Here is what to watch as prices trend up
For Margin Coverage Option (MCO) policyholders, one of the most important windows of the crop year is open right now. Harvest input prices are being set right now. Here’s what it means and why it matters.
How MCO Works
MCO protects your operating margin, not just crop price or yield alone. That means two things must be finalized before anyone can determine whether a payout is owed: the harvest crop price and the harvest input costs. Right now, the input cost side is being locked in.
Harvest Price Discovery Timeline
Inputs in Discovery as of April 16th
GLOBAL DISRUPTION IS DRIVING HIGH VOLATILITY
This April input discovery window is during a significant global market disruption. Ongoing conflict in the Middle East has introduced substantial uncertainty into energy and commodity markets. Diesel and natural gas prices have been especially affected. Fertilizer markets have seen large changes during the price discovery period.
WHAT HIGHER PRICES COULD MEAN FOR YOUR MCO MARGIN
Higher input costs make it easier, not harder, to have an indemnity. The higher the input costs locked in during this discovery period, the more likely the harvest margin falls below your trigger level. The daily prices being averaged this month will directly shape whether your harvest margin falls below your coverage trigger. This is not a window to ignore.
CROP HARVEST PRICES NEED TO BE SET ALSO
Input costs are being set now, but crop prices for corn and soybeans won’t be finalized until October. Neither half of the margin calculation is complete. As a result, no conclusions can be drawn yet about whether an indemnity payout will be owed.
FULL ANALYSIS COMING AFTER DISCOVERY CLOSES
Once all discovery periods have closed, PRM will publish a complete breakdown of finalized input costs, harvest crop prices, and what it means for MCO policyholders. If you have questions in the meantime, reach out to your Risk Management Advisor.
