As Growing Forward 2 winds down over the next couple years, decisions need to be made on whether programs such as AgriStability and AgriInvest are modified or replaced.
To their credit, a number of farm organizations are seeking feedback on the farm income safety nets. For instance, the Agricultural Producers Association of Saskatchewan has a producer survey on its website.
Unfortunately, as producers, we typically think about how the programs works for us and how much money we have received from them rather than looking at what programs are meant to accomplish.
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Crop insurance’s ability to help producers has its limitations
Farmers enrolled in crop insurance can do just as well financially when they have a horrible crop or no crop at all, compared to when they have a below average crop
AgriInvest provides free money every year with few strings attached. It’s no doubt extremely popular, but what function does it serve?
In theory, it enables producers to set some money aside to deal with minor income shortfalls. In practice, the larger your net eligible sales (up to the cap), the more money you get. And you can spend the money chasing land prices higher if you want.
The least popular program could be AgriStability. Before the payout criteria was scaled back a few years ago, it was a ticking time bomb for federal and provincial governments. The insured reference margins were getting so high that even a modest downturn was going to cost governments a pile of money.
With the program changes, there’s an ongoing debate over the value to producers. It has never been bankable because it’s just too complicated and discriminates against producers with multiple enterprises that have less income variability. The cost for producers to stay enrolled isn’t large, but many have dropped out.
If the next set of business risk management programs does not include AgriStability, farm accountants are likely to mourn its loss more than farmers.
The Advance Payments Program serves a useful purpose and now covers a wider range of commodities. Someday, when interest rates rise, it will be even more important.
AgriInsurance, specifically crop insurance, is a mainstay of support for the grain sector. However, it is primarily production insurance, and support levels decline dramatically when grain prices drop.
Producers complain about how unseeded acreage is handled and how the yield guarantees are too low, but most acknowledge that it’s important to have.
It’s great for producers to have programs that guarantee they will earn a profit, but that isn’t a reasonable objective. Government programs shouldn’t mitigate all the risk.
While it is reasonable for programs to support the industry through production and/or price disasters, it’s difficult to design programs that will cope with a series of bad years.
At what point does income support become an ongoing income transfer? At what point do income safety nets hinder adaptation and business restructuring?
Should programs encourage young producers? It sounds like a worthy objective, but many young farmers receive a considerable amount of help from their families while others do not.
What roles can and should private insurance programs like Global Ag Risk Solutions play?
Should programs be designed to achieve public policy objectives? For instance, should producers be denied insurance for seeding canola on canola or lentils on lentils?
We like to argue that we’re world class and big business, but we also like our hand-outs, arguing that agriculture is a special case.
In the current fiscal environment, it would be best to have clear program objectives because governments will be looking for ways to cut spending.
