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Ag Bytes<br />
Alejandro Plastina,<br />
Iowa State University<br />
Associate Professor<br />
in Economics<br />
yields and input costs calculated by the<br />
United States Department of Agriculture’s<br />
Risk Management Agency.<br />
The margin protection option is explained<br />
in a recent article in the Ag Decision Maker<br />
newsletter, written by Alejandro Plastina,<br />
associate professor in economics and extension<br />
economist at Iowa State University,<br />
and Steve Johnson, retired farm management<br />
specialist with Iowa State University<br />
Extension and Outreach.<br />
While the concept of margin protection<br />
is simple, Plastina said the options farmers<br />
face can be complex. For example, farmers<br />
can choose from 70% coverage up to<br />
85% coverage, which carries a subsidy<br />
ranging from 59-44%.<br />
Farmers can also choose “protection<br />
factors” with their coverage, which range<br />
from 80-120%.<br />
The article explains the different coverage<br />
options farmers have, and how coverage<br />
might look for<br />
a given operation.<br />
It also summarizes<br />
the different<br />
advantages and<br />
disadvantages of<br />
using margin protection.<br />
Plastina said<br />
it’s very important<br />
to pay attention<br />
to deadlines and<br />
timelines if using<br />
margin protection.<br />
The deadline to<br />
purchase margin protection is Sept. 30 prior<br />
to the insured crop year.<br />
If an indemnity payment is triggered, it<br />
will be issued 21 months from the closing<br />
date of purchasing the protection.<br />
Also, because the program relies on<br />
county-level averages for yields and national<br />
averages for costs, the margin formula<br />
may or may not produce results that<br />
favor an individual farm.<br />
“Margin protection is another form of<br />
insurance available to farmers, but they<br />
should closely consider the pros and cons<br />
before choosing this option,” Plastina<br />
said. “The program protects against a drop<br />
in profit margins, but is considered an<br />
‘area policy’ rather than a ‘farm-specific<br />
policy.’”<br />
Plastina and Johnson both recommend<br />
that farmers consult with a crop insurance<br />
agent to determine if margin protection<br />
best meets their needs and for detailed<br />
price quotes. Quick estimates of premiums<br />
can be obtained from the USDA Risk<br />
Management Agency Margin Protection<br />
Premium Estimator and Price Discovery<br />
at marginprotection.com, and to see prices<br />
published daily during the price discovery<br />
period.<br />
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