“I’m going to predict today AgriStability will be losing support and subscriptions from farmers because it really has got to be questionable if you’ll ever see a payment,” Doug Chorney said Sept. 14 following the conclusion of the federal-provincial-territorial agriculture ministers’ meeting in Whitehorse, Yukon.
Federal Agriculture Minister Gerry Ritz says governments will support farmers during severe challenges, but it’s time to invest in research, innovation and market development so farmers and agribusiness are profitable over the long term. To that end $3.06 billion will be spent in those areas over the next five years.
A newly created federal “agri-innovator committee,” with farm and industry representatives, will gather ideas on how the money should be spent.
“We must make sure that the programs in place make sense not only for today but are foundational for five or 10 years from now,” Ritz told reporters. “The programs… must not hold us back or mask market signals.”
Changes to AgriStability are part of the new five-year federal-provincial “Growing Forward 2” agreement, which takes effect April 1, 2013.
In addition to AgriStability, the agreement covers AgriRecovery, AgriInsurance, AgriInvest, as well as the new emphasis on innovation.
“Not only will we continue to share the farming risk, but governments will continue to cover the vast majority of risk that farmers face,” Ritz said.
“BRM (business risk management) program reform… should create space for the development of private risk management tools,” agriculture ministers said in a news release.
As expected, farmers’ program year margins will have to decline 31 per cent, instead of the current 16, to trigger an AgriStability payout. But the most damaging change, according to Chorney, is that future AgriStability payments will be based on either a farmer’s reference margin or his or hers allowable expenses, whichever is lower. Allowable expenses cover only 60 to 70 per cent of farmers’ operating costs and are usually lower than their reference margins, he said.
“AgriStability, a program designed to stabilize farmers’ margins, is no longer a margin program,” Chorney said.
Just when grain farmers’ reference margins were improving, governments changed the rules, he said.
“The reason government is doing this is because they are concerned grain prices will stay high, or continue to rise, and that creates greater risk exposure for government,” Chorney said.
A farmer with a $100,000 reference margin and $100,000 in allowable expenses would get a $66,500 payment under AgriStability now in a year when his or her program year margin falls to zero, but only $49,000 under the new program — a drop of $17,500.
But if a farmer’s reference margin tripled to $300,000 and his or her allowable expenses stayed the same the current program would pay $199,500, but the new program would only pay $49,000 — $150,500 less.
Under the new program farmers will be paid at a rate of 70 per cent when their program year margin falls below zero instead of 60 per cent.
AgriStability will also cost farmers less — 0.31 per cent of their reference margin instead of 0.38. That’s a saving of $70 a year for a farmer with a $100,000 reference margin.
Under AgriInvest farmers were allowed to contribute 1.5 per cent of their annual allowable net sales to an AgriInvest account and governments would match it up to $15,000 a year. Farmers’ contributions will be cut to one per cent, but governments will continue to match it up to $15,000 a year.
The AgriInvest account cap of 25 per cent of annual net sales, will go to 400 per cent.
Ritz said if farmers run into financial difficulties they can withdraw money from their AgriInvest account to cover the first 30 per cent decline in their margins, then AgriStability kicks in.
“My fuel bill I got last month would not be covered by all of AgriInvest program money for the year,” Chorney said. “Come on, who are they kidding?”
Neither Ritz nor his officials would say how much AgriStability changes will save governments.
Manitoba Agriculture Minister Ron Kostyshyn says investing in innovation will help farmers take advantage of growing world food markets.
“As I often say the money is out there,” he said in an interview from Whitehorse. “We need to develop the markets and we could enhance some of those dollars to provide financial security for the producers out there.”
The Grain Growers of Canada had a mixed reaction.
“On one hand we have aggressively lobbied for more investment into research and innovation and so are pleased to see more funding there, but on the other hand there are substantial cuts to some key risk management programs,” Grain Growers president Stephen Vandervalk said in a news release.