Margin Coverage Option (MCO): Another Tool for Managing Crop Margins

For farmers, protecting revenue is only part of the risk-management equation. Rising input costs can put just as much pressure on profitability, even when yields and commodity prices remain relatively strong.

That is where Margin Coverage Option (MCO) may offer another layer of protection. As producers plan for the 2027 crop year, MCO is receiving increased attention because it is designed to respond not only to changes in county yields and commodity prices, but also to increases in certain input prices.

What Is Margin Coverage Option?

MCO is an area-based crop insurance endorsement designed to protect against decreases in operating margin caused by reduced county yields, lower commodity prices, higher prices for certain inputs, or a combination of those factors. It covers a portion of the deductible on an underlying Multi-Peril Crop Insurance (MPCI) policy.

MCO provides coverage in the 90% to 95% band of expected crop value, helping address shallower losses that may not reach the deductible threshold of an individual crop insurance policy. The program also carries an 80% premium subsidy.

Why Input Costs Matter

One of the key differences with MCO is its consideration of certain production inputs. Changes in the prices of these inputs are considered alongside changes in area yields and commodity prices when determining whether an MCO indemnity is triggered.

Those inputs can include:

  • Diesel fuel
  • Natural gas
  • Diammonium phosphate (DAP)
  • Urea
  • Potash

Expected Margin is the expected revenue minus expected costs, where: Expected revenue (per acre) is the expected county yield multiplied by a projected commodity price; and Expected cost (per acre) is the dollar amount determined by multiplying the quantity of each allowed input by the input’s projected price.

How Does MCO Work With Your Existing Crop Insurance?

MCO is not a stand-alone policy. It must be purchased as an endorsement to an eligible underlying policy. Unlike an individual MPCI policy, MCO is area-based. Your underlying policy is triggered by an individual loss in yield or revenue, while an MCO payment is based on an area-level loss in expected margin, generally measured at the county level.

That distinction is important: an individual farm could experience different results than the county as a whole.

How Does MCO Compare With Other Supplemental Coverage?

MCO is one of several options producers can consider for filling coverage gaps above an underlying crop insurance policy.

MCO can be purchased alongside Supplemental Coverage Option (SCO), but it cannot be combined with Enhanced Coverage Option (ECO) or Margin Protection (MP) for the same crop and county. MCO is also not tied to a producer's ARC or PLC election through FSA.

Margin Protection (MP) provides coverage that is based on an expected margin for each applicable crop, type and practice. You may choose to cover anywhere from 70 percent to 95 percent of the expected margin. MP can be purchased by itself or in conjunction with a Yield Protection (YP) or Revenue Protection (RP) policy. If you buy a YP or RP policy, you will receive a Margin Protection premium credit to reflect that indemnity payments from one policy can offset payments from the other.

Is MCO Worth Considering for 2027?

MCO gives producers another way to address that risk by incorporating certain input costs into the coverage calculation. With fertilizer and other production expenses continuing to play a major role in farm profitability, it may be worth discussing how MCO fits alongside your existing crop insurance coverage.

For corn and soybeans, the MCO and Margin Protection sales closing date is September 30 prior to the insured crop year, making early conversations with your crop insurance agent especially important.

First State Insurance Agency can help you compare MCO with your current coverage and other supplemental options to determine what makes sense for your operation. Contact your local First State Insurance branch to start the conversation.

Coverage availability, eligibility and terms vary by crop and county. This information is for general informational purposes only. Refer to policy provisions and actuarial documents for complete program details.