Compare Livestock Risk Protection (LRP) Contract with Chicago Mercantile Exchange (CME) Put Option Premiums for Similar Coverage

		Current	History
1	Coverage Date	12/03/03	12/02/03	12/01/03	11/28/03	11/26/03

	Section I LRP Offer
2	LRP Weeks Covered¹	21.0	21.0	21.0	21.0	21.0
3	LRP Expiration Date	04/28/04	04/27/04	04/26/2004	04/23/04	04/21/04
4	% Coverage of Expected Market Price	92.82%	92.82%	92.82%	93.55%	94.18%
5	LRP Guarantee or "Put Strike" ²	$86.00	$86.01	$84.020	$84.08	$84.13
6	Premium/head for 750 lbs calf ³	$14.74	$15.48	$13.43	$14.26	$14.90
7	Tot LRP Prem per CWT	$1.97	$2.06	$1.79	$1.90	$1.99

	Section II Put Contract Alternative
8	Option Expiration Date	04/29/04	04/29/04	04/29/04	04/29/04	04/29/04
9	April Feeder Cattle Futures Close	$90.500	$92.000	$91.100	$90.500	$89.800
10	Futures Increase or Decrease	($1.500)	$0.900	$0.600	$0.700	$0.600
11	April Feeder Cattle Put Strike	$86.00	$86.00	$84.00	$84.00	$84.00
12	April Put Premium	$2.000	$2.000	$1.700	$1.850	$1.950
13	Commission⁴	$75	$75	$75	$75	$75
14	Total Producer Costs for a Put	$1,075.00	$1,075.00	$925.00	$1,000.00	$1,050.00
15	Total Put Cost per 100 CWT	$2.15	$2.15	$1.85	$2.00	$2.10

	Section III. Cash Comparison Put Vs. LRP
16	LRP Vs. Put Cash Prem. Difference	($0.18)	($0.09)	($0.06)	($0.10)	($0.11)
17	% LRP Discount vs. Cash Put	(8.59%)	(3.98%)	(3.17%)	(4.95%)	(5.38%)

	Section IV. Value of LRP based on Today's Market and LRP Expiration Date
18	KSU Estimated LRP Market Price⁵	$90.414	$91.913	$90.901	$90.459	$89.889
19	Mar/Apr Wt KSU Est.Volatility⁶	18.26	19.55	19.76	19.83	19.26
20	KSU Estimated "Put" Premium to Provide Similar LRP Coverage based on Today's Market⁷

		$2.229	$2.048	$1.749	$1.872	$1.915
21	KSU Est. "Put" Premium +Commission	$2.38	$2.20	$1.90	$2.02	$2.07

	Section V. Comparison of Put Vs. Current Market Value of LRP
22	Current Valued LRP vs. Put Prem. Diff.	($0.41)	($0.13)	($0.11)	($0.12)	($0.08)
23	% Current Market Value LRP Discount	(17.39%)	(6.07%)	(5.67%)	(5.99%)	(3.77%)

¹The LRP contract expiration date declines daily and will cause a change in coverage weeks. For example, LRP based on the April put had its coverage weeks reduced from 30 weeks on 10/2/03 to 26 weeks on 10/3/03.

²The LRP strike varies daily and is based on the expected market price and can not exceed 95% of the expected market price.

³LRP premiums are based on the previous day's close of the CME option market. RMA premium calculator that is located on the RMA WEB site at www.rma.usda.gov calculates the LRP producer paid premium on a per head basis.

⁴Commissions vary and some brokers charge a flat commission for options that includes the sale of the option, if it is in-the-money.

⁵Because on most days the LRP expires between two put expiration dates (for example, the March and April puts expiration dates) a weighted average price between the two futures' contract closing prices (for example March and April futures closing prices) were calculated to estimate the expected ending market price based on today's market. The change in the weighted average price was then subtracted from the current LRP expected price to forecast tomorrow's LRP expected price. The KSU expected price will compare with tomorrow's LRP expected price. KSU does not have access to the RMA model used to set the one day delayed LRP expected price.

⁶A weighted average of the implied put volatilities from the two puts used to set a LRP premium were calculated.

⁷The current LRP strike, current LRP expiration date, KSU estimated expected price, and weighted volatility based on the current market was then used to calculate the premium for a theoretical "put" that will provide similar coverage as the LRP contract.