Margin Protection

Overview & Key Points - 2025 Crop Year

• Margin Protection is a relatively new insurance option provided & subsidized by the federal government. It can be purchased in addition to your MPCI policy and used to provide protection against declining crop prices, lower county yields, and increasing input costs.

  • Margin = Revenue (Price x Yield) - Costs

• September 30th, 2024 sign-up deadline for the 2025 Crop Year

• Higher Coverage Levels

  • Can choose a coverage level from 70% up to 95% (in 5% increments)

• Subsidized

  • Subsidy based on coverage level

    • 44% subsidy at the 95% coverage level

    • Coverage Level (Subsidy) = 75% (59%), 80% (55%), 85% (49%), 90% (44%), 95% (44%)

  • BFR additional subsidy benefit applies to Margin as well

• Area Plan - based on county yields

  • You could have a loss on your farm, and NOT receive a Margin payment, or vice-versa

• Provides an additional (3rd) price to add alongside your MPCI Revenue Protection (RP) spring and harvest prices

  • Projected Prices - discovery period 8-15-24 to 9-14-24

    • $4.40 Corn (20% volatility, based on Dec ‘25 futures contract)

    • $10.42 Soybeans (17% volatility, based on Nov ‘25 futures contract)

  • Allows you to establish a guarantee that has a price component earlier than normal (for MPCI, the spring price is set in February and the harvest price is set in October)

• Input costs - Margin provides some protection against rising input costs between now (Aug-Sep 2024) and April 2025

  • Costs are based on futures contracts (NOT based on your actual input costs)

  • Input Costs included are Urea (N), DAP (P), Potash (K), Diesel, Interest, and some fixed costs

    • Fixed Costs: Corn $206.90 /ac, Soybeans $111.50 /ac

      • accounts for some fixed costs like land, machinery, seed, etc

  • For Margin, input costs have a MUCH smaller impact on potential loss payments compared to the Revenue components (Price & Yield) - see Quote & Coverage example below

    • This is partially because the variable costs (Urea, DAP, Diesel and Interest) which can change between now and next April (October for interest) are NOT a large percentage of the loss calculation in Margin, so as a result they do not have as great of impact

      • Urea is not consider as an input cost for soybeans

• Loss Payments

  • You get the greater of your MPCI or Margin loss payment

    • Any production loss payments from your MPCI policy are SUBTRACTED from any possible Margin payments

      • If your Margin payment would be $3,000, and your MPCI policy paid out $2,000, then your Margin payment is REDUCED to $1,000.

      • If Margin loss < MPCI loss, then NO Margin payment

    • MPCI Replant and Prevent Plant loss payments are NOT included (i.e. they do not reduce Margin payments)

  • If there is a Margin loss, it will be paid out the following summer (June 2026)

  • Loss payments are automatically calculated and paid out since not based on your yields, prices, or costs - no adjuster or claim submission necessary

  • Since this policy is a Margin guarantee, you are more likely to trigger a loss if one or all of the following happen:

    • The harvest price decreases (October average of grain futures)

    • The harvest yield decreases (actual county yield)

    • The input costs increase (from Aug-Sep to April)

    • And vice versa…

• Premium Credit

  • A premium credit (discount) will be applied to your Margin policy based on your MPCI policy

  • The discount is hard to accurately estimate and it is not calculated until your MPCI policy acres are reported and coverage/premium is calculated (next summer, ~July 2025)

  • The reason for the discount is because any MPCI production loss payments reduce dollar for dollar any possible Margin payment

  • The more coverage your MPCI policy provides (via higher coverage levels, higher spring prices and/or higher APHs), the more likely your MPCI policy will have losses that offset some or all of a possible Margin loss, the greater the premium discount will be on your Margin policy.

• Protection Factor

  • Margin includes a Protection Factor that you can vary from 80% to 120% (in 1% increments)

  • This factor allows you to scale up or down the coverage amount and premium to suit your needs. To keep things simple and since it can affect the likelihood of triggering a loss, I recommend setting this factor to 100%.

• Website - http://marginprotection.com/

  • This is the primary government website for Margin where you can run quotes and get more info

Quote & Coverage Example

• Below are quote and coverage examples

  • Premiums quoted are BEFORE any premium credit you may receive based off your spring MPCI policy - the higher your MPCI coverage, the higher the premium credit

  • Corn - NI (non-irrigated), Saunders county, 100% protection factor, no HPO

    • 180.9 bu/ac ECY (Expected County Yield)

    • 95% coverage level - $30.34 /ac premium for $756 /ac of coverage

    • 90% coverage level - $20.69 /ac premium for $716 /ac of coverage

    • 85% coverage level - $15.50 /ac premium for $676 /ac of coverage

    • A 5% change in coverage level changes your Margin coverage by $40 /ac

  • Soybeans - NI (non-irrigated), Saunders county, 100% protection factor, no HPO

    • 56.20 bu/ac ECY (Expected County Yield)

    • 95% coverage level - $24.66 /ac premium for $556 /ac of coverage

    • 90% coverage level - $17.21 /ac premium for $527 /ac of coverage

    • 85% coverage level - $10.48 /ac premium for $498 /ac of coverage

    • A 5% change in coverage level changes your Margin coverage by $29 /ac

  • To get a quote for your county, please contact us - call, text or email

    ** CLICK on Quote Worksheet below to ENLARGE **

Other Key Points:

• 2017 was the first year Margin Protection was offered

  • it grew in popularity in 2022 and 2023 (policy counts doubled vs previous couple years) due to higher margin projected prices and concern over rising input costs

• ECO or SCO

  • If you want to purchase ECO or SCO in the spring, then you can NOT purchase Margin in the fall

  • ECO & SCO are great values because of the higher subsidy (65%)

    • ECO - 65% subsidy ***NEW / increased for 2025 crop year***

      • Previous: 44% subsidy (51% subsidy if YP)

    • ECO & SCO are also less complex than Margin and any potential loss payments they generate are NOT offset by any MPCI losses you may have

• Margin & ECO similarities: 

  • Area plan - based on the same Expected and Actual county yields

  • Up to 95% coverage levels

  • Same harvest price for corn and beans (set in October)

• Margin & ECO differences:

  • Margin provides some protection against rising input cost; ECO does not

  • Margin provides a 3rd price - Margin’s projected price is set early in Aug-Sep before crop year; ECO projected price set in spring (February) just like MPCI

  • Margin has higher total liability (max payout)

    • Margin = expected revenue x coverage level x protection factor (similar to MPCI RP)

      • coverage from zero up to your coverage level (ex. 0-95)

    • ECO = only a small 4% or 9% band of coverage at the top end (86-90, or 86-95)

  • Margin loss payments are REDUCED by any MPCI production loss payments; ECO payments are not

• HPO (Harvest Price Option)

  • This option can be added to your Margin policy to have the crop price component of your margin guarantee based off the higher of the projected price or the harvest price - similar to your MPCI Revenue Protection (RP)

  • WITHOUT this option, the base Margin policy:

    • is less likely to trigger a claim if the harvest price > projected price

      • however, if the harvest price < projected price, then a Margin policy without the HPO performs the same as one with it

    • functions similar to MPCI RP-HPE (Revenue Protection with Harvest Price Exclusion) - this plan is very unpopular and shied away from for MPCI because as the harvest price increases, your bushel guarantee decreases (to keep the revenue guarantee the same).

  • Adding HPO to your Margin policy can cause the premium to increase significantly

    • Since most already have MPCI RP where they get the higher of the spring or harvest price, having this same feature in your Margin policy is not as big of deal

    • If you are using Margin more to protect against declining prices next year, then you may want to save on premium and NOT add the HPO. After all, if prices are higher next fall, you should be able to sell grain at a higher price which should help to offset some yield losses.

• No replant or prevent plant coverage under Margin (you already have this in your MPCI policy)

• Expected & Actual County yields are based on RMA data collected through the federal crop insurance programs

Margin vs ECO - Why or Why Not:

• Why Margin or ECO?

  • up to 95% coverage level

  • Subsidized at high rates

    • 44% margin

    • ECO - 65% subsidy ***NEW / increased for 2025 crop year***

      • Previous: 44% subsidy (51% subsidy if YP)

      • option to help protect against declining county yields, declining prices

  • No tie to ARC or PLC election at FSA

• Why Margin?

  • Price guarantee established early in fall before upcoming growing season

    • $4.40 Corn (based on Dec ‘25 futures contract)

      $10.42 Soybeans (based on Nov ‘25 futures contract)

    • If you think these prices are better than the prices will be in February when the ECO and MPCI projected prices will be set

  • If you think the variable input costs for Margin of Urea (N), DAP (P), Diesel, & Interest will be HIGHER next year than their expected prices are now in the fall.

    • Under Margin, if input costs go HIGHER, this INCREASES the size and chance of any loss payments

  • Margin has higher total liability (max payout)

    • Margin = expected revenue x coverage level x protection factor (similar to MPCI RP)

      • coverage from zero up to your coverage level (ex. 0-95)

    • ECO = only a small 4% or 9% band of coverage at the top end (86-90, or 86-95)

    • As a result, Margin could be viewed as a replacement for both ECO & SCO combined

• Why ECO?

  • Higher subsidy rate of 65% (Margin is 44%)

  • If you think projected prices will be higher in February than they are in the fall for Margin

  • Simple

    • unlike Margin, ECO has:

      • NO MPCI loss offset

      • NO premium credit calculation

      • NO input cost calculation

  • If you think the variable input costs for Margin of Urea (N), DAP (P), Diesel, & Interest will be LOWER next year than their expected prices are now in the fall.

    • Under Margin, if input costs go LOWER, this actual REDUCES the size and chance of any loss payments

• Margin vs ECO

  • Below is a comparison chart that shows some of the similarities & differences between the two along with a quote & loss example

Last Updated: 9-20-2024

Want to Discuss or have Questions?

• If you would like to discuss, get a quote or have questions, please contact us - call, text or email.