|ASGC's Involvement in LRP-Lamb
By AMY TRINIDAD
Sheep Industry News Editor
(August 1, 2007) Established in the 1996 Farm Bill, the National Sheep Industry Improvement Center (NSIIC) was designed to provide loans and grants for business ventures in the sheep and goat industries when normal commercial credit or funding was not available. However, there was a clause in the Farm Bill indicating that the center would no longer be a U.S. Department of Agriculture entity as of Sept. 30, 2006. At that time, leaders of the center surveyed the industry to see what it was in need of. Rather than interfering or competing with any of the already established industry organizations, the leadership wanted to develop an organization that could augment those businesses. It was through this goal the American Sheep and Goat Center (ASGC) evolved.
From 2000 to the date of privatization, the center made 58 grants totaling more than $20 million. NSIIC also provided 56 loans to 38 entities in 21 states for approximately $15.5 million through an intermediary relationship with National Livestock Producers Association (NLPA). The relationship that NSIIC had with NLPA will continue with ASGC which means that the lending program was uninterrupted during the privatization process. Although not currently providing loans to those in the sheep and goat industries, it is the
ASGC’s long-term goal to make sure that monies continue to be available for those activities.
Since September, ASGC has teamed up with the American Sheep Industry Association (ASI) to develop the Livestock Risk Protection-Lamb (LRP-Lamb) pilot project. This was not the first time ASGC had been involved with the project. In addition to a NSIIC grant awarded to ASI in 2005 for the LRP-Lamb project, it also provided the original grant in 2004 to determine the project’s feasibility to the industry.
“Our leadership recognized the potential this project could offer the industry and appreciated ASI’s proposal to directly participate in its development,” says Jay Wilson, ASGC executive director/CEO.
The ASGC board of directors determined they could best assist in the project by purchasing an insurance company, the Casualty Underwriters Insurance Co. (CUIC), that would offer industry members the LRP-Lamb product. In addition, the long-term goal is to make CUIC and ASGC profitable enough to generate capital that could be used to fund activities that benefit the industry.
“After reviewing the risk programs available to cattle and swine producers, we noticed they had not been marketed successfully because those selling the product are crop insurance people,” explains Paul Lewis, ASGC and CUIC president. “Without the purchase of an industry insurance company to sell the product to producers and feeders, we knew it would be in the same boat.”
As the process to receive approval for the LRP-Lamb project was lengthy and detailed oriented for ASI, so too was the purchase of the CUIC by ASGC.
Lewis says that due to financial reasons, the ASGC could not afford a well-established insurance company. Instead, they purchased a sub-standard automobile insurance business in Utah. This acquisition required approval from not only the state of Utah but the Livestock Marketing Information Center and the Risk Management Agency also had to sign off on the contract so that CUIC could offer the LRP-Lamb product. The CUIC also had to receive a rating from AMBest so they could get reinsurance.
“This acquisition has been an overwhelmingly time-consuming yet necessary piece to the successfulness of the project,” says Wilson.
“Our short-term goal is to be successful in selling LRP-Lamb insurance and venture into selling other related insurance products,” explains Chase Hibbard, vice president of ASGC.
The CUIC will not offer the LRP-Lamb product directly; producers will buy the product through an agency that is a subsidiary of ASI, the Food and Fiber Risk Managers LLC (FFRM). This creates a partnership between CUIC and FFRM, with CUIC as the silent partner to offer the LRP-Lamb product to producers. The FFRM is a limited liability company that serves as the insurance agent and is wholly owned by the Sheep Venture Co., a for-profit holding company of ASI. This relationship allows for both companies to benefit from the product.
“The ASGC is excited to partner with ASI to offer the product to industry members. The cooperation and mutually shared goal has been really good for each organization,” says Lewis. “This bolds well for what the industry can accomplish down the road.”
As for the original goal of the center to distribute grants and other financial assistance to industry entrepreneurs, the ASGC hopes to be able to continue that program soon.
“The cash flow that will result from the successfulness of the insurance product will give the ASGC the financial ability to fund other projects, one which may be the grant program,” explains Hibbard, who says this program has funded some good industry initiatives in the past.
“This has been an interesting process for the center. Closing the office in Washington, D.C., creating a new organization, purchasing an insurance company and educating the board on insurance has all been accomplished in a short time frame. It really is remarkable.”