CCA Reports: The critical need for better business risk management tools

Bob Lowe, president of the Canadian Cattlemen's Association, makes the case for AgriStability enhancements

This past year the COVID-19 pandemic presented the Canadian beef industry with significant challenges to cattle producers such as temporary processing plant shutdowns and extreme market volatility, but that was not all. As the pandemic went on and the year unfolded, many producers also faced weather-related challenges ranging from significant flooding in some regions to drought-like conditions in others. More than ever, this made it abundantly clear in our industry that access to well-designed and sufficiently funded business risk management (BRM) tools has never been more critical for cattle producers and the Canadian food system.

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Since 2018, federal and provincial governments have been conducting a comprehensive review of BRM programs. Throughout this time, CCA has continued to advocate for enhancements to the AgriStability program, including the removal of the reference margin limit (RML), increasing the $3 million payment cap, increasing the trigger to 85 per cent of the reference margin and increasing the program’s compensation rate. The good news is some of these enhancements have already been enacted in individual provinces for the current program year including British Columbia and Prince Edward Island. However, at the time of writing, other provinces have not yet moved on program changes.

CCA has placed a high emphasis on improving risk management programs for cattle producers. That’s why in order to bring more tangible evidence to federal and provincial governments that demonstrate why these program changes are needed, CCA partnered with the Alberta Cattle Feeders’ Association, Beef Farmers of Ontario and Maritime Beef Council to develop a number of AgriStability models on western and eastern Canadian operations to show the impact of reference margin limiting, trigger and compensation percentages and payment caps.

These models clearly demonstrated that the RML unfairly limits many cow-calf producers’ reference margins under the program. These farms require a much deeper, if not devastating, drop in production before the program provides support. As a result, equity, predictability and fairness would be improved for the cow-calf sector if the RML was removed. This is particularly important for young producers who are the future of Canadian agriculture. They need our support.

For larger feedlots, AgriStability payments cap out at $3 million very quickly, leaving a feedlot of this size exposed to potential losses in the tens of millions of dollars when facing depressed markets as experienced during the COVID-19 pandemic. The current $3 million cap on AgriStability payments has not changed in approximately 15 years. Yet, inflation has cumulatively increased by over 45 per cent and input costs have increased by over 70 per cent in the same timeframe. An increase to the compensation rate would also make the program more responsive to significant drops in farm margin and better support the viability of both cow-calf operations and feedlots. In short, our industry is long overdue for measurable improvements.

Last June, CCA had the opportunity to testify before the House of Commons Standing Committee on Agriculture and Agri-Food where we presented key recommendations on BRM programs that will improve equity and effectiveness for beef cattle producers. You may recall in November the Agriculture Committee released their BRM report. We were pleased to see a number of CCA’s recommendations on AgriStability, price insurance, Advance Payments Program and Livestock Tax Deferral adopted by the committee.

At the conclusion of the federal, provincial and territorial Ministers of Agriculture annual meeting at the end of November, Federal Minister Marie-Claude Bibeau announced that the government of Canada was prepared to make enhancements to the AgriStability program. In particular, the proposal tabled by Minister Bibeau to provinces and territories included the removal of the reference margin limit (RML) and an increase to the compensation rate from 70 per cent to 80 per cent. Both are intended to apply retroactively to the 2020 program year. Minister Bibeau also mentioned that the federal government is prepared to consider other program enhancement options.

This was welcome news. However, Minister Bibeau also acknowledged there was not national consensus among ministers to agree upon and implement the AgriStability proposal as the provinces needed additional time to reflect and respond. While the proposal did not include everything CCA lobbied for, CCA supports the proposed enhancements and believes they will significantly improve the program for cattle producers. We will continue to support our cattle producers and engage with federal and provincial governments alongside our provincial members to seek national agreement on the AgriStability proposal.

As we settle into the first quarter of 2021 and what this year may bring, I am hopeful that the provinces will announce their support of the proposed changes.

I ask you to stay the course and keep the conversation going on the need for a better AgriStability program within your own communities and channels of influence. I believe in the future of the Canadian beef cattle industry and our ability to showcase our high-quality products in Canada and grow opportunities to sell Canadian beef around the world.

About the author

Columnist

Bob Lowe is president of the Canadian Cattlemen’s Association.

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