The federal government’s proposed improvements to AgriStability will cost it — and provincial governments — more money.
But they need to be considered because Canadian agriculture and downstream industries need stability, says economist Al Mussell, with Agri-Food Economic Systems in Guelph, Ont.
“The risk situation has got significantly different,” he said in an interview Dec. 2. “Obviously there’s the protection of producers (to think about), but also there’s the protection of the capacity of our overall ag and food system… ”
All governments face fiscal constraints, Mussell said. And because agriculture is such a big part of the Prairie economy enhancing AgriStability will hit those provincial budgets hardest.
“However, on the other hand, if you’re seriously at risk of undermining producers and the capacity of the system that’s something you need to keep in mind when you’re assessing the budgetary liability with changes in the program,” he said.
“I believe that risk is real.”
Mussell and fellow agricultural economist Douglas Hadley call for the reference margin limit (RML) to be removed from AgriStability, and restoring its payout trigger to an 85 per cent drop in a farmer’s historical margin instead of the current 70 per cent, in a November policy note prepared for the Grain Farmers of Ontario.
“The RML is unnecessary, and it is unclear how it can be defended today given the equity principle in the CAP (Canadian Agricultural Partnership),” the note says. “However, in order to bring past participants back to AgriStability, more material changes are required than is possible through the RML alone; an increase in the payment trigger fills this need.”
The note calls the reference margin limit added to AgriStability in 2013 “arbitrary” and says it discriminates against some commodities, including field crops.
AgriStability payments to Ontario field crop farmers would have been 197, 291 and 126 per cent higher in 2016, 2017 and 2018, respectively, had the reference margin limit not applied, the note says.
Assuming figures cited are accurate the proposed AgriStability changes would increase Saskatchewan’s spending on the program by about $17.5 million, or 50 per cent, Peter Slade, assistant professor and Canadian Canola Growers Association Chair in Agricultural Policy at the University of Saskatchewan, wrote in an email Dec. 3.
“In some ways this is not a lot of money; it’s less than five per cent of the (Saskatchewan) Ag Ministry’s budget,” he wrote.
“However, the Prairie provinces, as well as all other governments, are finding themselves in a difficult financial position. It might be a hard sell to increase the ag budget when the ag sector, as a whole, has got through the pandemic in much better shape than other industries,” he wrote.
The AgriStability bill would be a lot higher if the payout trigger was restored to 85 per cent, Slade added.
“The likely reason for Bibeau proposing changes to the level of compensation as opposed to the trigger is cost,” he wrote.
Raising compensation to 80 per cent would meant 14 per cent more overall AgriStability spending, he said. Layering the two proposals brings it to 50 per cent more total spending. Bibeau has said that moving the trigger back to 85 per cent would equal a 70 per cent increase in the federal AgriStability cost.
“(I)f the Prairie ag ministers are having a hard time selling these changes to their government, then increasing the trigger would have been even more difficult,” Slade said.
Another argument for improving AgriStability is to avoid ad hoc farm support, Mussell said.
Farmers are voting on AgriStability with their feet, by withdrawing from it. But when farmers don’t participate in risk management programs, the risk doesn’t go away.
“It builds the potential for requests for ad hoc funding,” Mussell said. “And ad hoc funding is a nightmare for an agriculture minister.”
For starters it’s unbudgeted. By definition ad hoc leaves less time to plan and consider longer-term public policy objectives, Mussell said.
If Canada does enhance AgriStability there’s little risk of exceeding the amount of farm subsidies allowed under World Trade Organization rules, he said. The cap is currently around $4.3 billion a year and Canada, on average, spends about $1.6 billion.