LRP-Fed Cattle coverage is settled based on the price of fed cattle as calculated by the Agricultural Marketing Service (AMS) in a report titled the “5 Area Weekly Weighted Average Direct Slaughter Cattle.” The price series is the Live FOB Basis Sales, Steers, “Over 80% Choice” category. The difference between the published AMS price, and the CME live cattle futures price for the first nearby contract is referred to as ‘basis’. The basis (AMS price minus CME futures price) has increased substantially since 2011:

Several factors have potentially contributed to driving stronger cattle basis levels over time, including tighter overall cattle supplies and improvements in average cattle quality grades, which have supported higher cash market premiums. There have also been notable shifts in the regional mix of cattle included in the AMS 5 Area weighted average cash cattle price series. Iowa, Minnesota, and Nebraska have accounted for a larger share of reported marketings over the past five years, and fed cattle in those regions during that time have tended to trade at a stronger premium than fed cattle in Texas and Oklahoma.

The basis also has a strong seasonal pattern, rising in the spring months, with a peak in May/June, and then weakening towards the winter.

The model we use to project LRP-Fed Cattle Expected Ending Values will be modified, starting with RY2027, to address evolving trend, cyclical and seasonal basis patterns. The following few charts illustrate the direction and magnitude of the change.

The following table illustrates the change in EEVs and Producer Premium per Cwt, for sales effective date February 13, 2026:

In summary, covering live cattle with end months in March through August will become substantially more attractive. For end months September through February, expected prices are likely to be slightly lower under the new model.