Is AgriStability worth it? | Farmtario

Is AgriStability actually a good program? Should farmers participate if given the opportunity to do so? 

According to MNP, the answers are yes and maybe.

AgriStability may not be a good fit for all operations. Historical baggage and a misunderstanding of how the program works have contributed to apprehension among producers who may otherwise benefit from participating. 

Why it matters: The current format of Canada’s AgriStability program is beneficial to a wide range of producers, though not necessarily all. Misconceptions about the program’s workings keep some producers from participating when doing so would bring benefits. 

Overall, the program is considered valuable and a good foundation for wider business risk management plans. It is also up for revision during the next round of negotiations for the federal-provincial Agriculture Policy Framework.

AgriStability margins consist of three ingredients: production and price (revenue) minus direct input costs. Presenting during the 2021 Canadian Farm Writers Federation conference, Steve Funk, director of agriculture risk management resources for MNP, said program payments are driven by production and/or price drops on the revenue side and allowable cost increases on the expense side. 

People often misconstrue margin drops as being equivalent to payment drivers, he said.

All farms registered for AgriStability qualify for payments once a margin drop of 30 per cent is experienced. If a farm makes $100 and has $70 in expenses, for example, the margin is $30. A $9 drop (30 per cent of that $30) in margin is required to trigger a payment. 

“The key takeaway here is that $9 is only nine per cent of the revenue. So, for this farm, a $9 revenue drop equates to a 30 per cent margin drop,” said Funk.

Often the revenue drop that triggers payments is much less than 30 per cent. For grain and oilseed producers, for example, the required revenue reductions vary between 13.5 and 19.5 per cent. For feedlots, it’s less than 10 per cent. 

Payment can be driven by prices going down or up, or production going down – any combination, as long as it reaches the required drop level. 

“It’s important to know the composition of your margin and how sensitive it is to movement,” said Funk.

The removal of reference margin limits, a characteristic that caused revenue trigger points to rise in some cases, as well as the possibility of doubling up with private insurance coverage have also made AgriStability worthwhile to more producers. 

Reference margin limits were introduced in 2013, said Funk. There was also an overall doubling of the percentage required to trigger payment – 30 per cent from 15 per cent. Though now defunct, the legacy of both policies contributed to the perception that AgriStability leaves much to be desired. They may also have contributed to lower participation rates.

Stuart Person, senior vice-president of MNP’s agricultural services department, believes outreach could resolve the expectation that payment should be triggered just because revenue goes down. 

“I think there’s still opportunity for negative dialogue to be changed if there were more educational opportunities on how these programs work. There’s a disconnect between what the producer is expecting should happen versus what is happening.”

What could happen to AgriStability?

With 2022 as the last year of the current AgriStability framework, under the Canadian Agricultural Partnership, Steve Funk, director of agriculture risk management resources for MNP, says there are three possibilities for the program:

• The program will continue as is, with small tweaks such as allowing provinces greater flexibility in participation.
• A substantial revamp could occur in the form of a more general program. AgriStability would thus be less customizable to individual farms.
• AgriStability is replaced by another insurance program, such as one with varying premiums and coverage levels. 

Though unable to comment on which option he believes is most likely, Funk says all three are being considered. When asked why support for AgriStability is not universal among the provinces, he suggested issues around budget and liability might be the cause. Some provinces might be wary that participation rates would exceed the funds available for the program.