Livestock producers face a fundamental inequality when it comes to business risk management (BRM) programs in Canada — but industry groups are proposing a fix.
One of the starkest differences is in government-based insurance programs. Crop producers enjoy coverage that’s typically subject to a 60/40 government/producer split, with provincial and federal governments picking up the largest part of the tab.
Organizations such as the Canadian Cattle Association are calling on the feds and provinces to share the cost of pricey livestock price insurance (LPI) premiums with beef producers along the same lines, says Tyler Fulton, president of the CCA, who also serves as co-chair of the association’s foreign trade committee.
That would bring some equivalency to these BRM programs, says Fulton. Crop insurance covers yield loss, the biggest risk for crop growers. Meanwhile, downward market shifts — which LPI insures by allowing cattle producers to set a minimum price floor — present the greatest risk for those farmers.
Much of the new interest in LPI is in response to the threat of U.S. tariffs, he says. Many LPI policy holders intend to use it as a tool to manage them should livestock and meat ever be targeted.
“By virtue of the fact that we sell 50 per cent to export of what we produce here in Canada, we are very reliant on the export markets to help determine our price,” says Fulton.
WHY IT MATTERS: Livestock producers say they’re second class citizens when it comes to business risk management programs in Canada.
“And so when we see the tariff threats of 25 per cent it represents probably one of the biggest risks that we could experience, bar none. It’s just very significant because the U.S. represents such a large market for Canadian beef and live cattle.”
An LPI cost-share agreement would also be a relative bargain compared to the government’s cost of supporting crop insurance premiums, he says. Crop insurance requires several billion dollars in government support while a similar model of support for LPI would be closer to $150 million to $200 million, said Fulton.
Although he says the federal government is coming around to the idea of LPI cost-sharing, it has previously cited trade risk and prohibitive cost as reasons to not participate.
Fulton doesn’t think those arguments hold water in an environment already brimming with trade risk from U.S. tariffs, especially with many beef producers still priced out of the LPI market.
“It’s really frustrating that we can’t effectively cover the risk because the government says that it’s too risky in this environment.”
Ultimately, beef and crop production are related but separate ag sectors with their own specific needs, says Fulton, and a perceived “one size fits all” philosophy driving government-funded BRMs isn’t cutting it.
”I think that we need to move to a model that is more industry-specific. It’s really difficult, if not impossible, to design a safety net program or a risk management program that works well for all sectors of agriculture.”
Brian English, a beef producer from Rivers, Man. who runs a cow-calf, feeder and backgrounding operation at nearby Bradwardine, took out an LPI for the first time this year. He also highlights the government’s treatment of crop growers compared to beef producers.
“Why shouldn’t we get the same benefits as these guys that are putting in thousands of acres of cropland?” he said. “We should be on equal footing as them. The federal and provincial governments should do the same funding schedule for livestock price insurance as they do for crop insurance now.”
English took out an LPI policy this year in response to the threat of U.S. tariffs.
“Trump had put on the tariffs for two-and-a-half days (and) we heard the horror stories of the cattle crossing the line getting $1,000 tariffs on each animal. And then (the U.S.) stopped that for a brief period of time and there was a chance that it was going to come back on right away.”
Ongoing reluctance
LPI has historically been a hard sell to beef producers due to policy cost. Fulton estimates a high rate of $50-$60 per calf for a calf policy (the program has three cattle policies available: calf, feeder and fed) on a 10-year margin.
However, thanks to high prices in all cattle categories in recent years, margins are much better today. That offers extra incentive to take out an LPI policy because beef producers will have more to lose once the bull market (in investment terms) goes bearish, he says.
“$50 to $60 in today’s market is not as significant. It’s not as big a barrier, but it’s still a large barrier when talking about an individual animal (and) having to pay $50 or $60 just to be able to cover it.
“If you get 60 per cent of the cost of your insurance policy covered, it really changes the motivation and the desire to actually cover off that risk because you’re not using up a bunch of your profit margin just to insure it.”
Other LPI changes needed
Fulton would also like to see a widening of LPI’s application window. Although applications for feeder and fed policies are accepted year-round, calf policies are only available from February to June each year. However, risk exposure continues long past June.
“So for most of the year the tool is not accessible.”
English has a technology-based suggestion for improving the program. He says the application website needs to be more user-friendly for cell phone users and especially those who live in areas with limited internet bandwidth.
“It’s just a little daunting the first time that you’re (applying) … It’s kind of clunky. It’s not iPhone friendly and I do everything on my phone.
“We put all our records of our cattle on our phone, check on our weather. Everyone uses their phones more than a laptop and so I think if they made it so that it was a little easier to use on your phone, it’d be that much easier also.”
Balanced outcomes
There could be some positive tradeoffs with other government BRMs if a cost-share arrangement for LPI is developed, says Fulton. For example, AgriStability payments wouldn’t trigger as easily if beef producers already had coverage through LPI.
(AgriStability is a federal-provincial-territorial program meant to protect farmers from extreme market price declines that threaten the viability of their farms.)
“Let’s say a 20 per cent tariff is implemented by President Trump and our prices here in Canada drop by 15 to 20 per cent. That would likely trigger a payment in AgriStability normally,” explains Fulton.
“But if we had coverage with livestock price insurance, for those that had a policy it would result in a payment through livestock price insurance and therefore would not result in a drop in your farm income and consequently you wouldn’t need to trigger an AgriStability claim.”
It’s a scenario Canadian crop producers already enjoy, he says.
“Because people have crop insurance, they can experience a 40 per cent hit in their yield (and) they get a payment through their crop insurance policy. They don’t make an AgriStability claim because they’re already covered off through their insurance.”
Government willing to talk
The beef industry is slowly but surely catching the ear of government on cost-shared LPI policies. Fulton says both the federal Conservative and Liberal parties — motivated in part by U.S. tariff threats — were interested in providing better risk management tools to farmers prior to the federal election.
“This represents a cattle industry-developed program that works really well and so when we started to get exposed to the tariff issues, it really changed the conversation. It just made it very obvious that there was a deficiency here and they identified that.”
Fulton has spoken with new federal Agriculture and Agri-Food Minister Heath MacDonald and hopes to meet with him soon to address the uncertainty and risk the industry is facing.
He’s counting on the Prince Edward Island-dwelling MacDonald having an understanding of LPI, given Maritime producers have been eligible since last year.
Countervail fears
An attendee of Manitoba Ag’s Navigating Livestock Price Insurance webinar on May 8 asked if cost-shared premiums would trigger countervail action from the U.S. The answer is “unequivocally no,” says Fulton.
“The industry is not at all concerned about a countervail duty related to livestock price insurance cost-shared premiums,” he says.
“Our American counterparts have a very similar program that is cost-shared and it is really structured similarly to their crop insurance program, and so they’re addressing what they’ve identified to be a gap in risk management tools offered for farmers and inequity for livestock operations.”
Source - https://www.manitobacooperator.ca
