Margin Protection Plans: What You Need To Know

by | Sep 6, 2017

Margin Protection Plans: What you need to know

A majority of crop insurance policies offer protection for yield and price. The new Margin Protection (MP) plan covers your yield, price and margins. Learn about the latest changes to this crop insurance solution and how it can help protect your farm’s margins.

What’s Margin Protection?

Tractors break, equipment fails and unexpected expenses arise. You can’t always predict when your operating margin is going to decrease. A margin is what’s left after you factor the cost of production out of your final selling price for goods or services. Decreased margins mean that your operating expenses have increased or the return from the selling price has gone down.

Margin Protection is unique because it’s area-based. That means an average is taken from each county as a whole, instead of being based on individual farms. Crop prices, yield reductions and other factors are considered under Margin Protection plans.

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How do MP plans work?

Under Margin Protection crop insurance, coverage is determined by the expected margin for your county. Expected margins are calculated based on expected cost per acre subtracted from expected revenue per acre. All of these numbers are gathered after looking at predictions for the yield and commodity price in each specific county.

Depending on your farm operation, you may choose between 70 percent and 95 percent coverage of your anticipated margin. These MP plans can be purchased by themselves or in combination with other crop insurance policies.

When do I get paid?

If the harvest margin is less than the anticipated margin, or trigger margin, you may be paid for your loss. Since the MP is area-based, it won’t necessarily reflect your operations that year. Your farm may experience lower margins but not receive any payment from your MP insurance plan. The opposite may also be true, where you have high margins and still get a financial boost based on the county average. Typically, certain counties perform better than others year after year, so ask your crop insurance provider about the annual historical data for your area.

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Is my county covered?

MP plans are only available for select crops in select states and counties. Rice, corn, soybeans and wheat can be protected under MP coverage. Rice coverage is available in Arkansas, California, Louisiana, Mississippi, Missouri and Texas. Corn and soybeans can be protected under and MP plan in Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. Wheat coverage is an option for counties in Minnesota, Montana, North Dakota and South Dakota.

The sales closing date for Margin Protection plans is September 30, which is just around the corner. Schedule an appointment with the experts at Crop Insurance Solutions to learn more about your coverage options under a Margin Protection plan.