Safety Nets

[charliep]

Looking for comments on current direction of Provincial/Federal Safety nets for Canadian farmers.

What got my thinking going is the federal backing of initial payments. In my involvement with safety net discussions, I have never heard this mentioned once.

What is changing is the new enhanced NISA and what is the impact on your business? How knowledgeable are farmers of these proposals? Are you comfortable with them?

An interesting note is that many of the federal provincial safety net funding aggreements are coming to an end this March. The federal government is pushing ahead hard with their agenda.

Thoughts?

[almoy]

I haven't heard very much on what they are proposing for safety nets. I was told that all there would be is Cop Insurance and a watered down version of Nisa. After 2 years of drought I can't wait to see what we will be guaranteed from Crop insurance and at what price !!

[TOM4CWB]

Charlie;

I would be happy to lose the feds initial payment gar. if we got market accurate transparent cash pricing, as an option, avaliable after harvest is in the bin.

Pools contain real risk... therefore poolers should pay the price for the option they have chosen.

Why should PPO sellers be the only ones paying the bill for sloppy CWB risk management?

[Braveheart]

Charlie, when the federal gov't talks about its' committment to agriculture, it mentions the interest free cash advance program (now spring as well as fall), crop insurance, NISA, and of course whichever version of disaster program is currently being conjured, eg.AIDA/CFIP. I have never heard mention of the backing of initial prices for the CWB mentioned.

The current direction of safety nets seems to be directionless. CFIP is falling far short of meeting anyone's definition of a safety net, unless you own an ag accounting firm. Disasters below 70% of an average margin with margin calculations using land rent, machinery leases, and not at arms length labour as INELIGIBLE EXPENSES is almost cruel and unusual punishment. CFIP is too slow to arrive and more than anything can't be considered "bankable", meaning you just can't fill out the application and expect your payment. It's not that simple.

NISA is a good program, but not well understood by a large portion of farmers. Many have difficulty triggering a payout because of how they have their trigger set. Many opt to not take funds that are triggered because NISA represents the only savings some farmers have and they are reluctant to cash it in. NISA is not considered a current asset by lending institutions. I think an effective safety net should be able to be considered a current asset. By the way, making $600 million available to producers as "transitional funding", but only dumped into NISA is a joke.

The feds think that the APC along with the current style of safety net programs is enough to revitalize Canadian agriculture. They're wrong. Disaster programs and crop insurance start to run out on farms that have been dried out for a few years. NISA won't work for a beginning farmer or someone who has had to voluntarily withdrawn from NISA because the funds were sorely needed. Some of the provinces won't ante up their expected share of "forced bilateral" safety net funding. Some new thought is needed.

There is a need to simplify the safety net approach. Many farmers don't understand the current crop of programs and need accountants to apply for them.

Braveheart

[wd9]

As far as developments go for CFIP like programs in regards to committment to agriculture, these programs are gone. NISA and crop insurance are the new order. Stabilization is the key word, not support. I never like putting words in their mouth but the federal government is not interested and will no longer support non viable farms.

[TOM4CWB]

WD9;

My understanding of the new NISA is that the disaster part of the program is the part.

A new margin will be created for NISA, combining NISA and the disaster program margins, the 15% on top for NISA stabilisation, the 85% below as the support level.

Government contributions to NISA will only be sent to a farmer, if they are triggered out, no savings allowed of the matching gov. contributions.

Programs atributes are that there should be much less paperwork, easer to figure out what will be paid to a farmer.

The program will be done on modified accrual accounting, cash accounting for income tax still allowed, then adjustments made to Income tax cash statements to accurual.

Enhanced Crop Insurance is in the works, it will be interesting what comes out of today's AG Ministers MTG!

[TOM4CWB]

WD9;

Beside NISA I had a " " plus... it won't transfer into the thread...

So it is the plus part that is the support below 85% of the NISA plus margin, with the government putting in any amount that is not avaliable as a positive balance in the NISA plus account of the farmer.

The bottom 85% support of the margin average over the past years is the plus "disaster component" part of the program.

It is very likely that NISA plus and Crop Insurance will be linked... can't have one without the other!


I know the devil is in the details, but this NEW generation of programs could well generate better income support than the present generation!

[Braveheart]

Tom, I have heard the same proposed changes to Canada's safety nets. The additional info I've heard is that the new program will be whole farm. Also, there is a strong chance that any farm that does not have an environmental plan won't be eligible for this program.

[Braveheart]

Freud says I really meant an environ "mental" plan.

[charliep]

Thanks for comments. I am spending time listening to what the level of farm manager understanding of the new program proposals is. I am involved in some of these processes as well so am looking for feed back.

[charliep]

TOM43CWB could you give us an example of how the new Nisa would work using some possible figures from a farming operation. Thank you.

[Kasro]

If I were to design a safety net system , this is what it would look like.

1. Establish an open market for wheat, durum and barley.

2. Privatize crop insurance. Provide incentives for farmers to form their own syndicates to self-insure. This could be in the form of tax incentives, or if the gov't is still willing to contribute cash, it should allow farmers a choice of insurance programs, including private plans, and self-insurance plans. In combination with an open market in all crops, inventive and novel production and price insurance products will emerge.

3. NISA needs three fixes. First, tax should be levied on withdrawals instead of deposits. This would encourage more participation, and farmers would use it more for income stabilization. The fear of being taxed at a higher bracket close to retirement would have farmers withdrawing while still actively farming, instead of when they are downsizing or exiting. Second, remove the 'triggers'. Farmers will manage their deposits and withdrawals according to their financial needs. Third, remove the ENS cap. The program is outdated due to the larger farm size of today, so for medium to larger farms, it is really too insignificant to be a real income stabilizer. Gov't should stop biasing their programs to small farms.

[TOM4CWB]

Kernel;

I will see next week if I can get sample farm info.

Jack Howell had a discussion on the Call of the Land today... @http://www.agric.gov.ab.ca/ministry/call_land/02_338.html

Provincial Ministers of Agriculture and the Federal Agriculture Minister are meeting in Ottawa and one of their main subjects of discussion is the Agricultural Policy Framework – the proposed new way of doing business when it comes to risk management on the farm or farm safety nets if you like.

While nothing is set in stone as yet, a paper has been written on the issue and is posted on Agriculture Canada's website. We've been looking that paper over and thought we'd pass along some of what's in it. That way, you can get a feel for what's being proposed.

Let's start with NISA – the Net Income Stabilization Account. The proposals call for producer contributions to be matched by governments as they are withdrawn, rather than when they are deposited. Upon retirement, producers would only be able to withdraw their own contributions. Bonus interest payments would be eliminated. These changes try to address the concern that many farmers are using NISA as a pension plan, rather than a farm safety net.

There's other facets of NISA that would also change. Producer contributions would be based on a percentage of eligible net sales and a percentage of margin. There would be income stabilization and disaster assistance aspects to triggering a NISA payment, all based on a modified accrual accounting system.

An investment trigger is also being considered for NISA, whereby producers could withdraw NISA funds to make specific investments to improve long term profitability. As for contributions, the feds are proposing to increase contribution levels to NISA and to let farmers carry forward unused contributions.

Crop Insurance is getting an overhaul too. Remember this is a federal provincial program. There's a proposal for different levels of government support depending upon the type of loss. Full government funding is proposed to cover waterfowl and wildlife crop damage and infrequent catastrophic loss situations.

For "comprehensive production loss protection", 60 percent government cost sharing is proposed. The federal government, together with the provinces is proposing to cover only 33 percent of premium costs for spot loss and split risk options such as variety, field insurance, and so on.

A wider range of programming options are being discussed for crop insurance. What is called a "crop basket" option might be added as a way to insure total crop returns at less cost than crop-specific insurance.

The feds also want to develop a linkage between production insurance and the new NISA program to promote farmers being involved in both.

Cash advances get a look in this paper too. It's proposed that the cash advance programs be extended for five years, concurrent with the new Agriculture Policy Framework.

Now if adopted, change won't happen all at once. The government says key program changes would be introduced over time to ensure broad understanding. For 2003, it is proposed that producers continue to provide the same tax information they now provide for NISA. Producers would be asked to provide accrual information for that year only if necessary to calculate a disaster entitlement. This would mean providing the same data now collected under the Canadian Farm Income Program or CFIP as it's referred to.

As far as crop insurance is concerned, the feds say the same products would be available for the 2003 crop year, with new products gradually added by 2005.

Now as we said there's lots of discussion ahead on this. Several provinces haven't yet officially signed on to this Agriculture Policy Framework. Alberta is one of those who has. We'll see what comes out of the ministerial discussions this week.