Duane Johnson Insurance
In the past, we have insured our crops against reduction in yield (Yield Protection), later Revenue Protection (Price x Yield) became the hot item. Now, with Margin Protection (MP), we can insure against a reduction in margin (Price x Yield) minus costs. This is a new and innovative way to insure against market price gyrations, low yields and cost of inputs escalating.
Margin Protection (MP) is offered as an area-based plan using county yields, and can be purchased as a stand-alone policy or purchased in conjunction with a YP or RP policy (first time for duo protection). MP provides coverage that is based on an expected margin, which is the expected area revenue minus the expected area operating costs, for each crop, type and practice. When purchasing MP, YP, or RP policies, you receive a MP premium credit to reflect any overlapping coverage. In the event of a loss with both policies you receive the higher of (no double dipping).
MP is designed to “lock in a margin” so to do this it is necessary to set crop prices and input costs the Fall before the crop year, just as purchasing inputs ahead. To this end, MP has a Price Discovery Period from Aug. 14 to Sept. 15 (2017) for the 2018 crop year, this discovery period sets the crop price and input prices ( Diesel, Urea, DAP, Potash and Interest chgs for corn), then the “Harvest Price” for the inputs is discovered In April of the crop year and crop price in the month of October (same as RP). This “early” Price Discovery Period offers five additional months of price protection as compared to a RP policy – the RP Price Discovery stays the same as it always was.
The margin in any business is very important, as that is the money left over after harvesting bushels, selling them, and paying operating costs. The margin is the money left over to cover land costs, pay for management and labor, and family living. MP can be used to insure that margin.
MP for Corn and Soybeans was available for the 2017 crop year only in Iowa. But for 2018, eleven more states have been added: Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin.
MP coverage levels are 70% to 95%
Protection factors are from 0.80 to 1.20
Harvest Price Option (recommended) is available.
Sales Closing Date is September 30, 2017 (for 2018 crop year).
There are a lot of crop insurance options out there, and they can change from year to year. Let's find the right crop insurance plan for you.
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