Farming has never been without risk. Between weather, commodity prices, fertilizer costs, seed costs, and everything else that goes into putting a crop in the ground, there are a lot of things a farmer simply can’t control.
That’s where crop insurance comes in.
Most farmers are familiar with traditional Revenue Protection (RP), but there are additional tools that may be worth considering. Two of those options are Margin Protection (MP) and Margin Coverage Option (MCO).
At Hamlet Insurance Agency, we want to help farmers understand these options so they can make informed decisions about protecting their operation.
What Is Margin Protection?
Margin Protection is a crop insurance policy designed to help protect against a decline in your expected margin.
In simple terms, margin looks at the relationship between the value of your crop and certain costs associated with producing it.
That means Margin Protection isn’t looking only at what happens to the price of corn or soybeans. It also takes certain input costs into consideration.
For example, imagine commodity prices fall while some of your covered input costs increase. That combination can put significant pressure on your farm’s bottom line.
Margin Protection is designed to provide another layer of protection against those types of changes.
Why Might Margin Protection Be Worth Considering?
Every farm is different, but MP may be worth a conversation if you’re concerned about:
- Falling commodity prices
- Increasing input costs
- Changes in your expected crop revenue
- Protecting your expected operating margin
- Adding another layer of risk protection to your crop insurance plan
It’s important to remember that Margin Protection is a specific crop insurance product with its own rules and calculations. It doesn’t cover every expense you have on the farm.
What Is MCO?
Margin Coverage Option, or MCO, is another way to add additional protection to your crop insurance program.
MCO is an area-based product, meaning it looks at what happens at the county level rather than measuring the actual revenue of your individual farm.
One way to think about MCO is as an additional layer of protection.
You may already have an individual crop insurance policy protecting your farm. MCO can potentially provide additional county-level revenue protection on top of that coverage.
The Difference Between MP and MCO
Although the names can sound similar, MP and MCO work differently.
Margin Protection focuses on protecting a calculated margin and incorporates certain input costs into that calculation.
MCO provides additional area-based revenue protection and is tied to county performance.
Neither policy is a replacement for understanding your underlying crop insurance coverage. Instead, they are additional tools that may make sense depending on your farm and your risk-management goals.
Why Does County Performance Matter?
This is one of the most important things to understand about MCO and other area-based products.
Your individual farm’s production isn’t necessarily what determines whether an MCO payment occurs.
For example, you could have a poor crop on your farm while the county as a whole has a good year. In that situation, your individual loss may not result in an MCO payment.
The opposite can also happen. Your farm could perform reasonably well, but if the county experiences a significant decline, MCO could potentially provide a payment.
That’s why we believe it’s important to look at these products as pieces of an overall risk-management plan, rather than expecting any one policy to cover every possible loss.
So, Which One Is Right for Your Farm?
That’s where things get a little more complicated—and where a conversation with your crop insurance agent can be valuable.
There isn’t one crop insurance strategy that works for every operation.
When looking at MP, MCO, RP, or other options, we can look at things such as:
- Your crops and acres
- Your county
- Your APH yields
- Your current coverage
- Commodity prices
- Input costs
- Your comfort level with risk
- Your overall farm financial goals
The goal isn’t necessarily to buy the most coverage available.
The goal is to find coverage that makes sense for your operation.
We’re Here to Help
At Hamlet Insurance Agency, we’re proud to work with farmers throughout our area. We understand that crop insurance isn’t just another insurance policy—it’s an important part of managing your farm business.
If you’re curious about Margin Protection, MCO, or how they might work alongside your existing crop insurance, give us a call. We’d be happy to sit down with you, walk through the numbers, and help you understand your options.
Local roots. Reliable protection.
Coverage availability, eligibility, deadlines, premiums, guarantees, and policy provisions vary. Crop insurance products are subject to USDA/RMA rules and regulations. Contact Hamlet Insurance Agency or your crop insurance agent for specific information about your operation.
