The perfect farm income stabilization program is as elusive as utopia itself.
But a lot of farmers say they would be happy if AgriStability’s payout trigger went back to an 85 per cent, instead of the current 70.
But that would cost governments potentially a few hundred millions of dollars more, estimates University of Saskatchewan agricultural economist Peter Slade.
And there’s the rub. From the farmer’s point of view AgriStability could be more effective, but governments don’t want to pay for it.
Canadian agriculture is littered with abandoned farm income support programs going back 50 years or more. Some of which include the Western Grain Stabilization Administration (WGSA), Gross Revenue Insurance Program (GRIP), Net Income Stabilization Account (NISA), Agricultural Income Disaster Assistance (AIDA), Canadian Farm Income Program (CFIP) and Canadian Agricultural Income Stabilization (CAIS).
A Goldilocks program is hard to find. It must pay farmers when profits crash, but not cost governments too much. It must also not distort markets, mask market signals or break international trade rules.
University of Manitoba agricultural economist Derek Brewin knows how much farmers dislike AgriStability. As a member of the agricultural risk task force the Manitoba government set up in 2015, he heard the complaints first hand — AgriStability is unpredictable and slow to pay out. But he says the program isn’t all bad. AgriStability insures against a big drop in margins and does so at lower cost than insuring crop yields or prices individually, he said.
“With AgriStability you are protecting a margin and it’s more coverage than you think,” he said in an interview March 6. “Seventy per cent of 70 per cent of a margin is still a lot better than 70 per cent of your total revenue. That’s a thing to remember. You’re talking about half of your current margin. Half of your profit is a lot better than zero profits.”
Instead of restoring AgriStability’s payout trigger to 85 per cent, farmers might consider asking governments to invest the money they save into drought- and flood-proofing agricultural infrastructure, agricultural research and better grain-pricing information, he said.
“To me the payoffs in agricultural research are just a clear win.
“Some of these investments… would really improve the risk management options that farmers have and help them make better decisions about their risks.”
Insuring margins, as AgriStability does, is inherently complex, Slade said in an interview March 4.
“You are going to get into issues of accrual accounting for inputs as well as revenues,” he said. “I don’t think anyone can come up with a great way of making it less complex. A lot of smart people have looked at this issue.
“It’s going to take some time to give farmers their payouts because you have to get everything at the end of the tax year.”
Insuring revenue is an alternative. It would protect farmers against a lot of the same financial risks as AgriStability, but with fewer reporting requirements, Slade said.
“It would really simplify it a lot,” he said. “I think it would make it a lot more timely. You’re losing some of that input price protection, but given how complex farmers find AgriStability and how untimely the benefits are I think maybe that’s a worthwhile trade-off.”