Balancing act of farm risk-management programs

It’s a long-standing and generally accepted principle of Canadian agricultural policy that farmers need taxpayers’ help countering the unpredictable and wildly fluctuating risks of their operating environment.

Farmers have some measure of control over production choices. Their management can increase yields and reduce reliance on expensive production aids such as fertilizer or pesticides. They can also build an allowance for the unexpected into their game plan, such as seeking off-farm income.

But that can only go so far.

Farmers can’t plan for weather, climate, twists and turns in crop prices, the effect of external forces such as U.S. President Donald Trump’s tantrums or becoming collateral damage in Canadian diplomatic spats with China.

In short, they can do everything by the book and still face catastrophic losses. If farmers struggle, the rural and industry economies they underpin struggle, too — not to mention the potential impacts for the nation’s food security.

But the questions of when, how and by how much to support primary agriculture are delicate. Farm family incomes tend to be higher than average family incomes in Canada, so any supports governments provide have to be justifiable in the eyes of taxpayers and rationalized against other demands on the public purse.

Giving farmers too much of the wrong kind of support could affect their production choices, with the long-term consequences of failing to discern between a short-term blip and a fundamental shift in the marketplace. That could make them more reliant on subsidies when the goal is to give them the tools to be resilient.

Key programs such as crop insurance (which offsets production losses) work in tandem with AgriStability (which offsets sharp downturns in revenue). Both require farmers to help pay the costs and include safeguards against poor management, such as diminishing coverage after repeated claims.

Farm policy is even more complicated in the Canadian context because responsibility for agriculture was split between federal and provincial governments when Canada became a country in 1867.

Shared jurisdiction is both a strength, because it routinely brings the regions with all their diversity to the same table, and a weakness, because it requires all those diverse interests to agree on a policy framework every five years or so.

It’s a long, plodding process of consultation, negotiation, collaboration and ultimately, compromise before these frameworks are finalized.

With the current $3.5 billion suite of programs nearing their sunset, the consultation process for the next framework, due to take force in 2028, was launched in January by Heath MacDonald, the federal minister of agriculture and agri-food.

(Anyone interested can submit their thoughts on how governments should support farmers through the department’s website before June 30.)

The process has already sparked healthy debate at farm meetings and among policy pundits about whether the “one-size-fits-all” approach to business risk-management programs is realistic for an industry where farm sizes now range from operations that have a few hundred acres serving premium-paying niche customers to the likes of the struggling Monette Farms operating several hundred thousand acres growing commodities for export markets.

While crop insurance programs have a participation rate of 75 per cent or higher among Canadian farmers, government data show fewer than half of those eligible participate in AgriStability.

The program’s critics claim it lacks predictability and takes too long to deliver payments. Small farmers find it hard to qualify for a payout, while large farmers say the $3 million cap on payments is too low.

Some have suggested farmers’ expectations of government risk-management programs are simply too high.

Canada lacks the population and tax base to match how European and American governments support their farmers. If anything, economic circumstances are pushing Canadian support levels more towards the approach in Australia and New Zealand, where farmers are expected to be largely self-reliant.

Another question surfacing is whether there is a bigger role for private insurance, which can be more agile developing products that meet specific needs.

The sector is already reeling from recent cuts announced for agricultural research. In times of limited government capacity, a core question on the table will be balancing between supporting the status quo and positioning farmers for the future.

Laura Rance-Unger is editor emeritus for Glacier FarmMedia. She can be reached at lrance@farmmedia.com