They also may not feel they are being offered a fair price by packers. The number of hogs being marketed monthly must be known. The pilot policy is for six-month coverage either February to July or August to January. The policy must be renewed each period. Prices are based on futures and options placed on the 15th of the month, four months before slaughter.
Indemnities consider all factors, including feed and hog prices.
If more profits are made than expected, no indemnity is made. If less profit is made, the producer will get an indemnity. ISU livestock marketing specialist John Lawrence said the net results for insurance were about the same as put option strategies. The insurance is more convenient because it only takes one decision and sign-up is every six months, he said. Insurance can be tailored to an individual marketing plan and numbers.