- September 26, 2022
- Posted by: Daniel Lefstad
- Category: News
Margin Protection Insurance Policy
With higher commodity prices and the continuing rise of input costs there has been some interest in Margin Protection. The Margin Protection (MP) plan of insurance is available for wheat, corn, and soybeans in most of our region. Margin Protection can be purchased by itself or in conjunction with a Revenue Protection (RP) or Yield Protection (YP) MPCI policy.
The Margin Protection (MP) policy provides you coverage against an unexpected decrease in your operating margin (expected margin = expected revenue – 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. Because Margin Protection is area based and uses the average for the county, it may not necessarily reflect your individual experience. Your own operations yields and costs are not taken into account. If the average margin for the county is lower than expected, due to a decrease in revenue and/or an increase in input costs, Margin Protection may cover a portion of that shortfall.
There are no replant or prevent plant provisions with an MP policy (only insures planted acres), therefore an additional Revenue Protection or Yield Protection Policy would need to be in place to provide coverage in the event of those losses. If an MPCI RP or YP policy is purchased, it must be with the same insurance company that issued the Margin Protection policy. If you buy a RP or YP policy, you will receive a premium credit on your Margin Protection policy to reflect that indemnity payments from one policy can offset payments from the other. Any indemnities owed will be paid when final county yields are available, in spring the following year.
One benefit to MP Policies is the ability to lock in an insurance commodity price for each crop earlier, as the price discovery periods have already taken place (Corn: $6.11, Soybeans: $13.56, Wheat: $9.05). Premiums/Margin vary significantly by county, but an example premium for Mahnomen County (95% coverage and 100% factor) would be as follows:
*Policies can be purchased as low as 80% protection factor which would lower dollars of coverage & premium.
The sales closing date for Margin Protection policy for 2023 is September 30th 2022. For more information give us a call at ProAg.
ProAg Service & Insurance
2417 US Hwy 59
Mahnomen, MN 56557
This agency is an equal opportunity provider