This is an excerpt from The Business Risk Management Funding Debate in Canada: Understanding the Broader Context, a paper written by Al Mussell of the George Morris Centre.
As we move toward the anticipated renewal of Growing Forward, the omnibus federal –provincial agreement on agricultural policy in 2013, the focus has moved to business risk management.
BRM already occupies $3.5 billion, or 67 percent of funds spent by the federal government on agriculture and about 73 percent of funds spent on agriculture by provinces.
With this level of commitment in direct payments to primary agriculture, one might expect stable and increasing farm incomes, or at least some correlation between government payments and net farm income.
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However, the data suggest something very different.
Conclusions
When more than 50 percent of Canadian farms have revenue of less than $100,000 and are not identified as commercial farm businesses, what is the Canadian public “buying” with additional BRM support?
History suggests that as program payments increase, these actually do little to mitigate the farm income downtrend. This is in part because the payments go to recipients for whom farming is not the primary focus, nor the primary source of income. The more likely direct effect of the payments is to inflate farm asset values and land rents. The bulk of farm products are supplied by larger commercial scale farms (greater than $250,000 in revenue) that are not so dependent on additional program payments to provide sustainable household incomes.
It is really only a small subset of primary agriculture that is responsible for the bulk of farm product production.
With this observation, can BRM policy be better segmented and targeted in engaging smaller farms as distinct from larger commercial operations?
Farmers, as rural landowners, provide important public services for the environment and rural countryside, including everything from wildlife habitat to wetlands and ground water protection, to maintenance of agrarian landscapes.
These resources are important to Canadians; enhancements to BRM programming that were tied to measures to protect these resources would make for a stronger public policy case for such funding
In fact, BRM programs may have a perverse effect on these programs because they only make payments when farms sell products, thereby likely encouraging farming where other land uses may have more social value.
Conceivably, two BRM-type program sets can be envisioned here.
One program set could address farms in need of support – typically smaller, not full-time enterprises, not the core of farm production, but contributors to environmental goods and services in rural Canada.
Support funding could be predicated on (and potentially justified by) the implementation of specific beneficial management practices that provide environmental goods and services.
A second program set could address the stabilization needs of the commercial farm segment – program payments contingent upon “loss”, with deductible provisions, not support.
The objectives should be to create stabilization protection for a commercial segment without the need to reduce funding for the public infrastructure that can “grow” value-added in the agri-food sector, and support the non-commercial farm segment in providing environmental goods and services at an appropriate level.
To date, governments and industry have been unwilling to consider a multiple program set, each with a defined farm structure target.
However, by failing to do so, they expose critical weaknesses in the public policy rationale for existing BRM programming, let alone increased funding for it.
And in this environment, no producer – large, small, profitable, or unprofitable – will turn down an increase in program payments, or even pause before asking.
To advance the broader agricultural policy discussion, and to give pause to the unrelenting request for BRM funds, the opportunity costs and tradeoffs implied need to be articulated and made transparent.
