Ont. cost-of-production program in jeopardy

Ontario’s unique Risk Management Program is in the crosshairs as finance minister Dwight Duncan prepares to introduce a budget aimed at trimming the province’s $16 billion deficit.

It is the country’s only cost-of-production-based farm support program outside supply management, funded by the province and farmers as a key 2011 provincial election promise to rural Ontario.

And it is under attack.

Former federal bureaucrat and senior bank economist Don Drummond, hired by premier Dalton McGuinty to design a road to fiscal health, has argued that the RMP should be reviewed because it supports farmers without forcing them to innovate.

The Ontario Federation of Agriculture insists it is a vital farm business risk management program that must be preserved in the budget.

Rookie Ontario agriculture minister Ted McMeekin sounds supportive but non-committal. It will not be his decision.

“It’s not our government’s intention to abandon our agri-industry,” he said. “Our government wants to help move forward and to set the table for that so any change to the existing RMP arrangement will be done in consultation and collaboration with the stakeholders.”

So does that mean he expects the impending provincial budget to undermine RMP funding?

McMeekin said nobody supports “a dysfunctional status quo, so where there are areas where we can make things better and ultimately more productive, we’ll come to that point by talking to each other,” he said.

“But on a straight-up level, it is not our intention to abandon risk management.”

RMP has been controversial since Ontario created it more than three years ago as a program that allows farmers to buy income insurance based in part on cost of production.

A succession of recent Ontario agriculture ministers have supported the program and argued that Ottawa should pay 60 percent of the cost under its “agriflexibility” program.

The federal Conservatives have refused, arguing COP-based support could trigger trade countervail challenges. It means the program has had just the Ontario 40 percent funding.

The OFA argued in late February that the provincial budget should “make strategic investments and practice good government,” which includes continuing to fund the RMP.

“As our members know, this program is vital to farm business management, not as an income support program as noted in the (Drummond) report, but rather as a tool that helps producers manage risks beyond their control like fluctuating costs and market prices,” said OFA president Mark Wales.

Drummond saw the program differently, as an “illustrative example” of the kind of business subsidy the province should be reconsidering.

“Programs like the RMP serve to support the status quo,” he wrote in his wide-ranging prescription for finding billions of dollars in savings.

“By focusing the program objective on maintenance, not improvement, it provides businesses with no incentive to increase efficiency or expand markets, the very activities necessary to increase incomes and jobs. ”

Drummond argued that as an alternative, the government should encourage investments in “equipment and process improvements that help farmers become more competitive and less sensitive to shifting costs.”

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