What Is Margin Protection Crop Insurance?

Margin Protection (MP) might be a fit to insure your operation if:

  • You want to protect your operating margin (difference between expected revenue and expected costs)

  • You are interested in 95% coverage levels on a federally subsidized product

  • You want a county-based revenue policy, but you don't want to give up prevent plant coverage

Growers can use Margin Protection to lock in margin with a highly subsidized insurance product without physically locking in any grain sales or input purchases.

MP is a great choice for farmers whose yields are consistently in line with county yields, and who would like a county-based policy without having to give up their preventive plant or replant coverage. Since MP is well subsidized at the highest levels of coverage, it is also a good choice for those who are interested in 95% coverage level. 

Each year the number of MP policies written increases, as producers see the benefits of higher coverage levels.

What Is Margin Protection?

With MP:

  • Crop yields are based on county data

  • Crop prices are based on futures markets

  • Input costs are based on regional prices

The policy also takes into account a variety of factors, including:

  • Changes in crop prices

  • Reductions of yields

  • Changes in the prices of inputs used to grow the crop

MP uses the same harvest prices as Revenue Protection (RP), but bases its expected county yields on historical RMA data for the county. In the past, this was based on NASS data. Coverage levels can range from 70-95%.

Farmers also have the option to choose between MP and MP with the Harvest Price Option (HPO). The HPO provides protection on loss at the higher of the price projected months before planting or the price at harvest.

Farmers can also choose to buy a base policy — such as Revenue Protection or Yield Protection — and get a credit on the MP premium, allowing them to receive protection from the greater of losses.

By the sales closing date, you'll make the decision of whether to choose MP or MP with HPO. You will also select your Coverage Level and Protection Factor at this time. It is important to note that the MP policy and base policy must be written (or transferred) with the same company at the time the MP policy is purchased.

[READ NEXT: What Are Multi Peril Crop Insurance Deadlines?]

What Are the Expected Costs?

MP doesn’t measure growers’ actual costs. Assumptions are made based on regional agronomic conditions to establish the quantity of key inputs. These are based on the Expected County Yield and the volume of an input needed to produce the expected yield.

So what are your expected costs? These can include:

  • Variable costs, such as fuel, nitrogen, phosphorus, potassium and interest

  • Fixed costs, such as seed, machinery and other operating costs. Fixed costs are tracked but do not impact your ability to trigger an indemnity.

How to Calculate Margin Protection

Here’s an example of how this works:

Restrictions on Margin Protection

There are some restrictions on MP. It cannot be coupled with catastrophic (CAT) or other area-based coverage, and MP acres cannot be high risk acres excluded from a CAT policy. MP also cannot be used on acres covered by a High Risk Alternate Coverage (HRACE) base policy.

Also, there is no Prevented Planting or Replanting coverage with MP, but it can be supplemented by adding a base policy (RP, RPHPE or YP) that includes it.

It is also important to note that payments are made in the early summer of the following year after county yields are released, so cash flow would need to be managed to account for this. However, adding a base policy would allow for that part of an overall indemnity to be paid once the individual loss is calculated.

Learn More About Margin Protection

FBN Crop Insurance is personalized to meet your needs. Our team approach gives you access to agents who specialize in a variety of crops, and you’ll receive customized policy recommendations specific to your risk tolerance and budget using our innovative data-driven approach.

Complete the form below, click here, or call (866) 878-7133 to speak with a member of our team today.

Watch Now: What Is Margin Protection Crop Insurance?

In this 30 minute webinar, FBN Director of Crop Insurance Eric Sorensen discusses the benefits and drawbacks of taking a Margin Protection policy. 

The purpose of these materials is to promote awareness of risk management concepts and to highlight  risk management products, features, benefits and availability. This presentation does not provide full details of policy provisions or approved procedures. Producers should consult with a local agent for specific details and program requirements.

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We are an Equal Opportunity Provider. FBN Insurance services are offered by FBN Insurance LLC (dba FBN Insurance Solutions Services LLC in Texas, and FBN Insurance Solutions LLC in California and Michigan). FBN membership is not required to purchase through FBN Insurance LLC, but certain features may only be available to FBN members. FBN Crop Insurance is currently offered in all U.S. states.

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