Double whammy for farmers

Wednesday, November 25, 2015

by SUSAN MANN

A new study indicates gross Ontario government payments to famers for farm support programs dropped by 66 per cent while producer premium payments to the programs rose nearly 50 per cent over the past decade.

Conducted by Guelph-based Harry Cummings and Associates Inc., the study identified a more than $500 million drop in provincial government payments to farmers from programs that include not only the Ontario risk management program but also production insurance and the federal/provincial risk management programs AgriStability and AgriInvest.

It has also found that Ontario’s risk management program helps farmers grow Ontario’s economy and protects farm and agri-food jobs during times of market volatility. The program with its $100 million cap helps protect farmers against risks beyond their control, such as fluctuating costs and market prices.

A spokesperson at the Ontario Ministry of Agriculture, Food and Rural Affairs did not provide a response concerning the shift in numbers in time for the deadline of this posting.

UPDATE: 6:20 p.m. Thurs. Nov. 26, 2015 In an email late Thursday afternoon, OMAFRA spokesperson Bianca Jamieson says payments have dropped “primarily because prices for grain and oilseeds, cattle and hogs have been strong in the recent short term, and crop yields have been strong and rising.”

She notes that the farm business risk programs in the province are in place to “mitigate risks and provide assistance during difficult periods.”

In 2014, the province’s farm cash Ontario Farm Cash Receipts had increased to $12.5 billion, a 41 per cent increase from 2005 receipts, and she says total net income in the province has been more than $1 billion since 2011. “This means that programs designed to compensate producers due to low prices or decreased production have not been generating payments at historical levels in recent years.”

Jamieson adds that when the prices of farm products are high, prices of premiums will follow suit because of higher potential liability. “That is why PI (production insurance) premiums have increased over this period, for both producers and government,” she writes. END OF UPDATE

The study was recently commissioned by the Ontario Agriculture Sustainability Coalition because the Ontario government is reviewing the risk management program, says Bob Gordanier, coalition chair and president of Beef Farmers of Ontario. August is the province’s target for completing the review.

“We thought we would do a review of our own just to have something to compare” the province’s review to, Gordanier says.

Unlike other farm business support programs the Ontario risk management program is not funded by the federal government. It serves the coalition’s five commodities (beef, pork, grains and oilseeds, sheep and veal) and edible horticulture.

The province’s annual commitment to the program for an industry the size of Ontario’s agricultural sector represents a “relatively small investment,” says the study called Measuring the Economic Impacts of the Ontario Risk Management Program. (More than 200 producers and commodity representatives contributed to the assessment of the risk management program through surveys, interviews, focus groups and case studies.)

“In each year of the program, gross payments triggered by the program . . . have been over or near the $100 million (cap),” the study says.

The study notes that grains and oilseeds representatives consulted said in the case of a major downturn in their prices, the program would need $175 million to $200 million “to be safe in such an environment.”

The coalition wants the cap raised by $25 million annually over the next three years to $175 million.

Gordanier says the coalition hasn’t ruled out asking the new federal government to contribute funding but the coalition hasn’t discussed that option yet. “It’s certainly a possibility,” he says. The previous federal government rejected requests to fund the program.

The study found that in 2005 Ontario’s share of gross payments to farmers for support programs was more than $800 million. In 2014, that amount decreased to about $275 million.

From 2009 to 2014, AgriStability and AgriInvest accounted for the highest percentage of net Ontario government payments, a combined average of 71.6 per cent annually.

On the premium side, from 2005 to 2008 the average total producer premiums in Ontario were $48.4 million per year. From 2009 to 2014, farmers’ average total premiums had jumped to $71.2 million per year, an increase of $22.8 million or 47 per cent.

One reason government payments went down is due to “ongoing pressure from the international community to reduce government support to agriculture because of the perception of subsidy,” says Cummings, who is also a professor in the University of Guelph’s school of rural planning and development.

It’s considered to be unfair competition if one jurisdiction subsidizes its agricultural sector and another one doesn’t, he explains.

In the study, Cummings says he included the numbers showing the drop in government payments to farmers during the past 10 years to show “why the (Ontario) risk management program is a good investment.”

Other findings specifically concerning the risk management program include:

• 62 per cent of survey participants said if the program was unavailable they would not have kept all of their employees, and 36 per cent said they might have downsized or left the industry. Twenty-four per cent said they would have forgone doing maintenance, expansion and farm improvements.
• Without the program, 3,250 jobs would have been lost from the Ontario economy with even a modest contraction in economic activity and employment.
• Over the past four years, every dollar in payments generated $2.24 in positive economic activity.
• Ontario contributed an average of $59.5 million annually in net risk management payments to producers from the five OASC commodities from 2011 to 2014.
• Despite Ontario’s requests for the federal government to contribute a 60 per cent share of the program (as it does with other farm risk management programs), the federal government hasn’t done so. Ontario pays its 40 per cent share of the support payments.
• Between 55 per cent and 75 per cent of the eligible production in the province is covered under the program.
• Risk management program payments are used almost immediately to cover operational costs.

Farmers also value the program, the study notes. BF