The key elements, from Ontario’s perspective, are:

• NISA should remain as a core program across Canada with all farm commodities included, except those subject to supply management, and except where specific exceptions are requested by affected commodity organizations.
• Means should be introduced to ensure that non-supply managed commodities produced on dairy and poultry farms should be fully eligible for NISA contributions.
• Crop insurance should be a core safety net program. However, there was no consensus on how federal funds should be allocated for crop insurance support. Some Western Canadian farm groups argued that the allocation should be based on relative risk, a formula which would ensure that the bulk of federal crop insurance funds continue to go to those provinces. However, other groups argued that crop insurance money should not be used to offset inherent differences in natural competitive advantage, and the total federal safety net budget should be generally allocated relative to provincial net sales of non-supply-managed farm commodities.
• A disaster-relief support program could be offered, along the lines of those now in place in Alberta, British Columbia and Prince Edward Island. The support for this is stronger in most provinces other than Ontario. Ontario support is tempered by the absence of any valid calculation as to what such a program would cost, and where the money would come from.
• The continuation of companion programs. These include programs such as market revenue insurance and NISA top-ups in Ontario. Companion program funding is used to help support the "ASRA" program in Quebec (price supports based on costs of production), enhanced crop insurance in Manitoba and Saskatchewan, and disaster-relief programs in Alberta, British Columbia and Prince Edward Island.
• Self-directed risk management (SDRM) could be offered as a form of crop insurance for horticultural producers who are not well served by the present crop insurance program.
• Provinces would continue to have a substantial amount of flexibility in the form of safety net program delivery within their individual jurisdictions.
• Safety net funds should not be used to fund advance payments, and the use of safety net funds to support agricultural research should be a low priority. (See discussion elsewhere in this newsletter.)

The report of the National Safety Net Advisory Committee will go to Canadian ministers of agriculture, when they meet in Niagara-on-the-Lake in early July.

The CFA position also calls for the introduction of disaster-relief programs in all provinces -- apparently before knowing the full costs, and apparently as a spending priority over companion programs. In addition, the CFA calls for federal crop insurance funds to be allocated on the basis of risk (or possibly risk and "need," with the latter not being well defined).

The OFA is caught in the middle between Ontario farm interests and the CFA position.

Some groups believe no money should be allocated for research and development in the next safety net agreement. Others (probably the majority) argue that funds could go for this purpose, but only as a low priority (if money is "left over" from other purposes).

The OCPA is in a third group, a minority which feels the safety net money which has been allocated for research and development has been one of the most important elements of the current program...and that a small portion of safety net funds should continue to be allocated to research and development, as a priority.

As an example, OCPA directors point to the formation of Ontario Agri-Food Technologies (OAFT), a high-profile focus for agri-food biotechnology research and development in Ontario. Although OAFT has received financial support from other sources (notably OMAFRA, and membership fees), the $650,000 allocated out of safety net funds for the formation of OAFT is the primary reason this organization is now able to exist.

Safety net research and development funds have been allocated by commodity sector and, by definition, to specific commodities. Via this formula, about $900,000 of the total $10 million in Ontario safety net research and development funds has been allocated to corn research. OCPA has found this to be an extremely important source of research support, and has been able to multiply the effectiveness of this money several-fold in providing new funding for public research in Ontario.

Even though in the minority, OCPA will continue to lobby to have research and development included as a priority for safety net funding support.

Our other allies appear to include the Ontario Wheat Producers’ Marketing Board, the Ontario Flue-Cured Tobacco Growers’ Marketing Board, the Ontario Tender Fruit Growers’ Marketing Board, and, nationally, the Canadian Cattlemen’s Association. The latter insists that research and development is about the only priority for safety net funding.

The new corporation would invest the fund balance in securities yielding more interest than the present government-held account can offer, and could use instruments such as reinsurance and futures options to minimize the loss to the fund principal caused by low crop prices and market revenue insurance payouts.

An excellent meeting took place in late March, with the highlight being an extended conference-call interview with senior officials of the Risk Management Office of the U.S. Department of Agriculture (USDA) in Kansas City.

The U.S. crop insurance program is managed differently than its Canadian equivalent. While the federal government oversees the entire program and pays the government share of premiums, delivery is done entirely by the private sector. There are 16 private crop insurance companies involved, delivering their programs through 3,000 independent insurance agents (much like how other types of insurance are managed in Canada). The companies are paid an amount equivalent to 27 per cent of premium costs to operate the crop insurance programs, with about 16 per cent going to the agents. (This cost is about double the administrative cost for crop insurance, administered by AGRICORP in Ontario; crop insurance administrative costs, as a per cent of premiums, are generally lower in Ontario than other Canadian provinces.) There is an extensive audit process which companies, agents and the USDA must follow to satisfy the terms of the federal crop insurance program.

In reality, there are several types of crop insurance programs offered, ranging from a minimal cost disaster program (50 per cent of average yield, 60 per cent of base price, minimal cost to farmers) to some newer, experimental GRIP-like programs. The most relevant and popular program is Multi-Peril Crop Insurance (MPCI) which is similar in many regards to the Ontario program.

Perhaps the biggest difference is the availability of separate farm coverage – or multiple unit coverage, as it is called in the U.S. In some cases the unit separation is mandatory in the United States. In other cases, it’s voluntary. A separate policy is mandatory in all cases where land is farmed under a share-crop agreement, where the landlord shares in the farm input costs and crop revenue. Optional separate unit coverage may be permitted in other cases.

For example, if a farmer owns 500 acres, cash rents 600 acres, and has three share-crop agreements, there are a minimum of four farm units (owned-plus-cash-rented land for one, and the three share-crop arrangements). If certain conditions are met, there could be several other units (optional units).

The non-negotiable conditions for optional units are: Each unit must have a separate legal land identity (e.g., different section number in the Western Corn Belt; this would be equivalent to separate lot and concession in Ontario). There must be a clear separation between different farms (not one continuous field). Records must be kept of the production from each separate farm. And all acreage of each insured crop must be enrolled, even when grown on separate optional units.

The record keeping goes as follows. To be eligible for optional unit coverage, there must be records of crop yields from each separate unit for at least one previous year. If there is no claim in the current year of enrolment, the farmer must keep reliable yield records (which can be audited afterwards) of the amount of insured crop harvested from each farm. If a claim is anticipated, arrangements must be made for an adjuster to view the crop before harvest. And, unless the crop is weighed and stored at a location where third-party verification is possible, the auditor must measure the stored crop after each optional unit is harvested. The latter is especially crucial when the crop is co-mingled.

It is worth noting that unlike Ontario, the U.S. generally does not have final yield inspectors. Farmers declare their own final yields, and auditors usually visit only when there is a claim. However, the U.S. system involves a sophisticated series of spot audits (of farmers, agents and companies, and by both company and USDA inspectors) to try to ensure compliance. Penalties for cheaters can be severe.

Farmers pay a 10 per cent surcharge for separate unit coverage, the surcharge is the same regardless of the number of units. There is no surcharge or discount system in the U.S., as there is with crop insurance premiums in Ontario.

Optional unit coverage is very popular in the U.S. Midwest, according to USDA officials. We can see why.

While Ontario crop insurance appears to be superior to the U.S. equivalent in several ways, the separate farm program is clearly superior in that country.

There is precedence. Full compensation is offered to Prairie farmers whose crops are damaged by waterfowl, with the money coming from a source other than crop insurance. As well, farmers are compensated in Ontario when farm animals are killed by wildlife. Why not the same for crops?

Although OCPA is comfortable with the present system operated by OMAFRA, OCPA directors have agreed to support the proposal...with conditions. One condition is that costs be apportioned among crops relative to the provincial volume and value of sales. And a second is that corn producers not pay fees associated with other crops, or with policing of the Grain Elevator Storage Act. The future of this proposal hinges on a satisfactory resolution of issues identified above.

Representatives of the Ontario Agricultural Commodity Council met with Members of Parliament of several parties in Ottawa on April 21 to discuss the future of this valuable program.

Ontario farm groups are asking that the program be continued past its scheduled termination date of March 31, 1999, and that an increased portion of total funding available under the Canadian Agriculture and Rural Development (CARD) program of AAFC be allocated through CanAdapt, and its counterpart in other provinces.

The CanAdapt program has received strong support from federal politicians, but has been opposed by many bureaucrats who resent the transfer of power and decision making to farm and rural groups. Not surprisingly, a counter lobby effort exists within the civil service to ask that a decreasing portion of any CARD II program be apportioned to provincial groups, with a larger percentage retained under direct Ottawa control.

As you are aware, Canadian negotiators at the December 1997 international meeting on climate change in Kyoto, Japan agreed to reduce Canadian net emissions of greenhouse gases (chiefly carbon dioxide, methane, and nitrous oxide) to six per cent below 1990 levels by the average over the period from 2008-2012.

Unfortunately, it is far from certain that the ability of agricultural soils to serve as a sink for carbon dioxide, through increases in soil organic matter levels, will be accepted as part of the Canadian "Kyoto strategy." This is of serious concern for two reasons.

First, research has shown that current changes in agricultural technology – for example, increased use of no-tillage in crop production, increased forage production (for beef production, and other uses), better soil fertility, better yielding crop varieties – all have the potential to increase soil organic matter levels and "store" carbon. Increased soil carbon (organic matter) levels could make a major contribution to overall Canadian Kyoto commitments. This could also benefit Canadian farmers – for example, through new funds for research and other incentives to enhance the size of the soil "sink." Another potential benefit is through emission trading by which farmers might be able to trade sink capacity with major carbon dioxide emitters (public utilities, petroleum marketers, etc.). However, without recognition of the agricultural soil sink capacity as an "accredited" means of meeting greenhouse gas reduction commitments, none of this will be possible.

Our second concern is potentially even more critical in that Canadian agriculture may be forced to cut back on other activities which cause greenhouse gas emissions, without receiving any credit for one of the largest means – soil organic matter – by which net emissions are being reduced. This could affect our ability to expand Canadian livestock production, use fertilizers and manure and other crop inputs, and more.

However, the Ontario acreage will still be minute relative to the U.S. where about 750,000 acres will be grown in 1998. The Ontario acreage of Roundup-Ready soybeans -- while larger than for corn -- will also be proportionately much smaller than in the U.S., where at least half of the 1998 soybean crop may be Roundup tolerant in many states.

In all cases, the limitation is supply of seed, and number of adapted hybrids and varieties.

We worry when Ontario farmers are at such a disadvantage to access new technology. One year makes a big difference during the late 1990s – and it will mean an even bigger difference in the century to follow.

We can only overcome this disadvantage by more Ontario-based research and development (more direct funding by Ontario farm groups), and fewer regulatory barriers delaying access to new technology...especially technology being used by our competitors in other countries.

We continue our quest for a research levy on corn seed sales, as a means of overcoming this disadvantage. It may not matter that much to Canadian seed companies if the rate of adoption of new technology is a little delayed in Canada, especially if it is delayed equally for all companies. But it means all the difference in the world for Ontario farmers.