Contemplating Margin Protection Crop Insurance? Use this Guide to Weigh Your Options
Margin Protection (MP) for the 2023 crop provides coverage against an unexpected decrease in operating margin (revenue minus select variable input costs). It is area-based plan, using both expected and final county yields along with nationally indexed variable input costs, explains Steve Johnson, retired Iowa State University Extension farm management specialist.
An indemnity payment may be made when the harvest margin falls below the trigger margin due to a decrease in revenue and/or an increase in those input costs. MP coverage is typically an add-on product to a Revenue Protection (RP) or Yield Protection (YP) base policy.
Johnson and Alejandro Plastina, Iowa State University Extension economist, have developed a new publication titled Margin Protection (MP) Crop Insurance – A1-53. The publication can be found on the ISU Extension AgDecision Maker website.
“MP can be bought at up to the 95% coverage level,” Johnson says. “Since it uses county yield averages, growers should focus on purchasing the higher levels of coverage to have the most benefit for the policy triggering an indemnity should a margin shortfall occur. The product is subsidized by the federal government in a range of 44% to 59%, depending on the leverage of coverage elected.”
See the availability by county and crop for MP.
The MP discovery period (mid-August to mid-September) is for both the projected price and those select variable input costs. MP coverage is available for the 2023 spring planted crops and uses those futures price averages for December 2023 corn and 2023 November soybean futures prices.
“If a grower thinks that these variable costs are going to increase, or futures prices and/or county yields will decline, then MP should be considered,” Johnson says.
MP should be considered as an add-on crop insurance product. It best fits for growers whose farm yields track with the county average yields, and they typically buy 80% to 85% Revenue Protection (RP) coverage as a base policy annually before March 15th. Those spring projected prices for RP coverage are not determined until next February, he says.
Talk to your crop insurance agent now to see if MP coverage is a good fit for your operation. The deadline for purchasing MP is Sept. 30, however, MP premiums will not be known until after the discovery period ends in mid-September.
Read More
Consider Margin Protection to Manage Uncertain 2023 Crop Margins
Margin Protection: A Risk Management Tool to Consider for 2022
