Changes three years ago to AgriStability have prompted some Manitoba farmers to abandon the income stabilization scheme because the cost is too high and the potential for payments too low.
Federal statistics show the number of farmers enrolled in the program has dropped about nine per cent since 2012. However, if informal surveys by Keystone Agricultural Producers are any indication, dropout rates could be much higher.
A show of hands indicated 14 of the 25 farmers attending KAP’s general council meeting here April 16 said they’d dropped AgriStability in the last five years.
Holland farmer Les Ferris, who suggested the straw poll, is one of them. His accountant recently told him he’s not alone.
Ninety-five per cent of general council delegates who responded to a KAP survey later said they had been in AgriStability in the last five years, but only 75 per cent said they were still in the program.
“So we’ve seen a 21 per cent drop in enrolment during the transitions from Growing Forward 1 and Growing Forward 2 (which took effect April 1, 2013),” KAP general manger James Battershill said in an interview.
Respondents said they dropped out because changes to AgriStability meant their margins had to fall 30 per cent instead of 15 per cent to trigger a payout, he added.
“They and their accountants just deemed there was no chance that they would ever receive a payment,” Battershill said. “Quite a few of those who are still enrolled in AgriStability said they were going to be evaluating it and were considering dropping out of it sometime in the future.”
“This is exactly what we feared could happen,” said Selkirk farmer Doug Chorney, who was KAP’s president when changes to AgriStability were announced at the annual federal-provincial-territorial agriculture ministers’ meeting in September 2013. Chorney has since retired as president but continues to serve on the general council.
AgriStability’s lower payout trigger and changes to farmers’ reference margins mean some farmers would qualify for payments that are 50 per cent less than they would have received under the old program, Chorney said. Moreover, it’s harder than ever to trigger an AgriStability payment.
A farmer with a $100,000 reference margin and $100,000 in allowable expenses would get a $66,500 payment from the old AgriStability program in a year margins fell to zero, compared to $49,000 under today’s AgriStability.
But if a farmer’s reference margin tripled to $300,000 and his or her allowable expenses stayed the same, the old program would pay $199,500 compared to just $49,000 now.
KAP’s current president, Dan Mazier, says farmers now see AgriStability as disaster aid, instead of the income stabilization as was originally intended.
“The way the program works right now I think everybody agrees it’s broken,” he said in an interview April 28. “Do we need it? Definitely. But there are some holes in there. I think we really need to take a long look at it.
“It’s a convoluted process. It should be as easy as saying here’s what I have for inputs, here’s what I have for production, here’s my gross margin, here’s my coverage — end of story.”
Part of the problem is farmers’ real margins are not part of the equation, said KAP vice-president Glenn Young. Under AgriStability, production margins are calculated by taking allowable income minus allowable expenses plus inventory adjustments. Reference margins are an olympic average of the last five production year margins, dropping the highest and lowest values, or an average of adjusted expenses from the same three years, whichever is less.
Taking the lower number makes it hard for farmers to build their reference margin in good years making it less likely payouts will come in years that a farmer’s margin drops.
“It’s complicated and hard to figure out,” Young said. “You complete your paperwork and hope for the best.”
Because AgriStability is complex, many farmers rely on accountants when applying, adding to farmers’ costs, he said. With higher costs and less likelihood of a payment some farmers are opting out.
Young said while the program isn’t as useful to farmers as it was in the past, some protection is still better than none. “It’s not easy protection to get, but it’s better than zero.”
Every farmer has to decide for themselves.
“I think the more diversified guys (with more stable margins) are probably looking at the program as a real disaster assistance thing and that’s why they would drop off.”
In 2013, 73,779 farmers were enrolled in AgriStability — 7,135 in Manitoba, Agriculture and Agri-Food Canada said in an email. That compares to 81,458 nationally and 7,839 provincially in 2012. However, the department spokesperson said that nine per cent decline could be attributed to numerous factors such as a decline in the overall number of farms due to the long-term trend of farm consolidation, favourable market conditions experienced by many producers and individual business decisions.”
The participation rate is higher among farms with revenues of more than $500,000, suggesting large operations see the program as a way of managing risk, he said.
AgriStability can offset large declines in farm income due to disasters, including lower prices, a drop in production or higher operating expenses, he said.