Right now there is a lot of volatility in both the grain and input markets. 2022 corn and soybean market prices are currently at prices that allow most producers to operate at a profitable level, but rising fuel and input costs may change that picture. A Margin Protection Plan allows you to set a 2022 price of $5.06 for corn and $12.56 for soybeans now. Margin Protection is an area-based insurance plan that provides coverage against an unexpected decrease in operation margin caused by reduced county yields, reduced grain prices, increased prices of certain inputs, or any combination of these events.
Margin Protection Features
- Coverage up to 95% of the trend-adjusted county yield and revenue.
- Protection factors up to 1.2.– MP can pay up to $1.20 for every dollar of loss.
- Highly subsidized to keep farmer premiums at a low level.
- A premium credit is applied to MP when purchased with an underlying policy such as RP.
- Initial price discovery is August 15 – September 14.
- Uses the same harvest price as RP.
- Purchase deadline is September 30
Getting into the policy
– Margin Protection provides you coverage against an unexpected decrease in your operating margin (revenue less input costs). Margin Protection is area based, using county-level estimates of average revenue and input costs to establish the amount of coverage and indemnity payments. Because Margin Protection is area-based (average for a county), an individual farm may have a decrease in its margin, but may not receive an indemnity or vice-versa,
-Margin Protection can be purchased by itself, or in conjunction with a Yield Protection or Revenue Protection policy. If you buy a Yield Protection or Revenue protection policy, you will receive a Margin Protection premium credit to reflect that indemnity payments from one policy can offset payments from the other.
Margin Protection provides coverage that is based on an expected margin for each applicable crop, type, and practice.
Expected Margin = Expected Revenue – Expected Costs, where:
- Expected revenue (per acre) is the expected county yield multiplied by a projected commodity price
- Expected cost (per acre) is the dollar amount determined by multiplying the quantity of each allowed input by the input’s projected price.
You may choose to cover anywhere from 70 percent to 90 percent of your expected margin. A higher level of coverage will have a higher premium rate.
Determining the Margin
When determining the margin two types of inputs are considered, those subject to price change as listed below, and those not subject to price change (i.e., fixed from planting to harvest). Inputs not subject to price change are not specifically identified, but include, seed, machinery, operating costs (other than fuel), and similar expenses. Inputs subject to price change are identified in the Margin Provisions and include the following:
- Corn- Diesel, Urea, Diammonium Phosphate price (DAP), Potash, Interest
- Soybeans Diesel, DAP, Potash, Interest
A loss may be paid if the harvest margin is less than the trigger margin. If there is a loss paid under your Yield Protection or Revenue Protection policy, the indemnity amount from that policy will be subtracted from any loss under your Margin Protection policy. Any indemnities owed will be paid when final county yields are available, in the spring of the following year.
With all the volatility heading into 2022, adding Margin Protection should be something to highly consider. Give me a call to discuss your options. Deadline to sign up is September 30th.
Crop Insurance Specialist