Margin Protection Plan provides coverage against an unexpected decrease in operating margin (revenue less 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 payments. Because Margin Protection is area-based (average for a county), it may not reflect your individual experience.
Margin Protection takes into considerations changes in crop prices, reductions of yields and changes in the prices of inputs used to grow the crop.
Margin Protection can be purchased by itself, or in conjunction with a Yield Protection or Revenue Protection policy purchased from the same Approved Insurance Provider that issued the Margin Protection policy. If you buy a Yield Protection or Revenue Protection policy, you will receive a Margin Protection premium credit to reflect that indemnity payments from one policy can offset payments from the other.
Margin Protection is available in select counties for corn, rice, soybeans, and wheat in the states listed below:
- Rice – Arkansas, California, Louisiana, Mississippi, Missouri and Texas
- Corn and Soybeans – Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin
- Wheat – Minnesota, Montana, North Dakota and South Dakota (spring wheat type 12 only)
Margin Protection provides coverage that is based on an expected margin for each applicable crop, type, and practice.
Expected Margin = Expected Revenue – Expected Costs, where:
- Expected revenue (per acre) is the expected county yield multiplied by a projected commodity price; and
- Expected cost (per acre) is the dollar amount determined by multiplying the quantity of each allowed input by the input’s projected price.
You may choose coverage from 70 percent to 95 percent of your expected margin. A higher coverage level has a higher premium rate. The Catastrophic Risk Protection (CAT) coverage level is not available with MPP.
Frequently Asked Questions
Can I buy MPP with another Federal reinsured crop insurance policy for the same crop?
You can buy MPP and also buy a Yield Protection policy or a Revenue Protection policy (denoted as a base policy) on the same acreage. The base policy and the MPP policy must be purchased from the same Approved Insurance Provider, however, the base policy and the MPP policy may be purchased from a different insurance agent or insurance agency. If you buy a base policy you will receive a credit to your MPP premium because indemnity payments from the base policy are used to offset indemnity payments from the MPP policy. To receive a premium credit, the base policy type and practices must match the type and practices elected on the MPP Policy. You may buy any optional coverages or endorsements available for the base policy except the Supplemental Coverage Option Endorsement (SCO). SCO is not allowed on the crop if you purchase MPP. MPP cannot be purchased if you have Whole Farm Revenue Protection Policy covering the same crop in the same county.
Must I have a loss under my base policy before I can have a loss under my MPP policy?
No. Losses are determined separately. You may have a loss under your base policy but not under your MPP policy, a loss under your MPP policy but not your base policy, a loss under both, or no loss under either policy. If you receive an indemnity for a yield or revenue loss under your base policy, this will be considered in determining the amount of your MPP indemnity owed.
What effect does a loss under the base policy have on MPP?
Generally, any indemnity payments made for the base policy will occur first, with any remaining MPP indemnity payments occurring later (the following spring) after final area yields become available. The indemnity from the base policy, and any endorsement, is subtracted from the MPP indemnity. If the MPP indemnity is larger than the base policy indemnity, the amount of the MPP indemnity paid will be the difference between the MPP indemnity and the base policy indemnity, but not to exceed the total liability under MPP. If the MPP indemnity is smaller than the indemnity for the base policy, then no additional indemnity will be paid for the MPP policy. Payments received for replanting or prevented planting from a base policy, and any acreage insured under the base policy that is not eligible for MPP will not be considered.
Could you give an example of how to calculate a loss under MPP?
Assume the following outcomes occur for the crop year:
|The expected costs per acre are:|
|Final county yield||=||140.0 bushels|
|Harvest price||=||$4.00 per bushel|
|Margin harvest price||=||$4.00 per bushel|
|Diesel fuel price||=||$4.00 per gallon|
|Nitrogen price||=||$1.25 per pound|
|Base policy indemnity||=||$3,000|
The harvest revenue is 140.0 bushels x $4.00 per bushel = $560 per acre.
The harvest cost is:
|7.5 gallons x $4.00||$ 30.00 (This input is subject to price change)|
|150 pounds x $1.25||+||$187.50 (This input is subject to price change)|
|Other inputs||+||$300.00 (This input is not subject to price change)|
|Harvest costs||=||$517.50 total harvest cost (total allowed inputs both subject and not subject to price change)|
The harvest margin is:
$560.00 – $517.50 = $42.50 per acre
The indemnity is (see MPP Provisions):
|$ 63.75||Trigger margin from example above|
|–||$ 42.50||Harvest margin|
|=||$ 21.25||(per acre deficiency)|
|= $10,625||(if no base policy and this amount is less than the liability)|
|– $ 3,000||Assumed base policy indemnity|
|= $ 7,625||MPP Indemnity after base policy indemnity applied|
The liability for MPP coverage is $594.00 x 500.0 acres x 1.10 productivity factor x 1.000 share = $297,000. The indemnity calculated with or without a base policy is less than this amount; so the amount calculated is payable. If the calculated indemnity amounts were greater than $297,000, the indemnity would be limited to $297,000.
Not all coverage or products may be available in all jurisdictions. The description of coverage in these pages is for informational purposes only. Actual coverage will vary based on the terms and conditions of the policy issued. The information described herein does not amend, or otherwise affect, the terms and conditions of any insurance policy issued by ProAg or any of its subsidiaries.