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Ridgway, IL | I took a class that spent about an hour on it yday. It looks attractive to me.
I really only think it makes sense if you are already using grip (which is no longer called grip, its now arp).
MP, like grip/arp, is a county based policy. So if you have eliminated grip from your policy selection in the past for that reason, this product really does not give you reason to reverse that previous decision.
MP can be used as a stand alone policy, or it can be used as a companion policy to a individual based policy like rp. You cannot take mp and grip.
I really don't see how it could ever be practical, from a farm budget point of view, to take both policies... as the MP policy premium will be similar to or higher than grip. In our area, there are some counties where grip and rp premiums are quite similar, especially when you compare premium $ vs protected $. Many counties in the Midwest, that is no longer the case and grip premiums are way higher than similar coverage RP policies
However, if you do decide to use mp, as a companion policy to your rp policy, you get some reduction in overall premium, that is sort of dependent on the number of years of your aph you provide as well as what your simple avg aph is
Next, the Nuts and Bolts
The majority of insurance policies most of us employ follow this logic
You get the higher of
Spring price x aph x coverage %(deductible)= guarantee/trigger revenue
Or
fall price x aph x coverage% (deductible) = guarantee/trigger revenue
Minus
Fall price x actual yiel = actual revenue
You get 1$ for each dollar of loss
Grip (now known as arp) simply replaces your aph in the above formula with the counties aph in which you farm while also giving you the ability to buy coverage up to 90%, instead of the 85% max available with rp. While further sweetening the pot by allowing you to receive up to 1.50 for each 1$ of loss
In both those cases the spring pricing period is avg of dec futures in feb. Fall pricing period is dec futures in oct.
MP expands on grip by making the following changes
1. Replace the spring pricing period with a pricing period in the fall of the previous year (avg of dec 18 futures during the period of aug 15-sep 15 of '17)
2. Change the policy from a revenue product, to a margin product, by also including a price discovery period for inputs. There are 2 baskets of inputs. a. a number for fixed and non traded items b a number that uses crop removal type factors x expected county yield x cme futures for NPK as well as diesel fuel and interest rates
I spent about 30 min looking at the basket of costs, and though not perfect... the logic seems good enough.
So rather than insuring a revenue/ac #, you are insuring a revenue-costs = margin number$
This seems extremely attractive right now for a couple reasons
1. Massive carry in corn market to cz18. The guarantee is based on near 4$ futures,
2. Input costs are historically low right now too. If we get into an active hurricane situation, or other disaster around the world, and energy goes up, these inputs are gonna go up.
3. Premiums appear to have major subsidy dollars behind them.
4. Actually allows you to bump up your coverage to 95%!!
Sales closing is sep 30 in Illinois. It's not available in all states still.
Our farm has been on grip more than 10 years. I ran a quick quote yday and it looked like for about the same money we spent spring of this year, we are getting a lot more coverage with a couple other ways to win (rising input costs?). I plan to dive on into more next week, if we aren't shelling corn, and make sure there aren't any catches... but I can see this workin for us for corn acres. Not really interested in beans, sx18 too low for me.
Here is a website you can see of available in your county, also it's a premium quoter. You really do need someone that understand the product to walk you through the quoter though.
http://www.marginprotection.com
Edited by LKM 9/1/2017 11:18
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Margin Protection Crop Insurance - GRIP on Steroids
