Federal, provincial officials continue to study how whole farm revenue insurance could replace AgriStability.
Canada is inching closer to a whole farm revenue insurance program that could replace AgriStability.
Officials have been working since 2019 on ways to insure production and market risk under a single contract across an entire farm.
A senior program officer at Agriculture Canada outlined their progress last month at the Saskatchewan Stock Growers Association convention.
Scott Surgenor said the intent is to develop a product that is more predictable and timely. Analysis of how whole farm insurance would work for grain and oilseed farmers, cow-calf producers and the feedlot sector is complete.
Officials are now working with the Manitoba Pork Council on the hog sector and the Prince Edward Island Potato Board. However, it will take time to work through the fruit and vegetable industry since there are so many products.
AgriStability remains in place until at least March 31, 2028, when the current policy framework expires. The federal, provincial and territorial agriculture ministers meet July 15-17 in Halifax, where business risk management programs will be on their annual meeting agenda.
Why It Matters
Farmers have long criticized AgriStability, which is supposed to cover margin declines, for being too complex, unpredictable and not paying out soon enough. There have been changes, such as increasing the compensation rate, but uptake still lags.
Poor uptake in AgriStability program
Surgenor said participation in AgriStability has dropped from about 60 per cent of production and 75 per cent of total farm revenue.
“We only have about 30 per cent of farms participating in that program today, and representing less than half of the value of production,” he said.
The implementation of AgriStability was a significant policy shift away from previous government support measures and does require a loss over the whole farm, but Surgenor said it also came with problems that governments haven’t been able to fix.
It isn’t timely because it requires tax-filed information and won’t respond until all of that is processed, he said. Only 57 per cent of payments are made within eight months of the end of the tax year. The remainder typically takes nine to 20 months.
Surgenor said it’s complex and requires a large amount of production and financial information. It’s unpredictable because coverage is based on historical farm income but adjusted annually to farm size, resulting in a “moving target.”
Producers can’t predict coverage or payments, so they have to find other ways to cash-flow large income declines.
Surgenor said officials realized early on AgriStability couldn’t simply be turned into a revenue insurance program. They looked at other countries’ programs, but the majority of them are commodity specific.
A made-in-Canada solution was required.
Solution must adhere to WTO rules
It has to stay within the amber box for domestic support under World Trade Organization rules, making it worth about $4.5 billion, and it has to be available to all sectors.
Surgenor said this type of insurance should be cheaper for farmers and governments.
Canada’s business risk management programs have paid out about $9.6 billion in the past five years, he said, and AgriInsurance, namely crop insurance, accounts for $5.7 billion, or 60 per cent.
“The program is triggered even when the whole farm is profitable, and that creates an expense issue,” he said.
The analysis found premiums would be 30 to 40 per cent cheaper than traditional cost-shares. They would be shared depending on different levels.
Premiums for catastrophic loss coverage, such as a one-in-15-year loss, would be fully funded by governments.
“The premiums associated with what we call a medium risk loss, which is a one-in-five-year loss, would be shared by the farmer and government on a 50-50 basis. And the premium with what we call a normal loss, which is one-in-two-year event, would be fully funded by the farmer under this design,” Surgenor said.
Farmers could then tack on additional coverage for specific commodities.
The actual cost-share, however, would depend on federal and provincial negotiations.
“The idea is to rebalance government supports towards disasters and that all farms have the same probability of triggering under the system,” he said.
The additional cost of insuring market price risk is made up from the savings in the whole farm design.
Surgenor said this type of program would be more timely and predictable because it doesn’t use historical revenue and isn’t tied to the tax system.
The study on the cow-calf and feedlot sectors was done with the Alberta Cattle Feeders Association and used March, April and June calving periods. For cow-calf producers, the program would use the number of calves born multiplied by average daily gain, using regional aggregate data, while feedlot coverage would be based on the type of animal, average daily gain and time on feed.
Surgenor said coverage levels for both were similar to Livestock Price Insurance but would also have a premium cost-share. The net premium costs could be about 60 per cent cheaper than the existing LPI program, he said, although the gross cost could be about 15 per cent higher.
He also said both cattle products would have to start out with basic coverage because there isn’t the 60-year history available like there is for the crops sector.
Source - https://www.producer.com
