Rimbey area cattle farmer sees big advantage in AgriStability changes
With the spring of the year 2018, Canada’s federal, provincial and territorial governments entered into a new five-year agreement, Canadian Agricultural Partnership (CAP), a framework to support country’s agricultural sector.
AgriStability is one program in a suite of Business Risk Management (BRM) tools in that framework which offers government support to help producers protect their whole farm operation and manage significant risks.
Under CAP, AgriStability has seen some changes aimed at ensuring a more equitable level of support to farmers participating in the program and one of the key changes affects Reference Margin Limit (RML) calculation.
Chris Simpson, a cow-calf producer in Rimbey area, finds the new formula for the RML most useful for his operation.
“As a cow-calf producer, we have seen some good reference margins being built over the last few years, but under the old rules, we were never able to utilize these increased reference margins as many of us were penalized with the RML treatment,” Simpson said.
The fourth generation of his family running their farm, Simpson says he farms with his wife and four children.
“We run about 200 commercial cows and also do some custom feeding,” he said.
“We have our calving split into two groups – two thirds in January/February and the rest in August/September.
“This allows for us to market a couple of times per year and hit some different markets, spreads out our cash flow, spreads out the workload and allows us to use some of the resources (bulls) more than once a year.”
Simpsons also grow their own feed, do their own haying and silaging with all family members actively contributing to the operation.
The improvement in the change
“As cow-calf producers we tend to have lower allowable expenses since we grow our own feed, keep our own replacement heifers, use our manure for fertilizer and graze our pastures for summer feed, all of which don’t result in any allowable expenses,” Simpson said.
“As a result, it causes our reference margins to be significantly reduced due to the old RML rules. With the change to the AgriStability and specifically the RML, we will now have a higher reference margin to work with.”
Simpson was referring to the new cap to RML, whereby the weight of allowable expenses in the calculation of benefits is reduced and producers subject to limiting are guaranteed at least 70 per cent of their calculated Reference Margin when RML is applied.
Alongside running a cattle operation, Simpson is also a partner with MNP, a consultancy and accounting firm, and he is well positioned to calculate the benefits that cattle producers like him can receive by joining the AgriStability program.
AgriStability allows me to manage the risk if I happen to have a wreck on the livestock production side.
He makes a vitally important point on the scope of the coverage AgriStability can bring to a cow-calf producer.
“As a livestock producer, I can take out hay/silage insurance and hail insurance to manage the risk on my feed supply; I can take out livestock price insurance on my calves to manage the risk on the markets, but that only works if I have the calves to insure, not in the event of a livestock disaster such as a calving wreck (scours, bull trouble, spring storms, disease, etc.).
“AgriStability allows me to manage the risk if I happen to have a wreck on the livestock production side.”
Overall, Simpson believes the changes to the AgriStability program under the CAP are quite encouraging for producers to continue with participating in the program or consider rejoining it.
“I look at AgriStability similar to fire insurance: I hope that my barn doesn’t ever burn down, but I still continue to take fire insurance on it just in case, and participating in AgriStability is no different.
“I would rather have my income come from the markets, and not have a payment from AgriStability, but if my allowable expenses increase, calf prices drop or I have a production decline (crop or livestock), I know that AgriStability is available to provide me with some coverage to continue farming.”
Producers wishing to join or rejoin the AgriStability program should enrol by April 30 of the program year they would like to participate in. Producers who would like to have more information about AgriStability should visit AFSC.ca or call 1.877.899.2372.