Margin Coverage Option (MCO)
Margin Coverage Option (MCO) is margin coverage made simple.
The Margin Coverage Option (MCO) crop insurance endorsement is meant to take the simplicity of Enhanced Coverage Option (ECO) and combine it with the unique capability to insurance against reduced margins as introduced by Margin Protection (MP).
MCO protects against reductions in expected margin cause by a combination of:
- Area-level yield losses
- Commodity price declines or increases
- Increases in certain input costs
MCO combines the simplicity of ECO with the margin protection concept of Margin Protection — but, without all the complexity of MP.
Designed for growers who want top-band protection against margin risk, not just yield or revenue coverage.
MCO is an endorsement product and provides area-based coverage. MCO attaches to the underlying crop policy.
MCO covers a band from 90% (where SCO coverage triggers) up to 95% of expected crop value. When combined with STAX 90% endorsement, MCO covers a band from 90% to 95%.
The Margin Coverage Option (MCO) endorsement carries an 80% premium subsidy rate.
MCO has a Sales Closing Date of September 30 for all crops and counties.
What is the Margin Coverage Option (MCO) endorsement?
Margin Coverage Option (MCO) provides area-based coverage against an unexpected decrease in operating margin (revenue minus input costs) caused by reduced county yields, reduced commodity prices, increased prices of certain inputs or any combination of these perils. Because MCO is area-based (average for an area), it may not reflect your individual experience.
It uses the same expected and final area yields and harvest prices as the Supplemental Coverage Option (SCO) and Enhanced Coverage Option (ECO), but covers a band from 90% (where SCO coverage triggers) up to 95% of expected crop value. When combined with the Stacked Income Protection Plan (STAX) at the 90% area loss trigger, MCO covers a band from 90% to 95%.
Like SCO and ECO, MCO is based on your underlying policy plan of insurance. 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.
Where is MCO coverage available?
MCO is available in select counties for corn, cotton, grain sorghum, rice, soybeans and spring wheat in the states listed below. The sales closing date for corn, cotton, grain sorghum, soybeans and spring wheat is September 30. The sales closing date for rice varies by state and county.
| CROP(S) | STATES (Check actuarial documents for specific counties) |
| CORN AND SOYBEANS | Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin |
| COTTON AND GRAIN SORGHUM | Kansas, Oklahoma, Texas |
| RICE | Arkansas, California, Louisiana, Mississippi, Missouri, Texas |
| SPRING WHEAT | California, Idaho, Minnesota, Montana, North Dakota, Oregon, South Dakota, Washington |
MCO must be purchased as an endorsement to a Yield Protection (YP), Revenue Protection (RP), Revenue Protection with the Harvest Price Exclusion (RP-HPE) or Actual Production History (APH) policy.
What coverage levels are available for Margin Coverage Option (MCO)?
As an endorsement, MCO is offered in a coverage level band from 90% or 95%. Additionally, producers with a 90% STAX endorsement can elect 95% MCO with a 5% coverage band.
You may choose any coverage level shown on the actuarial documents on a crop-by-county basis and by irrigation practice. Coverage levels cannot be varied by type and will apply to all applicable (insurable) acres.
How is the margin determined for Margin Coverage Option (MCO)?
Inputs may include diesel fuel, natural gas, and certain fertilizers for which projected and harvest prices can be obtained from third-party markets. Price changes for these inputs, along with area yield changes and changes in the price of the commodity, determine whether an indemnity is paid. Inputs by crop are:
- Corn, Cotton, Grain Sorghum, Rice and Wheat: diesel, natural gas, diammonium phosphate, urea, potash.
- Soybeans: diesel, natural gas, diammonium phosphate, potash.
As a reminder, individual farm input costs are not used in these calculations.
How do losses work with MCO?
MCO begins to pay (triggers) when the area margin falls below 95% of the expected margin. Any indemnities owed will be paid when final county yields are available in the spring of the following year.
- The trigger margin is calculated by subtracting the deductible of 5% of the expected area revenue from the expected area margin.
- The amount of area margin loss is calculated by subtracting the harvest margin from the trigger margin.
- A payment factor is calculated by dividing the amount of area margin loss by the band of area coverage value.
- The payment factor ranges from 0.50 to 1.00. The MCO protection is then multiplied by the payment factor to get the indemnity.
When does Margin Coverage Option (MCO) make sense for producers?
MCO crop insurance may be good for your farming operation when:
- Growers want margin protection, not just yield or revenue coverage
- Fall projected prices support positive margins
- Growers are comfortable with area-based triggers
Margin Coverage Option has a Sales Closing Date of September 30 for all crops and counties. This matters because:
- Projected prices are locked in during the fall
- Projected input costs are also set at that time
- Coverage decisions are made before any spring price volatility takes place
As a result, MOC is most attractive when fall projected prices support favorable margins. When fall prices are low, growers may be less included to elect MCO.
AGENT TIP: MCO is not a spring add-on. If it isn’t elected by September 30, it’s not available for that crop year.
Margin Coverage Option uses an area-based margin calculation, not the grower’s individual expenses.
MCO protects against reductions in expected margin, not individual results or actual expenses. Margin is calculated using area-level assumptions that apply uniformly to all insured producers in the same county or rating area.
- Expected Crop Value – Expected Input Costs
- Allowed Input Costs – RMA Approved Inputs
But how are input costs determined?
- Quantities are fixed based on area agronomic assumptions
- Prices are projected using RMA-approved data sources
- Costs are calculated on an average area basis
Input prices for MCO are determined by using the average daily price for the respective futures contract during the discovery period from August 15 to September 14.
The contracts are as follows:
Pro Ag Management, Inc.* (collectively with its corporate affiliates, “ProAg®”) is a managing general agency representing several risk bearing insurance companies, including Producers Agriculture Insurance Company and U.S. Specialty Insurance Company and doing business as Pro Ag Insurance Services, Inc. in California, CA Entity License #0F34212. The insurance products described on this website may not be a complete list of all products offered and may not be offered in all states. The provided information does not amend, or otherwise affect, the terms and conditions of any insurance policy issued by ProAg or any of its subsidiaries; always refer to the policy provisions. Actual coverages will vary based on the terms and conditions of the policy issued.