LETTER FROM ONTARIO
The Canadian Agricultural Income Stabilization program: A better way but not a complete solution

Farm & Countryside Commentary by Elbert van Donkersgoed

Editor's NOTE

Elbert van Donkersgoed is the Strategic Policy Advisor of the Christian Farmers Federation of Ontario, Canada. CFFO is supported by 4,500 family farmers across the province of Ontario.

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December 1, 2003: A better way of providing financial support for farmers is imminent. The federal government has been pushing its new approach to business risk management for months. Most provinces have signed on to the Canadian Agricultural Income Stabilization program. Ontario's new provincial government may be just weeks from signing on - after one last push to tweak the details. The basic concepts are not likely to change - mainly because this is a well-designed program. "Well-designed" maybe a little overstated. The Canadian Agricultural Income Stabilization program is a good replacement for past programs, particularly the Net Income Stabilization Accounts.

The improvements are significant:

  • The program will trigger payments more often and for more farmers.
  • The use of declining production margins, as the trigger for payments, is more sensitive to need than gross margins.
  • Farmers can choose to contribute in proportion to the amount of risk for which they want stabilization.
  • Payments will be larger.

Most important, the new program is much better focused on need - more of the government assistance will go to those farmers whose losses stem from market and weather variability. It will differ substantially from NISA, the Net Income Stabilization Accounts, slated for phasing out. Governments contributed to those accounts based on farmers' net eligible sales. While the NISA program was an excellent way for farmers to build up a rainy-day reserve fund, not all farmers had rainy days -- while others had back-to-back disasters with no reserves left in their accounts.

Some of the technical details are cause for concern. Should negative margins be covered? Is farm labor an expense when calculating production margins? How do you value inventories of livestock and crops when market prices never stand still? Will there be a cap on payouts so that government funds will be targeted to family farms? Do farmers really have to tie up so much money in a savings account to establish their eligibility for the government support? These questions will likely lead to subsequent improvements in the new program.

There are two big issues that will cause all of us concern. One, this program is no match for the massive subsidies that the U.S. government allots its farmers. Two, it is not a solution when a whole farm sector gets hit with a disaster -- like closed borders as a result of one sick cow. It is only a stabilization program, designed to buffer the low points in price and weather cycles by getting farmers to set some money aside and matching it with government dollars.

The Canadian Agricultural Income Stabilization program is coming. It is a better way than previous programs. It is NOT a complete solution.

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The detailed CFFO policy statement on the Canadian Agricultural Income Stabilization Program can be found here.

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