Producers face shrinking margins for the second consecutive year as we are witnessing some of the sharpest commodity price declines on record coupled with high input prices. One tool that can help farmers through this environment is area or county-based crop insurance plans.

These relatively recent crop insurance plans use county-average yields to determine payouts. There are three types available: Margin Protection (MPP), Enhanced Coverage Option (ECO) and Supplemental Coverage Option (SCO). MPP and ECO coverage may provide up to 95% coverage against an unexpected decrease in operating margin while SCO can offer up to 86% coverage.

To make the right choice, you need to consider a few key questions:

  • Will a traditional MPCI policy cover production costs?
  • Do you have enough working capital to cover the lost revenue?
  • How much risk are you willing to accept?
  • How do your production yields compare to the county average?

Read more about county-based crop insurance plans here.

Information courtesy of Tony Jesina, senior vice president of crop insurance for Farm Credit Services of America/Frontier Farm Credit.