Last week at Manitoba Ag Days I got a chance inside a scrum to ask Gerry Ritz, the federal agriculture minister, about aid for hog farmers if there’s another hog crisis this year.
Yesterday I got a chance to talk with the Manitoba agriculture minister, Ron Kostyshyn, about the same thing.
The messages I heard from both ministers was: Sign up for risk management and safety net programs and rely on those, because we aren’t planning to bail-out farmers who face crisis because they weren’t well prepared for problems.
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That might seem cold-hearted and pitiless, but it’s probably right. I’d have trouble arguing against it, because it’s exactly what I’ve said in columns and in this blog. With all the risk management tools available, including those in various types of safety nets, farmers shouldn’t cry for aid if they haven’t at least used those to minimize their naked risk. That applies to all farmers, not just hog farmers. Hog profits are particularly volatile, with repeated crises since 1998, but crop and beef producers shouldn’t assume themselves to not be similarly exposed.
Most farmers do some hedging. Many use safety net programs. Those who have survived repeated doses of harsh market medicine have generally learned to be careful risk managers – or have been bounced out of the industry. Every crisis shakes a few unprepared people out of the industry, and while it’s a tragedy, it’s predictable.
There are risks that farmers can’t hedge for, and sometimes hedging instruments fail or actually increase a farmers’ risk. Weanling hog producers have more trouble than farrow-to-finish or feeder barn operators in trying to lock-in future margins. They were particularly hit by the crisis last year and most of them didn’t have any perfect way to protect themselves. Contracts that counterparties renege upon are another risk that’s hard to manage. Acts of God are another.
But there were ways for most to minimize the risk, and farmers that didn’t employ those means were some of those who shut their barns and left the industry.
I was pleased yesterday to hear Kostyshyn supporting the notion and structure of a soon-to-be-made-official hog industry insurance program, in which a (likely) $75 million line of credit will be used to cover hog margin losses in future downturns, to be repaid entirely by farmers on future sales of hogs at probably five dollars per head until any deficit is paid off. That, to me, sounds like an entirely good risk mitigation program: producer-funded, insurance-oriented and predictable.
All it needs is government sign-off on it and it should become reality soon. Kostyshyn wants the federal government to share in the underwriting risk, and that’s still being talked about.
So the message, from both left-wing and right-wing, provincial and federal ag ministers seems the same: plan on using risk management to protect yourself from future crises, because governments aren’t planning to ride to the rescue next time.
After they did virtually nothing to help the hog industry in the fall, do you have any illusions that they’ll be more receptive next time?
