Editorial: Effective ag stabilization programs a must

It’s tempting to look into the shadows for a deep, dark conspiracy behind the three Prairie provinces’ reluctance to fully support AgriStability.

The farm income support program, cost shared 60-40 by the federal and provincial governments, compensates participating farmers if their farm income minus eligible expenses drops below a certain threshold.

Farmers and their organizations have complained for years that the program isn’t functioning properly and many producers were simply dropping out. That leaves the primary agriculture sector vulnerable to increased volatility, which increases risk and discourages growth. A struggling primary sector quickly ripples through the value chain and spills over into the economy in general.

Related Articles

Finally, after years of lobbying, the federal government last November offered to support changes in line with what producer organizations said were necessary. Those changes would make it easier for farmers to qualify for compensation and increase the amount they receive.

The example provided illustrates these changes could mean the difference between a Prairie grain farmer receiving $4,000 from the program or $75,000.

Of course, that also increases the potential cost to taxpayers by an estimated $170 million annually, about $68 million of which would come from the provinces.

Ontario, British Columbia, Prince Edward Island and Quebec are on board with the plan. The three Prairie provinces aren’t saying. At least two of the holdouts have to opt in for the changes to move forward under the federal-provincial agreement on how agriculture is supported in Canada.

Their silence prompted Agriculture and Agri-Food Canada Minister Marie-Claude Bibeau to turn up the heat a little earlier this month.

Finally, the two levels of government moved forward with one of the changes last week, worth about $95 million, by removing the so-called “reference margin limit.” But there was no agreement on increasing compensation as the federal government was proposing.

But it’s also become known that the Prairie provinces are cooking up a different approach, a whole-farm revenue insurance program they want to see up and running in 2023. The model would insure an entire farming enterprise for a margin decline from revenue fluctuations, expense changes, or a combination of the two.

Insurable margin would be based on historical yields, prices and expenses. A producer would be able to choose their level of coverage for their insurable margin from a minimum of 50 per cent to a maximum of 90 per cent. Like crop insurance, the program would be self-sustaining and include producer premiums.

Its cost effectiveness remains to be seen. So far, little has been said about whether this could unravel Canada’s national network of farm supports, how it might impact Canada’s ability to negotiate trade deals or how it might affect equity for producers across the country.

Provinces understandably want to keep a lid on costs. The ongoing pandemic has taken a heavy toll on government coffers, so putting more dollars into a program to support a sector that right now isn’t suffering is a hard sell to the keepers of the treasury.

In fact, farm incomes are soaring and net worth is rising, as noted in the recently released annual Farmland Values report from Farm Credit Canada. Average farm net cash income rose a record 21.8 per cent in 2020. More than 70 per cent of farm operations are on track to record profitable incomes in 2021.

With good times rolling in agriculture, the provinces won’t get any complaints from taxpayers if they balk at paying more into farm subsidies. Farmers may be displeased, but they aren’t likely to change their voting patterns. So, governments’ political exposure is low.

However, good times in agriculture are precisely why governments should support the effective stabilization programs.

The average age of farmers in Canada is 56. Rising land values are a good opportunity for farmers nearing retirement to consider exiting. While it may be attractive for some to sell out and cash in, it also will be appealing to hang on to their land and rent it out.

Access to rented land reduces a significant barrier to entry for young or beginning farmers, especially when combined with high commodity prices and low interest rates. But beginning farmers are typically more highly leveraged and more vulnerable to business risks due to production or market losses.

They need backstops like AgriStability more so than established farmers who have built up their equity.

As well, agriculture is a significant contributor to Prairie provincial economies, which will be counting on its performance to support a post-pandemic recovery.

Refusing to invest is short sighted, pure and simple.

About the author

Vice-President of Content

Laura Rance

Laura Rance is vice-president of content for Glacier FarmMedia. She can be reached at [email protected]

Comments

explore

Stories from our other publications