Margin Coverage Option (MCO): Another Tool for Managing Crop Risk
Crop insurance continues to evolve, giving producers more options for managing risk when both input costs and commodity prices can change quickly.
One of those newer options is the Margin Coverage Option (MCO), an endorsement designed to combine features of Margin Protection with the Enhanced Coverage Option (ECO). MCO can help protect a producer's margin while also providing the benefit of an earlier price discovery period.
How Does MCO Work?
MCO is designed to provide protection when higher input costs put pressure on a producer's potential margin.
It works in combination with an underlying Yield Protection (YP), Revenue Protection (RP), or Revenue Protection with Harvest Price Exclusion (RP-HPE) policy.
Coverage is available at either the 90% or 95% level, similar to ECO.
One of the features that makes MCO different is its earlier price discovery period. This can give producers an opportunity to establish protection at a different point in the marketing year than their underlying crop insurance policy.
Why Might a Producer Consider MCO?
MCO may be worth considering for producers who are concerned about protecting their margins when input costs are high or commodity markets are uncertain.
According to the program information, MCO allows policyholders to:
- Protect their margins. MCO provides coverage similar to Margin Protection when higher input costs threaten profitability.
- Use an earlier crop price discovery period. This can provide additional protection against market volatility.
- Spread risk across two price discovery periods. Producers can use one discovery period for MCO and another for their underlying YP, RP or RP-HPE policy.
That last point may be especially useful when markets are moving. Rather than having all of your crop insurance protection tied to the same price discovery period, MCO provides another way to diversify how some of that risk is managed.
Is MCO Right for Your Operation?
Like most crop insurance options, MCO isn't necessarily the right fit for every operation. The important part is understanding how it works alongside your existing coverage and whether it fits into your overall risk management plan.
At KDL Insurance, we're here to help you look at the numbers, compare your options and understand how different coverage choices could work for your farm.
If you're interested in learning more about MCO, contact KDL Insurance. We can walk through the coverage with you and help determine whether it makes sense for your operation.