There was an important development at the meeting of Canada’s ministers of agriculture in Quebec City that didn’t receive a lot of initial attention. The commitment to better align business risk management programs (farm safety nets) with tools from the private sector represents a breakthrough.
Most producers probably don’t realize this, but if you receive a hail insurance payout or a payout from a private farm revenue support program, this counts as income reducing or eliminating any support that may come from AgriStability in a difficult year.
In effect, producers who spend their own money to protect their income can end up being penalized by reduced support from the government program.
This linkage makes sense when it comes to crop insurance programming, which is already subsidized by government. Crop insurance payments should be considered income for purposes of AgriStability or it would be akin to double dipping. Private insurance programs are a different kettle of fish.
Global Ag Risk Solutions is the main margin-based insurance program available to prairie grain producers, and GARS president Grant Kosior has been lobbying for ways to integrate private insurance with AgriStability and not have one offset the other. It appears federal and provincial governments are listening.
“The ministers discussed adjustments that could improve existing programs to address the needs of producers and complement private sector tools,” says the communique released at the conclusion of the Quebec City meeting. “The ministers directed officials to return with a set of proposed improvements to AgriStability for the ministers’ consideration before year end.”
In the backgrounder document, further information is provided. “They agreed to analyze how AgriStability treats private insurance payments and directed officials to encourage the development and use of complementary risk management tools.”
Some producers and producer groups will be disappointed that nothing is happening immediately, but changes in business risk management programs take time when there are so many governments involved.
Kosior is hopeful that changes will allow GARS to cover margin losses not covered by AgriStability, making both GARS and AgriStability much more attractive to producers. This would be open to any other private insurers wanting to become involved. Similar to the Advance Payments Program, multiple providers are allowed, as long as they meet the stringent requirements.
GARS covers a farm’s seed, fertilizer and chemical expenditures plus a chosen margin. Let’s say your seed, fertilizer and chemicals total $175 an acre and you chose a margin or $125 an acre. If your overall crop revenue drops below $300 an acre ($175 plus $125), GARS support kicks in.
The premium for this level of coverage varies from one producer to the next, but it’s often in the range of $20 to $25 an acre — a large upfront insurance payment.
If AgriStability and GARS could work together, the first 70 percent of a margin shortfall could still be covered by AgriStability with GARS picking up the 30 percent not otherwise covered. This would cut the GARS premium dramatically, making it more affordable for producers wanting this additional protection.
Producers would have access to more margin coverage at a more affordable price and it wouldn’t cost federal and provincial governments any additional money.
This won’t address all the shortfalls in AgriStability, but the approach has a lot of promise and makes a lot of sense.