Oil could put AgriInvest on chopping block

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Published: February 12, 2015

Don’t be surprised if AgriInvest is in the cross-hairs as federal and provincial governments look for cost savings to counterbalance low oil prices.

Maybe it won’t be cancelled in this budget cycle, but you have to imagine that it’s being evaluated.

Producers enjoy this little annual shot in the arm, happily leaving it to accumulate in an AgriInvest account or pulling it out to cover expenses. But if the program was eliminated, how much could we really complain?

A few years ago, the amount was cut from 1.5 percent of allowable net sales to one percent. This came in combination with significant changes to AgriStability. There were complaints, particularly about AgriStability, but it did little to erode support for prime minister Stephen Harper’s government among farmers and ranchers.

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The Harper government reinstated AgriInvest, modelled after the Net Income Stabilization Account, which had previously been discontinued.

Like NISA, AgriInvest requires an equal producer contribution to get the government money.

With NISA, the money had to stay in the account until a producer met certain income shortfall requirements. With AgriInvest, a producer can remove the money at any time.

As a result, the matching producer contribution is really cosmetic window dressing to make the program more palatable to taxpayers.

It is capped at $1.5 million in allowable net sales, which means producers receive up to $15,000 a year. Supply managed commodities — milk, poultry and eggs — are not eligible. The federal government pays 60 percent and the provinces and territories pay the other 40 percent.

Unlike AgriStability and crop insurance, AgriInvest money flows each year and isn’t linked to a production shortfall or commodity price drop. The idea is that producers can build up a fund to help themselves through tough times.

Grain producers have enjoyed some of their best returns ever over the past half dozen years. How do you defend payments of $5,000, $10,000 or $15,000 a year to farm operations that are already highly profitable?

Many producers look at their AgriInvest account as the down payment for their next land purchase. Do we really need extra cash heating up the land market? There are valid reasons for the maintenance of farm safety nets. It’s a cyclical business, and it’s reasonable to provide producers with some level of income protection when the weather and/or markets turn ugly. To meet those challenges, it’s important to have reliable programs in place rather than trying to build a new program around the latest disaster.

Crop insurance, for all its faults, is well-understood and predictable. Most grain producers are enrolled, but some remain out of the program, believing coverage levels are unrealistically low.

AgriStability is so complicated that producers don’t have a lot of faith in the program. However, most farm financial specialists advise their clients to continue participating, and most producers do so because the annual premiums are not onerous.

AgriInvest is free money, a no-brainer. It’s hard to imagine why an eligible producer wouldn’t participate. Even if you have to borrow to make the matching producer contribution, it will be an almost 100 percent return on your investment.

But while free money is always popular, is it really a good use of taxpayer money? When the next crisis hits the industry, will we lobby government less because we’ve been collecting AgriInvest payments over the years?

AgriInvest would appear to be a potential target as government budgets are trimmed.

About the author

Kevin Hursh

Kevin Hursh

Kevin Hursh is an agricultural commentator, journalist, agrologist and farmer. He owns and operates a farm near Cabri in southwest Saskatchewan growing a wide variety of crops.

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