The reference margin limit has been removed from AgriStability for 2021 and 2022. This change will have a significant impact for many producers and is retroactive to the 2020 program year. The deadline for 2021 program enrolment has also been extended to June 30 to give producers more time to enrol in the program.
What does this mean for producers?
This change makes AgriStability less complex, and more responsive to all types of farming operations. We anticipate that approximately half of participants will benefit from the change over time and their coverage could be increased by up to 30 per cent.
Before this change, triggering a payout required a significant drop in a producer’s margin; however, with the removal of the reference margin limit, a 30 per cent drop in the current year may trigger a payout. Sectors most likely to benefit from the removal of limiting include livestock producers who grow their own feed, organic and commercial crop and forage producers, members of the apiary industry and mixed farmers.
Other enhancements to AgriStability
Beginning in 2020, producers are no longer penalized for proactively managing their price risk by using private insurance. Private insurance payments are not included in the current year, but are included in the farm’s history, raising the coverage level. This change includes Livestock Price Insurance and AFSC Straight Hail Insurance.
At AFSC, we’ve also improved our clients’ experience with AgriStability. Clients can chat with staff in real time to access support or assistance, as well as submit forms through AFSC Connect, enabling them to file their information at their convenience. Additionally, improvements to file turnaround times have been implemented to streamline processing times and get money back in producer’s pockets as soon as possible. Each farm is different, and one of AgriStability program’s strengths is its individualized nature. If you want to understand how these changes might apply to you, please reach out to our team members today and find out how your farm could benefit from AgriStability.
AgriStability at work: Producer example
Let’s talk about an Alberta producer and how the changes will apply to their farm. They have a mixed farm, mostly crop and some cattle. It is a good-sized farm, with allowable farm income, including inventory value, averaging about $1 million. Because they grow most of their own feed, their allowable costs are relatively low, averaging $400,000. This means that they have a margin of $600,000 because we have subtracted the expenses from the income.
From the introduction of the adjusted reference margin limit in 2018, this farm would have had the reference margin limited $420,000, and if you think about falling below this amount to trigger a payment you would have to have an income loss of 31 per cent. But with the new changes, which are retroactive to 2020, there is no further limiting of the reference margin, so this producer’s margin will be $600,000 requiring an income drop of 18 per cent.
So finally, what does this all look like?
Let’s say this farm’s income and inventory value in 2020 fell from $1 million to $600,000 due to price and production drop. However, their 2020 expenses stayed the same at $400,000. Added together, we end up with the 2020 margin of $200,000.
Total margin= Income – expenses
Total margin= $600,000 – $400,000 = $200,000