Farm Insurance 101: Margin Protection

Margin Protection (MP) coverage is designed to protect against unexpected decreases in operating margins and can be purchased annually for crops such as corn, rice, soybeans, and spring wheat in select states and counties.

Here’s how it works: Expected Margin = Expected Revenue (Yield × Price) – Expected Costs

An MP indemnity is paid if the actual margin falls below the trigger margin. MP indemnity payments are made if there are potential margin losses due to factors such as reduced county yields, declining commodity futures prices, increased input costs, or a combination of these perils. It’s important to note that MP utilizes county-based yields, so a farm-based loss may not necessarily trigger an MP indemnity payment, and vice versa.

Details to know:

• MP can be purchased as a stand-alone policy or in combination with a Multi-Peril Revenue or Yield Protection policy (base policy) for the same crop acres.
• The base policy uses farm-based yields and has a price discovery period in February, while the MP policy uses county yields and has a price discovery period in mid-August through mid-September of the previous year.
• Indemnity payments, if triggered, are made once the final county yields are published by Risk Management Agency (RMA), typically in mid-June of the year following the crop year.
• MP offers premium subsidies, ranging from 44% to 59% based on the coverage level you choose – with an additional 10% subsidy factor for beginning farmers across all coverage levels.
• When purchasing an MP policy, you can elect a protection factor between 80% and 120% in 1% increments. This factor determines the level of protection provided by the policy.

Margin Protection offers several advantages, including higher coverage levels and protection factors, subsidy support, protection against margin decline, and an earlier price discovery period compared to other policies. However, it’s important to consider the disadvantages, such as the need to make the MP purchase decision before the September 30 sales closing date, additional premiums and administrative fees, and the inability to consider individual farm revenues and input costs under MP.

A crop insurance agent can provide detailed price quotes and assist in determining if Margin Protection aligns with your risk management needs. You can also utilize the USDA Risk Management Agency Margin Protection Premium Estimator and Price Discovery tools to obtain quick premium estimates and access daily prices during the price discovery period.

To learn more about the insurance products available for farm risk management, reach out to Chelsea Heatherington at Kingsgate Insurance.

Chelsea Heatherington, Farm & Ag Specialist

Call or Text: 515-302-8400

Email: chelsea@kingsgateins.com