With the U.S. cattle inventory sitting at a 75-year low, the Trump administration is eyeing new ways to stimulate herd expansion. The latest tool on the table is a federal insurance endorsement known as the Beef Retention and National Development (BRAND) endorsement for Livestock Risk Protection (LRP).
The proposal aims to incentivize cow-calf producers to retain heifers for breeding by essentially insuring the opportunity cost of not taking them to market over a two-year period.
But according to a new report from the American Enterprise Institute (AEI) and recent comments by its author, former USDA Chief Economist and AEI Nonresident Senior Fellow Joe Glauber, the product is fundamentally flawed, expensive to operate, and risks major market distortion.
In his report, “Off-BRAND: The Fallacy of Encouraging Beef Herd Retention Through Insurance Subsidies,” Glauber argues the plan would “distort production decisions” and “in the near term... result in higher cattle and beef prices and prolong economic adjustment in the sector.”
What Is the LRP-BRAND Proposal?
Under the USDA Risk Management Agency’s proposed BRAND endorsement — which still requires approval from the Federal Crop Insurance Corporation board — cow-calf producers who retain heifers for breeding would establish an insured value based on the heifer’s projected slaughter or feeder value at enrollment.
If, over an endorsement period extending up to 104 weeks (two years), the animal’s realized slaughter value exceeds the economic return of keeping her as breeding stock, the policy would cut the producer a check for the difference.
The administration framed the endorsement as a critical risk-mitigation tool under its broader Ranchers First Initiative, unveiled in August by U.S. Secretary of Agriculture Brooke Rollins and designed to give producers financial peace of mind to rebuild the national cow herd without leaving cash on the table.
The Mechanics of “Opportunity Cost” Insurance
Unlike standard insurance contracts that provide a price floor (a put option), Glauber notes BRAND acts more like a subsidized call option.
“This is intended to encourage those who are retaining heifers not to bring them to market, and it does so by saying, ‘Okay, well, look, we’re going to give you an insurance product that will pay you the difference if the opportunity cost of selling that cow increases,’” Glauber explains.
A guest on AgriTalk with Chip Flory on Monday, Oct. 19, Glauber notes the details remain limited.
With a potential 35% premium subsidy, the taxpayer expense could be significant and the duration is unusual.
“The idea is that you would hold those up to two years,” Glauber explains. “That’s a long time for an agricultural insurance contract to run... the longer that period is, the more expensive is the option.”
Subsidy Harvesting and Compliance Loopholes
One major red flag is the ability for producers to exercise the option early, similar to an American-style financial option. Glauber points out this opens the door to “subsidy harvesting,” a criticism that has already been leveled at standard LRP contracts when producers cash out the value of a subsidy early.
Furthermore, there is a glaring logistical hurdle: verifying herd retention. When Flory asks what happens if a producer claims an indemnity payout when feeder heifer prices spike, but then sells the female anyway, Glauber acknowledges the blind spot.
“Whose responsibility is it to ensure that they’re retaining the heifer, right?” Glauber asks. “This should be the cost that the insurance company has to take on. I mean, they’re not going to want to be standing over making sure that they haven’t sold that.”
Ignoring Natural Market Signals
Perhaps the biggest concern is the policy risks interfering with natural market signals that are already setting the stage for expansion.
“We’ve seen cow-calf returns really high over the last few years. The reason they haven’t expanded is we’ve had really lousy pasture conditions in the Plains,” Glauber explains.
With recent weather patterns easing drought conditions and precipitation forecasts improving, “that would be the natural time where cow-calf operators say, ‘Yeah, this is the time to start doing this.’ I don’t think you should get in there and say, ‘Oh, by the way, we’ll give you money to do that.’”
Glauber stresses injecting subsidies into herd retention strays from the core purpose of federal crop and livestock insurance, which is to provide underlying risk protection for yield and price — not to create an instrument that captures opportunity costs. Providing incentives where the market is already self-correcting risks creating a scenario with “too many cattle” down the road.
“I think Secretary Rollins had it right a year ago and said, ‘Look, we don’t want to give incentive payments because we don’t want to distort what the market is telling producers,’” Glauber concludes.
Listen to Glauber and Flory’s discussion here:
