Margins Under Pressure: MCO and the 2026 Hormuz Disruption

Rwit Chakravorty, Henrique Monaco and Francis Tsiboe

No 404824, ARPC Brief from North Dakota State University

Abstract: The 2026 crop year offered the first major stress test of the Margin Coverage Option (MCO), a new area-based insurance endorsement designed to protect county-level operating margins from lower crop revenue, higher input costs, or both. This brief examines how the 2026 Strait of Hormuz disruption affected expected MCO-95 outcomes for corn and soybeans. The disruption sharply increased fertilizer and energy costs during MCO’s April harvest input price discovery period, while crop prices provided little offset. Using simulated county-level yields, market conditions as of June 11, 2026, and RMA policy data, we estimate that MCO-95 trigger probabilities averaged about 68 percent for corn and 61 percent for soybeans. Expected net returns were also positive, averaging approximately $35.60 per acre for corn and $22.10 for soybeans. Results suggest that MCO provided meaningful cost-risk protection in 2026, although final payments remain conditional on harvest prices and county yields.

Keywords: Agricultural and Food Policy; Agricultural Finance; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2026-07-15
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Persistent link: https://EconPapers.repec.org/RePEc:ags:arpcbr:404824

DOI: 10.22004/ag.econ.404824

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