It’s an old issue with a new twist: how should government safety net funds be allocated on the basis of need (targeted), or the same for all (entitlement)?

Canadian ministers of agriculture faced this issue a few years ago when Saskatchewan and Manitoba argued that they should continue to receive a disproportionately large share of federal safety net funds because of greater need. But in the absence of any data showing financial risks with farming were any higher, on average, in those provinces than elsewhere (in fact, results of a federal study showed this was not so), the federal government chose to allocate its base safety net funds across provinces in approximate proportion to net farm sales of non supply-managed commodities. (Saskatchewan and Manitoba do continue to get a disproportionately larger share of federal safety net funds through other ‘transition/adjustment’ programs – but the balance is much better than before.) The discussion, at the time, was not focused on commodity sectoral needs, but rather on provincial totals.

This decision at the national level has been matched by a steady shift in emphasis, in federal policy, toward one-size-fits-all safety net programs - with the chief ones being NISA and disaster assistance - and away from commodity-specific designs. Ottawa does target safety net dollars to the crop sectors through crop insurance and interest-free advance payment programs, but the bulk of federal funds go into NISA and disaster assistance. This has been the federal push ever since it dropped the national GRIP (Gross Revenue Insurance Program) after the 1994/95 crop year.

This shift in federal policy is one reason why grain and oilseed producers, who face foreign subsidy competition far greater than that experienced by other agricultural sectors, have suffered so grievously in recent years.

But now the issue is coming even closer to home with the Government of Ontario considering how to implement its new ‘made in Ontario’ approach to safety net program design. Will this design target taxpayer money to where it is most needed, or will it mimic the federal approach?

The equal-money-for-everyone advocates are focusing on NISA. Let’s increase government contributions to NISA for all farmers, they say, so that NISA contributions represent the dominant usage of public safety net funds. With increased NISA contributions, there will be money for those who need it, an opportunity to build up equity for those who don’t need the money now but might some time in the future (perhaps even after retirement), and equal support even for those sectors whose income fluctuations are reduced by production controls and price contracts. The rationale is that, by building everyone’s NISA account up to a sufficient level, there will be adequate NISA-account reserves when the crises occur.

This is a distinct departure from the initial concept of NISA, in which NISA was considered to be a complement to GRIP and other more targeted support programs.

The argument is also made that by providing the same programs and financial assistance for every sector, there will be less risk of trade action for those heavily dependent on exports of farm produce to the United States.

The view supported by OCPA and other grain and oilseed groups is that, while NISA should function as originally intended, the bulk of public safety net funds (of which there are rarely enough) should be most concentrated in areas of need.

Market Revenue Insurance - Ontario’s version of the once national GRIP - is a prime example of targeted support. It was created specifically to help grain and oilseed farmers survive and compete in the face of huge U.S. and EU subsidy programs targeted to grain and oilseed farmers in those countries. That need existed when Market Revenue Insurance and GRIP were created in 1991, and is just as great today.

The U.S. Department of Agriculture reported in late 2000 that it had tripled its direct payments to farmers since 1997, with 95% of total U.S. payments going to grain and oilseed farmers. OECD data on producer subsidy equivalents (a measure of the percentage of producer income provided by government programs) show the same pattern. The latest (1999) ‘PSE’ calculations (a general measure of the percentage of producer income provided by governments) for Canadian grains and oilseeds are generally in the range of 10-19% - substantially lower than for the United States (25-46%). Yet across all Canadian farm commodities, the imbalance between Canada and the U.S. is not as dominant, an average PSE of 20% for Canada versus 24% in the U.S. PSE values for Europe are far higher in both cases.

Ontario’s safety net approach may also continue to include disaster assistance even though this program receives frequent criticism, but scarce praise from any farm sector. The program is also complex and expensive to administer, and tends to reward single-enterprise farming operations much better than those with diversification. The approach is a poor substitute for superior programs designed to address specific problems such as crop insurance and Market Revenue Insurance. Disaster assistance funds could be better used, at least for crop farmers, in providing enhanced support for other programs.

If there are adequate funds for safety net support, no problem exists: let’s have a well-funded, enhanced NISA program for potential future needs, coupled with well-funded, targeted programs, like crop insurance and enhanced Market Revenue Insurance, to address current and future specific income needs for crop farmers, along with disaster assistance for those whom it may benefit.

But what if there is not enough money from government to do it all? What are the priorities?

There is obvious political appeal in the ‘something-for-everyone’, enhanced-NISA approach. But it makes more fiscal sense to concentrate limited dollars on programs which are most effectively targeted to needs. Among those, an enhanced version of Market Revenue Insurance which provides support equivalent to that which exists for competing U.S. growers must rank - along with crop insurance - at the top of the list.

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