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There has been a lot of chatter recently about Livestock Risk Protection and how many have been abusing the subsidized program to “harvest subsidies”. Reports of this have garnered enough attention that some grassroots organizations like the Iowa Cattlemen’s Association are even adopting policies to attempt to change the program so that some of these maneuvers are more difficult. The argument to this point has been that people are “subsidy harvesting” by purchasing LRP on a specific set of cattle and then selling an equal value put option to effectively pocket the 35-55% subsidy and remain net neutral the market.   Example:    Purchase LRP on feeder cattle steers with a floor of $268/cwt.                       and an end date of 09/02/24 for $10/cwt.   Sell $268 put option for $13/cwt. with an expiration date of 09/02/24, pocketing the $3/cwt. government subsidy.   In this example, if the price continues to move higher the cattle are gaining value, the short put premium will be realized profit while the LRP won’t pay an indemnity and premiums will be due within 30 days of the policy end date. Win, win, lose. If the bottom…

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