Agri-stability devolves into agri-exasperation

In Canada's agriculture one of the never-ending issues that perplexes the industry revolves around risk management programs for producers.

To long-time observers of the agriculture business in Canada, one of the never-ending issues that perplexes the industry revolves around risk management programs for producers. If that sounds familiar it should, as we see this movie repeat itself about every five years. It’s been a guaranteed source of fodder for farm media writers for a couple of generations including your humble columnist. The words “risk management programs” are the most recent buzzwords so cherished by government politicians and bureaucrats, but in reality for the past 60 years it all has to do with the subsidization of producers affected by a market downturn or some other financial calamity. But therein lies the ambiguity – for some producers these subsidy programs can save their operations from financial disaster; for others, they just add to more profitability. It seems to boil down to the principle that financial support programs should serve all producers equally and fairly. That has always been all but impossible because of the sheer diversity of commodity production systems and the different management skills of the operators, but that hasn’t stopped bureaucrats from trying to design support programs that in the end either don’t work or work too well for either governments or producers. I expect that long process gave hundreds of bureaucrats long and lucrative careers in the civil service.

Recently, provincial and federal Ag ministers and their officials have been commenting on the need to review the AgriStability risk management program. The motive seems to be that the program is losing the participation of producers. That is the usual producer response when programs are no longer effective and to their advantage. However, governments tend to have a complete opposite perspective – they see a support program as a failure if it proves to be too popular with producers and too costly for the government. They then arbitrarily amend the program to reduce their costs, which invariably sees producers withdraw from participating in the program. The program is inevitably cancelled and government ministers then try to re-invent another type of support scheme. Some readers with long memories might recall earlier programs with names like GRIP, NISA, WGSP, TSP. Even AgriStability has been split into different versions. It seems each new generation of government program planners tend to ignore the fate of previous programs and naively invent new programs that are sure to repeat history. The only guaranteed carryover from previous federal support programs is that actual financial support will be disputed and much delayed. In reality farm support programs have increasingly become a benefit to lending institutions and accountants.

One of the goals of farm support programs is to have them become actuarially sound and based on insurance principles. Crop insurance programs are usually cited as the template, but as desirable as that might be, it only works when they are crop specific, or livestock type specific as with the Alberta and Western Livestock Insurance Programs. It’s all quite exasperating as there does not seem to be a way to stop history from repeating itself. Because some support programs do work – like crop and livestock production insurance – maybe the federal government should just make cash contributions to those programs. And get out of the whole farm and margin type financial support programs like AgriStability – but that would put a lot of bureaucrats out of work.

As you might expect, farm support programs have been studied to death, mostly by governments. Perhaps it’s time for a different approach – how about asking producer organizations to provide government with advice on what their members would like to see in support programs. The advice from producers might just identify a much simpler and more effective approach towards financial support. Alas, such advice is usually not that welcome, as government ag ministers tend to be captives of their senior bureaucrats who have a self-interest in seeing their advice prevail. Perhaps what the government should do to get the ball rolling is to initiate a thorough review of producer and commodity support and subsidy schemes that are in place in other countries like the USA and the EU. Those countries have schemes in place that are decades old and on the surface some seem to work. In tandem, governments should provide provincial producer groups with adequate funding to identify what their sectors would like and what they think would work. The process needs a new philosophy and it’s all in the hope that history will not continue to repeat itself again and again and again.