This time, it was April when disaster struck.
Calves were dropping across the province. Livestock operations, bitten hard by the 2021 drought, were urgently waiting for pastures to green. Nobody needed a half-metre of snow, enough precipitation to send parts of the province under water and extended power outages.
In the aftermath, producers began to count their lost calves.
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The discussion began: Is it time for the government to step in?
Why it matters: Ad hoc programs like AgriRecovery are meant to smooth the hit from outlier years, but what if outlier years start to become the norm?
It is but the latest instance of calls for ad hoc government aid, or discussions on whether such a pitch should be made, in outdoor livestock sectors.
Last year, it was for the opposite extreme. The drought gripped all of Western Canada enough that the federal government proactively announced funds for AgriRecovery, a program typically triggered by the provinces.
Before that, it was 2019, and a very similar call from Manitoba’s Interlake and Parkland — where dry conditions had forced 18 municipalities to announce states of agricultural disaster.
While it is hard to quantify how much changing climate is playing to Manitoba’s wild weather swings, Manitoba Beef Producers president Tyler Fulton said, on the ground, it certainly feels like things have got more volatile.
“It’s not like we haven’t discussed it before,” he said. “I think the difference maybe is that we’ve got most of our sector that probably sees that these events are more frequent.”
But while agrometerologists have warned that agriculture will have to adapt to more extreme weather, the ad hoc programs often reached for are designed for the disaster year, not consistent use.
Adapting the safety net
The problem, Fulton noted, is that no one really likes having to reach for ad hoc aid.
“It’s not something you can plan on,” he said. “It’s not something you can reference when preparing for the years ahead, whether it’s from a cash flow perspective or from just strictly your business strategy.”
Industry pitching an aid program has no guarantee that government will agree, nor what the specifics of the eventual program will look like — although consultation with the affected sectors is usually a matter of course.
From the government’s perspective, ad hoc aid may mean an unexpected and unwelcome bill.
Last year, for example, Manitoba’s drought crisis led to an AgriRecovery program worth $155 million in federal and provincial funds. Programs were announced to aid producers buying feed or transporting it from long distances. Ranchers could get other help to move animals to better feed. Currently, producers who suffered serious hits to their herd genetics can expect help for replacing breeding animals they were forced to cull in 2021.
In terms of calf losses this spring, the province announced in early May that livestock and farm infrastructure losses would be eligible for Disaster Financial Assistance, if insurance could not be purchased.
In 2019, however, similar calls for ad hoc aid had fallen on less fertile ground. Addressing the Association of Manitoba Municipalities that fall, then-agriculture minister Blaine Pedersen argued any feed transportation aid program would be ineffective, pointing to previous transportation programs that had led to only higher freight rates rather than tangible aid.
Although the province later announced that Crown land leases would get a rent break in the worst-hit areas, the main thrust at the time was for a review of forage insurance, which had seen historically poor uptake.
Reluctance to participate
By Fulton’s view, the path forward may be both adjusting the budgetary process to leave more buffer for aid, and a more tailored business risk management (BRM) safety net, something that would add more consistency for the farmer and avoid financial shocks for the government.
One problem, however, lies in a historical lack of participation from livestock producers, and the cow-calf sector in particular, in some of those same BRM programs.
There is still a culture of independence and preference towards on-farm resiliency practices (such as baling additional ditches, turning to novel feeds or using annuals for feed) that feeds into farmer reluctance on BRMs, Fulton admitted.
About 70 per cent of forage acres in the province remained uninsured last year, according to the Manitoba Agricultural Services Corporation (MASC), well below normal uptake in the grain sector, which typically shows the grand majority of acres insured. Even those numbers are an increase from prior to 2018, when uptake typically hovered at a quarter or less.
“We’ve been slow to adopt the crop insurance products that are available, and they have seen some pretty significant improvements over the course of the last two or three years,” Fulton said.
Last year saw the first improvements from the province’s 2020 forage review, including yield cushioning, an IPI on corn silage and more generous transportation allowances.
This year, the province and federal government also announced $254,000 to develop a usage-based forage product, spearheaded by the Dairy Farmers of Manitoba.
“It might take a few years to go through and develop an insurance product that will stabilize farmers like the grain side has right now,” Manitoba Agriculture Minister Derek Johnson said, noting that the grain side of agriculture has the benefit of six decades of tailored AgriInsurance.
He believes Manitoba is, however, on the right track to bolstering that BRM landscape for producers, he added.
AgriInvest
There are good existing options in the BRM suite available to producers, according to Bill Campbell, president of the Keystone Agricultural Producers.
AgriInvest, for example, has the potential to build up a farm’s financial buffer, with the flexibility to be used as that individual farm needs.
“Those are farmer funds,” he said. “Every individual farm will utilize them at different times. I know that at certain times in previous years where we had some weather-related issues, but I also had machinery breakdowns and had a huge bill, AgriInvest was the funds that I accessed to ensure that I carried on my farming career.”
At the same time, he noted, the federal government in 2020 raised issue with the amount of AgriInvest funds laying unused. At the time, producers had as much as $2.3 billion sitting in AgriInvest accounts.
Critics at the time suggested those numbers did not break down into unreasonable amounts per farm.
“If you don’t have AgriInvest funds, then your next course of action is to go to the government to say, we’ve got a problem here,” Campbell said.
Better for livestock
At the same time, Campbell said, other programs have not exactly been tailored for livestock.
AgriStability, for example, is technically meant to absorb hits when farm revenue significantly falls below normal.
“But we have seen where AgriStability is a broad, encompassing program, but it doesn’t necessarily prove to be effective for every sector,” Campbell said, noting that the livestock sector, in particular, is hindered by a lack of eligibility on expenses and problems with profit margin under the program.
“There has not been a great number of years of profitability those producers can bank or set aside,” he said. “I know producers are very good at inventory of feed and baling an extra year (worth) of straw, but they don’t have that opportunity with their bank accounts.”
Johnson acknowledged the issue.
Margins for beef in Manitoba range around 4.6 per cent, he noted, adding that those tight margins mean an operation must be ever bigger in order to support the business.
“I don’t think that any insurance, at any point, anywhere, will drop your risk to zero,” he said. “So we have to have a medium in between where we can ensure that the farmer remains sustainable, but also utilizes some of the better management practices to reduce their own risk.”
At the same time, he added, governments need to improve insurance products for beef.
“If you buy insurance on your house and it burns down and you don’t get paid for your house, you’d obviously be quite angry. The second time it burns down, if you don’t get paid again, then you probably wouldn’t buy the insurance,” he said.
There have been instances, Campbell said, where programs have been altered or eliminated by government because of too much perceived risk, which may have avoided a later call for ad hoc funds.
“If you don’t have a program that addresses the events specifically, then it can sometimes be a blunt tool to address it,” Fulton added. “AgriStability, while there have been some recent improvements, it typically is not widely used in the cow-calf sector and I would view it as a very blunt tool to address a weather-related event that had an impact on the viability of your operation.”
Improvements
Deadlines for AgriStability have been extended to the end of June this year, the province has noted.
Last year, the program also saw the removal of the reference margin limit, while during last year’s drought, the province and federal governments announced a rise in interim payment percentages.
Johnson, meanwhile, pointed to the eventual dividends of the Dairy Farmers of Manitoba program on forage insurance, as well as an Agriculture Crown Land pilot meant to bolster pro-jects that would increase productivity on leased land.
At the same time, the province continues to fund on-farm beneficial management practice projects such as cover crop establishment or other management practices geared towards extreme weather resiliency.
“The more you can make the land productive, the less risk there is, and that’s our goal, to make farming sustainable with as low risk as possible,” he said.
On the budgetary side, Johnson noted, the province has looked at reinsurance through MASC to lower their own financial risk and, despite higher claims from last year’s drought (MASC reported $48.3 million in forage insurance payouts alone last year), they expect to be “well within” their budgeted buffer.
As for AgriRecovery, Campbell noted, there is push for a review of the program, its criteria and outcomes.
Attention also turns to the next policy framework, and what that might mean for the future of BRMs.
Johnson noted that the province hopes to see AgriInvest funds easier to access under the new framework.
Moving ahead
The way forward will depend highly on producers effectively making their needs known and proper engagement between those producers and the different levels of government, Campbell said.
“If it’s a three-level shared agreement on the programs, then there needs to be that understanding by producers. You can ask for the moon, but if it’s not affordable for the governments, you’re not going to get it,” he said. “You need to be aware that any enhanced programs may come from engagement with producers and premiums, accordingly, to show that they have skin in the game, the government shows it’s got skin in the game, so does the federal government.”
There also, he said, needs to be an understanding of the term “insurance.”
“It’s not to ensure profitability,” he said.
Rather it’s to “ensure that some of your costs are covered, that you don’t force producers into a state of bankruptcy because of circumstances, be they weather, be they markets, whatever.”
Fulton, meanwhile, suggested that it might be time for an ‘AgriEnvironment’ BRM product specifically tailored for the impact of extreme weather.
Such a product would fill a similar need to what AgriRecovery does now, he suggested, but with more consistency and structure.
“We would all be better served if we could really sit down and figure out if we could design a product that would address these climate-related issues,” he said.
For more content related to drought management visit The Dry Times, where you can find a collection of stories from our family of publications as well as links to external resources to support your decisions through these difficult times.
