Funding cap on business risk management program forces payout of farmers' premiums
Tuesday, August 5, 2014
Low prices and high input costs for grain and livestock farmers resulted in the Ontario Agriculture Sustainability Coalition deciding to pay out premiums just one year after they went into the program fund
by SUSAN MANN
When the provincial government slapped the $100-million funding cap on the Ontario business risk management program starting last year, farm leaders scored a major coup during the program's redesign with an agreement to retain participating farmers' premiums in a separate fund.
The money, managed by the farm groups participating in the program, is to be used to bolster the government funding for business risk management in years when demand for program funding outstrips the $100 million capped amount. Money in the fund can also be kept year after year for use in other years. As of 2013, farmers' premiums began being retained in the fund.
But, just one year after premiums went into the fund, they went right back out the door again as Ontario Agriculture Sustainability Coalition representatives decided farmers needed a payout.
The Coalition is made up of leading non-supply-managed commodity groups – Grain Farmers of Ontario, Beef Farmers of Ontario, Ontario Pork, Ontario Sheep Marketing Agency and Ontario Veal. They, along with the edible horticulture sector, use the province's business risk management program that helps farmers mitigate risks beyond their control, such as fluctuating costs and market prices. Unlike the other five sectors, edible horticulture has a self-directed risk management (SDRM) program where, instead of paying premiums, farmers deposit money into an SDRM account that's matched by the Ontario government up to a maximum amount based on farm sales.
Dave Stewart, Beef Farmers of Ontario executive director, says that last year the demand for the Ontario business risk management program was higher than the $100 million in available provincial government funding and the premiums "were used up as well."
Agricorp spokesperson Stephanie Charest says by email that, for 2013, there were 1,856 customers enrolled in SDRM and $19.90 million was paid out as part of the SDRM portion of the risk management program. For the business risk management program for grains and oilseeds, there were 5,733 customers and $32.58 million was paid out and for livestock, there were 2,243 customers and $37.50 million was paid out.
Additional money for farmers was needed and that's where the premium fund comes in. Ryan Brown, Grain Farmers of Ontario vice-president of operations and chair of the Farmer's Risk Management Premium Fund board, says there was $21.7 million in the premium fund and 95 per cent of it was paid out this spring.
Livestock farmers got payments from the fund in April, while grains and oilseeds farmers received theirs in June, according to the Agricorp website. Agricorp issues the payments on behalf of the premium fund. Money from the fund went to farmers who received risk management payments for 2013.
Brown says commodity board leaders decided "they wanted to basically get as much of that money back in producers' hands as possible."
Several farm group spokespeople say they knew the premium fund would be needed soon after it was established. Jennifer MacTavish, general manager of Ontario Sheep, says that in 2012 and 2013 sheep prices dropped sharply in a short period of time.
The average price for an 80-pound lamb declined to $163 in 2013 from $170 in 2012 and $204.95 in 2011. At the same time as the price dropped, production costs rose.
Stewart of Beef Farmers says that, in the first part of 2013, there were low prices combined with high input costs and "there were feedlot losses probably for the first three quarters" of the year.
Despite the problematic nature of the risk management program's funding cap, farm leaders aren't criticizing the government for installing it. MacTavish says that "at the end of the day, the Liberal government is the government that gave us this program." BF