Canada’s key agricultural safety net program may undergo a redesign to make it more acceptable to a majority of producers who say it isn’t working for them.
Agriculture ministers could consider turning AgriStability into something resembling an income insurance program without the highly unpopular financial margins underpinning it.
The idea is only one of many options under consideration for the next generation of farm business risk management programs.
But the fact that ministers are even looking at switching from a margin-based program to an insurance-based one could signal a major shift in government thinking on farm income support.
“I see us coming toward a watershed time in terms of where we move with safety nets,” said Ian Wishart, Keystone Agricultural Producers president. “It’ll go this way or it’ll go that way, and they’re quite different.”
Farmers have complained for years that AgriStability and its predecessors CAIS, CFIP and AIDA are flawed because they work off individual financial margins based on previous years’ average income. If incomes remain low for several consecutive years, margins shrink and payments decline just when producers need money the most.
That’s particularly true for beef producers who have suffered from depressed markets ever since BSE occurred in 2003.
“You eventually get to the point where there’s nothing to pay out,” said Ron Bonnett, Canadian Federation of Agriculture first vice-president.
Government sources confirm agriculture ministers are exploring the option of an insurance-based model for AgriStability as part of a business risk management (BRM) program review.
“I see us coming toward a watershed time in terms of where we move with safety nets.”
– IAN WISHART, KAP
Exactly how that would work isn’t clear. But it could involve insuring against drops in income instead of just using financial margins based on historical averages to trigger payments.
It’s also not certain if changes would occur soon or if they would come after the current federal-provincial Growing Forward program expires March 31, 2013.
Wishart said the program could be a combination of crop insurance for crops and production insurance for livestock.
He acknowledged livestock insurance could be a stumbling block. Production insurance for livestock producers exists on paper. But officials have so far been unable to produce a working model for livestock production insurance.
One possibility could be a cattle price insurance program, in which producers pay premiums to insure against a drop in beef cattle prices over certain periods of time. Such a program currently exists for fed cattle in Alberta.
BRM consultations between government and producer groups wrapped up in June. Wishart said ministers received a summary of comments at their recent annual meeting in Saskatoon. AgriStability was high on the list of complaints.
Wishart said government has two choices on what to do with the controversial program.
“Either fix AgriStability in a major way and deal with some of the issues in terms of declining margins or come up with some other alternatives,” he said.
“Their choice is to restructure and go to something different or start making interim tweaks to AgriStability.
“If they’re going to go with AgriStability in the future, they’re going to have to make the tweaks as soon as possible.”
Greg Marshall, Agricultural Producers Association of Saskatchewan president, said enrolment in AgriStability is falling off because of farmer dissatisfaction.
“The program is not working and farmer customers are dropping out of it because they don’t like the program and they don’t want to be involved with it. It needs improvements,” Marshall said.
Government officials say the problem is that producers want AgriStability to do something it wasn’t designed to do.
They say the purpose of the program is to stabilize income based on the recent history of the farm, not merely to deliver income deficiency payments.
Federal Agriculture Minister Gerry Ritz acknowledged producers’ disenchantment during a news conference following the agriculture ministers’ meeting.
But he said it was important that government programs not distort markets.
“We don’t want to mask market signals,” Ritz said. “We don’t want to stifle innovation with programs that would do that.”
While farm safety nets are important to cover risk, the real need is to make farmers profitable in the long term, said Bonnett.
“I don’t think looking at an insurance program is going to be the answer to profitability.” [email protected]