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Livestock Insurance: Protecting the Big Business of Beef
November 02, 2017
Beef is big business in the US. In fact, the beef cattle production represents the largest single segment of American agriculture. There are more than 800,000 ranchers and cattle producers in the US with Texas leading the nation in beef cattle production.
With the largest fed-cattle industry in the world, the United States is also the world's largest producer of beef. The population of the US consumes approximately 25 billion pounds of beef each year. And, some $6.343 billion of beef are exported every year, including its largest beef importers, Japan, Mexico, South Korea, Canada and Hong Kong. And demand for beef is growing worldwide.
While there is some 250 recognized breeds of cattle throughout the world and more than 80 readily available in the US, many US ranchers have relied significantly on one breed of cow, the Angus.
In the 1870s, four Angus cows were brought to the United States from Scotland. Since then, Angus and Angus-cross cattle represent the majority of the total US herds, with more than 60% of commercial cattle producers reporting their herds as Angus.
The Angus breed has a number of advantages. It is fast growing and produces reliably tender, well marbled meat. And, according to the American Angus Association, studies show Angus animals bring more at auctions than non-Angus contemporaries which the organization attributes in part to the breed’s reputation for feed efficiency and superior beef. Plus, it’s considered a more low-maintenance breed, known for calving ease and maternal characteristics with helps in breeding.
Like any form of livestock, the price of Angus cattle fluctuate. Typically though, Angus cows are valued higher than other breeds, prompting many Angus ranchers to take added precautions in protecting their valuable herd from common risks.
Weathering the Weather
In a year already plagued by fire and volatile weather, for instance, many ranchers are carefully watching the greatest risk to their herd – the natural elements. Wildfires, drought and winter weather has had a significant impact on many herds resulting in financial losses for ranchers.
Consider the winter weather that we’ve already seen in 2017. A late, unexpected spring snowstorm plastered parts of eastern New Mexico and Colorado, the Texas and Oklahoma panhandles, and western Kansas and Nebraska on April 29-30, 2017. It brought 12 inches to 24 inches or more of snow and 60 mph wind gusts. The storm surprised all those in its path with a combination of the mid-spring timing and the accompanying wet snow and harsh winds. The result was a trail of dead and lost cattle.
Cattle deaths are not formally reported, however, a local sheriff in Cimarron Country said he heard a consistent number of 1,700 head were killed during this storm. Looking more broadly, our estimate, based on market research, is that insured losses from this blizzard exceeded $30 million.
Insuring High-Value Livestock
To recover from such loss, ranchers have often relied on their farm or farm operations insurance coverage which typically offers limited animal mortality coverage. Many farm policies however do not cover certain broad livestock perils, such as sickness and disease.
To address this, especially given the higher value of breeds like Angus, a growing number of ranchers are opting to purchase a standalone livestock insurance policy for more comprehensive coverage and a dedicated policy limit. Most Livestock Mortality Insurance policies available on the market today offer you the option of purchasing all risks of full mortality or to tailor the coverages with more limited specified perils protection. If a rancher, for instance, lives in area that sees blizzard conditions on a frequent basis, it’s wise to make sure blizzard insurance coverage is available under the policy.
Some insurers will also offer a more comprehensive animal mortality policy that includes sickness and disease or policy options for a specialized type of animal. These options can include individual coverage for higher-value animals, blanket coverage that will insure all your farm property for a predetermined value including structures, equipment, tools and livestock, or herd coverage which allows you to insure a specific number of animals, say a herd of 1,700 Angus cattle.
Prices are determined by chosen coverages – either more comprehensive coverage or limited peril coverage. Also, if the policy offers limited coverage, weather events, natural disasters, animal attacks or collision or other death while transporting may not be included.
Insuring the future herd
Given the popularity of the Angus breed in the US, and the need to successfully breed herds to keep up with growing beef demand, Angus bulls are particularly valuable investments for many ranchers. Typically, they would average around $10,000. However, some bulls can be valued from $2500 to $450,000. And there are some exception bulls like the one bull that recently sold for $725,000.
To protect these higher-value Angus bull investments, Bull Mortality & Infertility Insurance is often must-have coverage for ranchers. This specialty insurance coverage provides ranchers with traditional, full mortality for death from natural causes or human destruction because of a life-threatening injury. There’s also an endorsement for Accident, Sickness & Disease (ASD) Infertility which provides coverage in the event of permanent impotency, infertility or the bull’s inability to naturally service cows because of accident, sickness or disease.
Given beef’s significance to the US economy and its growing demand worldwide, more ranchers are looking to protect the growing value of their herds. Fortunately, there is a robust livestock insurance market that they can turn to for help.
About the Author
Eric Conklin is a senior underwriter in XL Catlin’s Livestock insurance business. XL Catlin has been providing insurance solutions for the livestock industry for over 25 years. For more information about livestock insurance coverages, contact Eric at firstname.lastname@example.org.