the time when the producer enters into a forward contract, they no longer have price risk – and unlike MPCI or DRP, LRP protects against only one type of risk – price risk. The appropriate use for LRP is to set the SCE to expire at around the time when they enter into a forward contract as that is the time when livestock is considered sold. The LRP change producers have requested for years is the ability to buy LRP as soon as they acquire price risk, i.e. enter into the forward contract as a buyer. The change to the definition of “sold” allows for that. LRP further provides flexibility to producers who own cows or sows to which covered livestock is or will be born to, so they can consider their livestock ‘sold’ when they physically deliver livestock. Also keep in mind that ‘basis contracts’, or ‘formula contracts’ are not considered as ‘livestock purchase agreements’ for LRP purposes.