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As harvest progresses and crop prices stay at historical lows, the last thing most farmers want to think about is price risk management for 2025, but the federal crop insurance program offers a tool that can lock in prices for the next crop year. Last year, Margin Protection (MP) crop insurance was made available to corn and soybean producers in Arkansas and other states across the southeast region. MP is an area-level (i.e., county-level) crop insurance product designed to provide risk protection against the risk of thin margins using a combination of county yields, futures prices, and region-specific input usage. Coverage levels range from 70% to 95% and may be purchased with any individual insurance, such as Yield Protection (YP) or Revenue Protection (RP). It may not be purchased with Supplemental Coverage Option (SCO) or Enhanced Coverage Option (ECO) (see Biram and Connor, 2023).
While most federal crop insurance sold in Arkansas has a sales closing date of February 28th, MP for corn and soybeans has a sales closing date of September 30th. MP for all rice types has a sales closing date of February 28th just like YP, RP, SCO, and ECO. Given a different price discovery window offered by MP (August 15, 2024 to September 14, 2024) provides corn and soybean producers with the option to buy MP and lock in futures prices which could potentially be higher than those faced by producers in the normal price discovery window (January 15, 2025 through February 14, 2025). For example, the current RMA projected price for MP purchased for corn is $4.39/bushel which implies a price guarantee of $4.17/bushel assuming county yields and costs remain constant.
Another decision variable in the MP coverage decision is the Protection Factor (PF). The PF ranges from 80% to 120% and offers higher (lower) protection at a higher (lower) premium cost and largely functions as a farm-level production adjustment. That is, if a farmer perceives their yield to be higher than the county average, they may select a PF higher than 100% at an additional premium cost. Alternatively, if a farmer perceives their yield to be lower than the county average, they may select a PF less than 100% and pay a lower premium.
The University of Arkansas, Cooperative Extension Service offers a fully web-based Margin Protection decision aid. The decision aid allows the user to input information such as state, county, crop, and irrigation practice to determine Margin Losses (i.e., indemnities) net of producer paid premiums across all coverage levels. Additionally, the tool offers a feature which calculates a breakeven price which is a harvest time crop futures price which results in a Margin Loss which is the same as the producer paid premium, or results in a zero net indemnity which requires no out-of-pocket premium from the producer. Breakeven prices vary by coverage level and harvest county yields which may be input by the user. The decision aid may be used to determine breakeven prices which will trigger Margin Losses which may be enough to more than cover the producer premium.
An example output providing net indemnities across different harvest crop futures prices, including a breakeven price of $3.98/bushel at the 95% coverage level, is given in figure 1 below. This figure suggests is that Margin Losses at or above the producer paid premium is experienced if the 2025 December corn futures price has a 30-day average below $3.98/bushel at harvest (i.e., August 15, 2025 through September 14, 2025). You may access the Margin Protection Payment Estimator (2025 Crop Year) at this link. Fact sheets which provide all of the details of MP may be found at the following links: Margin Protection Crop Insurance and Determining Expected Cost and Premium Rates.
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