“This program just doesn’t work well on multi-year declines.”
– IAN WISHART, KAP
Adramatic plunge in government program payment s, t r iggered mainly by a livestock industry crisis, is further proof that farm safety net programs do not work properly, according to Keystone Agricultural Producers.
Statistics Canada reported Monday that program payments to Canadian farm-e rs dropped nearly 25 per cent between January and September 2009, compared to the same period in 2008.
The big reason is the ongoing financial crisis in the cattle and hog sectors, said Ian Wishart, KAP president.
Cattle producers have suffered from poor returns ever since BSE occurred in 2003. Hog producers are entering their fourth straight year of losses.
But AgriStability, designed to help farmers in lean years, isn’t paying out to those producers, said Wishart.
“They’re not triggering (payments) because their margins have declined,” he said.
“Margin-based programs with five-year Olympic averages do not work in multi-year disasters.”
AgriStability payments are based on individual producers’ financial margins (income minus allowable costs). Margins are calculated on a five-year rolling average with the high and the low years thrown out (the so-called Olympic average). When producers’ incomes fall below their long-term margins, payments are triggered.
KAP has consistently argued that approach doesn’t work during prolonged financial downturns, when margins decline and payments fail to occur.
That was true for the grain sector in the 1990s and it’s true for the red meat sector now, said Wishart.
“It actually seems as though our situation is a multi-year decline and this program just doesn’t work well on multiyear declines.”
KAP says AgriStability should index margins to reflect farmers’ production costs. That would have benefited producers last year when fertilizer and fuel prices were extremely high, said Wishart.
KAP expects to recommend indexed margins in a working paper it plans to present to government this winter.
Laurent Pellerin, Canadian Federation of Agricul ture president, agreed margin-based programs do not help farmers in multi-year crises.
“It’s always the same thing. When you are in a very bad period and going worse and worse, the payments are less and less. That’s really bad,” he said.
Pellerin said the real solution is to base safety net payments on farmers’ costs of production instead of long-term margins.
“If we have something based on COP, it will be a more stable program for farmers.”
In its report, Statistics Canada said total farm cash receipts during the first three quarters of 2009 fell 4.2 per cent to $32.8 billion. Crop receipts were down 1.4 per cent to $16.8 billion, while livestock receipts declined 2.8 per cent to $13.5 billion. Program payments fell 24.5 per cent to $2.4 billion. (Figures may not add up because of rounding.)
Manitoba’s farm cash receipts remained unchanged at $3.6 billion between January and September.
But third-quarter income took a real tumble. Nationally, cash receipts between July and September fell by 11.8 per cent (three per cent in Manitoba), reflecting the deepening crisis in the hog and cattle sectors.
“Canada’s livestock sector has been affected by a strong Canadian dollar, concerns about the H1N1 flu virus and U. S. country-of-origin labelling (COOL) legislation, which has put downward pressure on U. S. demand for live animals,” Statistics Canada said in its report. [email protected]