Did you manage to get away for a winter vacation? We did. In fact, this is being written from sunny Mexico. Unfortunately, we have to go back home to the cold later today.
You meet a lot of Canadians at winter vacation spots, and a lot of them are farmers, particularly grain producers. Back home, you see many people at farm meetings sporting a vacation tan.
I don’t feel guilty about having the financial resources to afford a short winter getaway, but I do feel a bit guilty about the government support I receive as a farmer that other Canadians do not.
Even in good times, there are always some farm businesses struggling, and it’s important to have farm safety nets that mitigate the downside risk. However, we also need to recognize that times have changed.
For generations, farmers were relatively poor, earning less on average than their city cousins. Any good times were relatively short lived, and the farm economy seemed to lurch from one financial crisis to the next. Farm safety nets weren’t just about reducing risk; they were an intentional form of income transfer.
In the grain sector, economics changed abruptly about 10 years ago. Farm incomes improved dramatically and with escalating land values, net farm worth has soared.
While not every farmer is rich, and high asset values don’t always translate into high net income levels, wealth has been generated over the past decade. And yet this hasn’t shattered the notion that for some reason farmers need and deserve income transfer programs.
If you have net eligible sales of $500,000 a year, and it doesn’t take a very big farm to do that anymore, AgriInvest sends you a cheque for $5,000 each year. Sure, you need to put it in a financial institution along with a matching contribution, but it’s still your money to use at any time.
If eligible net sales are $1 million or more, you get the maximum AgriInvest contribution of $10,000 a year.
You get this payment whether the farm is struggling or highly profitable. It’s meant to help buffer income shortfalls, but you can use the money for a winter vacation. Or you can store it up to outbid your neighbour on the next parcel of land that comes up for sale.
Free money is of course popular, but is it a proper use of taxpayer money?
I would argue that crop insurance is a good program. Some producers don’t enrol, believing they are better off to self-insure, but three-quarters or more of cropland is insured every year to guard against production shortfalls.
Governments share the premium cost and pay for all the administration. For sake of argument, let’s assume the cost to the federal and provincial governments runs about $7 an acre over most of the prairie region.
Unlike AgriInvest, there’s no cap on how much crop insurance support a farm can receive. Using the assumption above, a 2,000-acre farm receives about $14,000 in annual support to lower premiums and pay for administration, while a 10,000 acre farm receives $70,000 and a 20,000 acre farm receives $140,000.
Is it time to consider some sort of cap on the support received?
Don’t get me wrong. I take all the support offered by business risk management programs, and I believe programs are important. However, we aren’t all poor peasants anymore. Government investment in agriculture should be less about income transfer and more about moving the industry forward.