Margin
Coverage Option (MCO)

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. If 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 86% (where SCO coverage triggers) up to 90% or 95% of expected crop value.

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.

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MCO Highlights

Coverage:

Based on your APH but uses county-level data for loss determination.

Input Costs:

Diesel

Diammonium Phosphate

Urea

Potash

Range:

Covers from 86% to 95% of the expected margin (9% band).

Crops:

Corn

Soybeans

Spring Wheat

Affordability:

A more budget-friendly way to start covering your margins, with an 80% subsidy

Exclusions:

Cannot be purchased with ECO. Doesn’t include interest or fixed costs when calculating input costs.

Premium Costs:

Corn averages at $7.20 for $63.47 coverage, and soybeans at $4.27 for $43.46 coverage.

Calculation Method

EXPECTED CROP VALUE

Projected Price or Harvest Price X Approved Yield = Expected Crop Value

TRIGGER MARGIN

Expected Margin – ((1- Trigger Level %) X Expected Area Revenue) = Trigger Margin

COVERAGE RANGE

Trigger Level – Lower Coverage Level = Coverage Range

HARVEST MARGIN

Margin Coverage Option (MCO)

MCO Highlights

Coverage:

Input Costs:

Range:

Crops:

Affordability:

Exclusions:

Premium Costs:

Calculation Method

EXPECTED CROP VALUE

Projected Price or Harvest Price X Approved Yield = Expected Crop Value

TRIGGER MARGIN

Expected Margin – ((1- Trigger Level %) X Expected Area Revenue) = Trigger Margin

COVERAGE RANGE

Trigger Level – Lower Coverage Level = Coverage Range

HARVEST MARGIN

Final Area Yield X Margin Harvest Price = Harvest Area Revenue – Harvest Cost = Harvest Margin

MCO PROTECTION

Expected Crop Value X Coverage Range X Coverage Percentage = MCO Protection

AREA MARGIN LOSS

Trigger Margin – Harvest Margin = Area Margin Loss

EXPECTED AREA REVENUE

Expected Area Yield X Higher of Projected or Harvest Margin Price = Expected Area Revenue

PAYMENT FACTOR

Area Margin Loss / (Expected Area Revenue X Coverage Range) = Payment Factor (MAX 1.00)

EXPECTED MARGIN

Expected Area Revenue – Expected Cost = Expected Margin

MCO INDEMNITY

MCO Protection X Payment Factor = MCO Indemnity

EXAMPLE

EXPECTED CROP VALUE

MAX($4.56, $4.20) X 150 = $684

COVERAGE RANGE

95% - 86% = 9%

MCO PROTECTION

$684 X 9% X 100% = $61.56

EXPECTED AREA REVENUE

167 X MAX($4.56, $4.20) = $761.52

EXPECTED MARGIN

$761.52 - $123.23 = $638.29

TRIGGER MARGIN

$638.29 – (5% X $761.52) = $600.21

HARVEST MARGIN

160 X $4.20 = $672 – $123.23 = $548.77

AREA MARGIN LOSS

$600.21 – $548.77 = $51.44

PAYMENT FACTOR

$51.44 / $61.56 = .8356 MIN(0.6266, 1.00)

MCO INDEMNITY

$61.56 X 0.8356 = $51.44

INSURANCE CYCLE

Aug 15- Sept 14

MCO PRICES, YIELDS, AND COSTS DETERMINED.

Sept 30th

SALES CLOSING DATE

April 1 - 30th

HARVEST INPUT COSTS DETERMINED

Oct 1 - 31st

HARVEST PRICES DETERMINED

April

FINAL COUNTY YIELDS DETERMINED TO SEE IF INDEMNITY IS DUE

Margin
Coverage Option (MCO)

$51.44 / $61.56 = .8356
MIN(0.6266, 1.00)

Sept
30th