Margin Protection

Margin Protection Overview

Understanding Margin Protection

Margin Protection (MP) is a risk management tool that provides coverage against unexpected losses due to price, yield or an increase in input costs.

The annual sign-up deadline for MP is September 30.

Watch the video to learn more.

How it works

The popular Revenue Protection insurance focuses on the revenue side of your balance sheet, but does not protect you against unexpected increases on the input cost side.

That’s where Margin Protection comes in.

How it’s calculated

While the revenue formula is relatively simple (Yield x Price = Revenue, using the higher of the February or October price average), cost calculations are slightly more complex.
Costs are not based on the producer’s own costs; they are calculated by RMA, based on input prices from August 15-September 14. These include:
- Variable inputs (diesel, NPK, interest rate)
- Costs that are covered but do not change (seed, lubrication, select crop protection)
Note that land, rent and labor are not included.

Revenue and Margin Formula

Yield x Price = Revenue - Cost = Margin

Dual-coverage delivers flexibility

Combining MP with other coverage options offers added flexibility.
- You are able to base decisions on price guarantees in September, February and October. MP locks in the futures price in the fall, when the market typically rewards delaying sales.
- You can purchase MP with either ARC or PLC.
- MP is based on county yields, prices and inputs. This means indemnities are not paid until after USDA determines county yields – roughly six months or more after harvest.
If you have a claim on your individual RP policy, you receive that indemnity more promptly. But – you receive the higher of the two claims. Given a smaller “deductible” with a 95% policy, and the impact of the protection factor, MP may beat RP and you’ll receive the balance of the indemnity later.

Other ways MP and RP work together

MP offers higher coverage up to 95%.
MP does not cover prevent plant, replanting or quality adjustment; RP does.
RP and MP together provide peace of mind and protection for both individual risk protection and area coverage for the expected operating margin.
Analysis of history suggests an advantage over the long run to purchasing both.

Available to all qualifying producers regardless of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status.

Margin Protection Features

Area-based plan

Coverage 70% up to 95% of the trend-adjusted county yield.

Icon of a hand holding a dollar sign within a circle

Protection factors from 0.8 to 1.2. Hence, MP can pay up to $1.20 for every dollar of loss.

Icon of a circle with a dollar sign in the middle above a graph

Highly subsidized premium benefit.

A premium credit is applied to MP when purchased with an underlying policy.

Icon of a calendar with dollar sign in a circle in the lower right

Initial price discovery is August 15 – September 14.

Calendar icon with a green circle on a date

Purchase deadline is September 30.

Uses the same harvest price as RP and Supplemental Coverage Option (SCO).

Why Work With Us for Margin Protection

Icon of a person with a thought could with a leaf in the center

Dedicated Specialists

Our agents are non-commissioned and focus 100% of their time on crop insurance and livestock insurance — every working day of every week in the year. They don’t sell property, casualty or life insurance.

Icon of a shield with three people within it

Highly Trained

Our insurance officers receive annual training on RMA changes to crop insurance and livestock insurance plans and stay informed throughout the year.

Icon of a light bulb and circle with a dollar sign and arrows pointing in a circle

Financial Expertise

As a lender, we understand financial risk and work to protect your working capital, not just your crop or livestock.

Icon of a hand pointing at a browser window with a dollar sign in the middle

Decision-Making Tools

Our proprietary Optimum tool analyzes federal insurance policies to find the best choice whatever your risk management goal.

Frequently Asked Questions

1

Margin Protection provides coverage against an unexpected decrease in operating margin (revenue minus input costs) caused by reduced county yields, reduced commodity prices, increased input prices or any combination of these perils.

Because Margin Protection is an area-based product, payouts are made using county-level yield estimates. An individual farm may have a decrease in margin but not receive an indemnity and vice versa.

2

Margin Protection provides coverage that is based on an expected margin for each applicable crop, type and practice, where:

Expected Margin = Expected Revenue – Expected Costs

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.

3

In 2023, the USDA expanded where Margin Protection is available. It’s available for corn in select counties across the nation, for soybeans in 34 states and for wheat in select counties in Minnesota, Montana, North Dakota and South Dakota. To see maps of Margin Protection coverage, visit the RMA website.

4

The Margin Protection sales closing date for corn, soybeans, and spring wheat is September 30 of the calendar year prior to insured crop year.

5

When determining the margin, two types of inputs are considered, variable inputs and fixed-price inputs.*

VARIABLE INPUTS

Corn: diesel fuel, interest, diammonium phosphate (DAP), potash**, urea

Soybeans: diesel fuel, interest, DAP, potash**

Wheat: diesel fuel, interest, monoammonium phosphate (MAP), potash**, urea

FIXED-PRICE INPUTS

While fixed-price inputs impact the amount of insurance coverage, only price changes for variable inputs determine whether an indemnity is paid along with county yield changes and changes in price for the commodity.

Corn: preharvest machinery, seed, lime, herbicide, insecticide

Soybeans: preharvest machinery, seed, lime, herbicide

Wheat: seed, maintenance, chemicals, lubrication

*Land, rent and labor costs are not included.

**The price of potash won’t change from fall to spring because there is no current viable trading market.

6

Margin Protection elections come in two forms: with harvest price option and without.

The Harvest Price Option allows you to include replacement cost coverage under the Margin Protection policy. Similar to many popular revenue-based polices, if the harvest price is greater than the projected price, the expected margin and the trigger margin are recalculated based on the higher harvest price.

7

Margin Protection can be purchased by itself, or in conjunction with a Revenue Protection or Yield Protection policy purchased from the same Approved Insurance Provider (AIP) that issued the Margin Protection policy.

Your Farm Bill program election does not limit your ability to purchase Margin Protection; it can be purchased with either Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC).

8

Compared to Revenue Protection, Margin Protection offers higher coverage up to 95%. However, Margin Protection does not cover prevented planting, replanting or quality adjustment, but Revenue Protection does.

Additionally, Margin Protection locks in the futures prices in the fall, which provides an earlier time frame to establish minimum guarantees.

Together, Revenue Protection and Margin Protection provide peace of mind and protection for both individual risk and area coverage for the expected operating margin. Historical analysis suggests there is an advantage over the long-run to purchasing both.

9

A premium credit is applied to Margin Protection when purchased with an underlying policy such as Revenue Protection or Yield Protection. The amount of the premium credit will depend on the producer’s historical unit yields relative to the county yields for the same years.

Premium credits apply only if the base policy and Margin Protection policy are for the same person or entity. The premium credit is determined when all information needed to establish liability under the base policy is known, which is after the approved yield has been established and the acreage report filed.

10

Coverage levels for Margin Protection range from 70%-95% of your expected margin. The protection factor ranges from 80%-120% and is applied to the indemnity.

Margin Protection offers the same premium subsidies as other area-based plans, which vary by coverage level.

11

A payment may be made when the harvest margin for the county is lower than the trigger margin due to a decrease in revenue and/or an increase in input costs.

12

Margin Protection is based on county yields, prices and inputs. This means indemnities are not paid until after USDA determines county yields – roughly six months or more after harvest.