One More Pillar Needed

Over the last few years, Ontario Grain and Oilseed producers have been told that prices will get better due to demand through new markets, mostly energy based. They have also been told that new trade rules would alleviate some of the price pressure caused by foreign government policy on Ontario Grain and Oilseed prices. Last spring and winter, it looked like we were headed to better prices. Wheat was in a worldwide shortage due
mostly to drought. Corn and soybean prices were rising due to energy demand. Government was telling us that we did not need the Risk Management Program (RMP). At the same time media started reporting that increases in world food prices were hurting the unfortunate and turning up the pressure on livestock industries by making feedstocks more expensive. Eight months later in November, harvest is over, wheat prices are still strong due to ongoing droughts, but corn and soybean prices in Ontario have not lived up to high price expectations.

The RMP sets support prices based on cost of production. Current prices for old and new crop corn and soybeans are still below those support prices. The high value of the Canadian dollar has put downward pressure on commodity prices in Ontario. At the same time, we have not seen the substantial increase that was predicted in world grain and oilseed prices. Along with this, producers have seen large increases in their costs of production, especially in fertilizer – a major contributor to the cost of growing crops. If costs continue to increase, the cost of growing crops in
Ontario will be substantially higher in 2008 than in the last few years.

The Ontario government recognized that even though prices are somewhat better, grain and oilseed producers needed a long term risk management solution to their problem. Minister Dombrowsky announced the RMP on August 22nd. The first payments will be mailed mid-December. The RMP is a producer-developed solution that will meet the needs of Ontario grain and oilseed producers. The Ontario government has agreed to fund their 40% share of RMP. Unfortunately the Federal Government through former Minister Strahl has refused to fund its share of RMP.

The Agricultural Policy Framework (APF) that was implemented in 2003 and expires in 2008 was based on two programs, Canadian Agricultural Income Stabilization Program (CAIS) and Production Insurance. Ontario grain and oilseed organizations indicated from the beginning that CAIS would not work for the grain and oilseed industry and that a replacement program for Market Revenue Insurance was needed to address the issue. CAIS was so ineffective that almost a billion dollars a year was paid out in ad hoc dollars to address issues that CAIS couldn’t. This one size fits all approach to agricultural business risk management does not address our income issue appropriately.

The Federal Government is proposing new programs to replace the APF. These programs include AgriInvest, AgriStability, AgriInsurance and AgriRecovery. AgriInvest is similar to the former NISA program and does not offer substantial support to Grain and Oilseed producers. AgriStabilty is the CAIS program renamed. It didn’t work before and won’t work with a new name. AgirInsurance is production insurance similar to what we’ve had in the past and covers production risks. AgriRecovery was developed to address natural disasters such as BSE, Avian influenza, flood, etc.

The new suite of programs will not address the needs of Ontario producers any more than the APF programs did. The Federal Government admitted that CAIS did not address issues facing Ontario grain and oilseed producers. These new programs will also fall short and more ad hoc dollars will be required.

Once again, there is a solution. Grain and oilseed organizations in Ontario and Quebec (under the Ontario-Quebec Grain Farmers’ Coalition) have proposed a fifth component to the proposed suite of federal funding programs: AgriFlex.

Principals of AgriFlex include flexibility within new and existing national BRM (Business Risk Management) and non-BRM programs for regional administration, delivery and allocation of funds; along with the flexibility to develop new programs, BRM and non-BRM, to address regional needs within broad, overarching national objectives that are cost-shared federally and provincially. This would include a new envelope of funds that would replace the ongoing ad hoc dollars that are being spent to address the shortcomings of national, one-size-fits-all programs. It would also allow a federal government which has said “no” to funding RMP, a chance to do so indirectly – providing a workable solution for both producers and government.

AgriFlex was proposed to both the federal government and the Canadian Federation of Agriculture (CFA). CFA supports this proposal and is working with other Canadian agricultural organizations to lobby the federal government to implement it. Other regional and national producer organizations support these principals and would like to see regional flexibility within national business risk management programs.

Producers work hard at keeping costs down to be profitable. Food is a very political commodity worldwide and foreign government policy can influence the price that Canadian producers get for their products. Supply and demand will not always decide the price of our products. Producers will continue to need workable, bankable, BRM programs. Ontario has recognized this and implemented the Risk Management Program. We need the federal government to implement AgriFlex. With a fully funded AgriFlex program, grain and oilseed producers in Ontario would have access to a fully funded Risk Management Program.