Who Will Participate in the

New BRM Program ?

Rakhal Sarker, Shashini Ratnasena and Farzana Enam RasnaDepartment of Food, Agricultural & Resource Economics

University of Guelph

October 26, 2012

Introduction• Canada has a long tradition of Safety Net Programs

– Originally designed to protect the income of efficient producers• The design & richness of the programs changed through time to

accommodate changing needs of the agri-food sector– ASA (1958) ASA(1975) FIPA(1991) GRIP &

NISA– APF CAIS– GF1 BRM- AgriStability– GF2 BRM2-AgriStability (R)

• Richness of the program

• More producers participate, the higher the sample size for relevant data 2

Perceived benefits to producers

Participation rate

Key Features: Current vs New BRM Programs

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0%Negative Margin

Tier 3

Tier 1100%

85%

70%

Tier 2

Figure 1(a): AgriStability Payment Tiers 2008-2012

Consider two Farms with very different sizes growing Grain & Oilseed in Ontario. Reference Margin

How Does the Current AgriStability Program Work?

Farm 1 Farm 2

Ref. Margin $50,000.00 $1,000,000.00

Current Margin $5,000.00 $100,000.00

Total Loss $45,000.00 $900,000.00

Loss in Tier 3 $30,000.00 $600,000.00

Loss in Tier 2 $7,500.00 $150,000.00

Loss covered under AgriInvest $7,500.00 $150,000.00

Government Share of AgriStability Payment:

Tier 3 $24,000.00 $480,000.00

Tier 2 $5,250.00 $105,000.00

Total Payments $29,250.00 $585,000.00

No CoverageReplaced by AgriInvest

 

80%

  60%

70%

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0%Negative Margin

100%

70%

Replaced by AgriInvest (50:50 cost share) & other

private risk mgt. tools

30%Producer

share

AgriStability 70%

Government share

30%Producer

share 

70% Government

share

Cost share as current

year margin

declines below

reference margin

Producer’s Reference M

argin

Farm 1 Farm 2

Ref. Margin $50,000.00 $1,000,000.00

Current Margin $5,000.00 $100,000.00

Total Loss $45,000.00 $900,000.00

Loss covered under AgriInvest

$15,000.00 $300,000.00

Loss covered under

AgriStability

$30,000.00 $600,000.00

Government Share of AgriStability Payment:

Total Payments $21,000.00 $420,000.00

 

Consider two Farms with very different sizes growing Grain & Oilseed in Ontario.

Figure 1(b): Cost sharing under AgriStability in Growing Forward agreement 2013-2018

How Will the New AgriStability Program Work?

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ResultsNumber of Farms Qualified/Expected to Qualify to Receive

AgriStability Payments under the Current & New BRM Program Structures

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Results• In aggregate, fewer farms will qualify for the new

BRM program payments in Ontario. The rate of decline, however, will vary across sectors.– The largest drop is expected in the grain & oilseeds

sector (37.3%)– The second largest in beef (14%)– The smallest drop will be in Hog sector (13%)

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Results- Grain & Oilseed FarmsFigure 2: The Eligibility Rate of Receiving AgriStability Payments under

Current & New BRM Program Structures

Small LargeMedium

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Results: Farms’ Participation in Current & New BRM Programs-

Grain & Oilseed Sector

• Considering the size categories, the largest adjustment will take place in hobby, small, large & very large grain & oilseed producers

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Results- Beef FarmsFigure 3: The Eligibility Rate of Receiving AgriStability Payments under

Current & New BRM Program Structures

Small LargeMedium

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Results: Farms’ Participation in Current & New BRM Programs-

Beef Sector

• Most of the drops will take place in small sized farms

• The medium & large sized farms will be relatively less affected by BRM2

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Results- Hog FarmsFigure 4: The Eligibility Rate of Receiving AgriStability Payments under

Current & New BRM Program Structures

Small LargeMedium

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Results: Farms’ Participation in Current & New BRM Programs-

Hog Sector

• Since hobby farms practically disappeared from the hog sector, the new BRM program will not have any impact on these farms

• All other hog farms are likely to be less affected by the new BRM program

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Concluding Remarks

• Fewer farms will participate in the new BRM program

• The extent of drop varies widely across sectors• Grain & oilseeds sector will be affected more than

beef or hog sectors in Ontario– Hobby, small, large & very large farms will be more

influenced than the mid-sized farms– Beef & hog sectors, the drops will be small among mid-sized and large farms

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Concluding Remarks

• Only a few large farms will participate• Will limit agencies’ ability to receive readily available

data from the growing & increasingly more relevant segment of Ontario agriculture

“Past is not always a good predictor of the future”

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THANK YOU

Happy to answer any questions

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