Thank you, Mr. Chair.
Good afternoon. My name is Ray Orb and I am the vice-president of the Saskatchewan Association of Rural Municipalities. I thank you for inviting SARM to present here today regarding business risk management programs under Growing Forward 2.
SARM represents 296 rural municipalities in Saskatchewan, which means that it is the voice for 100% of the rural municipalities in the province. It represents and serves the interests of Saskatchewan agricultural producers.
SARM consulted with the Province of Saskatchewan and Saskatchewan livestock industry groups prior to devising our recommendations. I will be speaking from that paper here today regarding the AgriInsurance, AgriRecovery, AgriInvest, and AgriStability programs.
Beginning with AgriInsurance, we feel insurance for crops needs to be improved. The largest problem with the current crop insurance program is that it does not have adequate coverage levels or reasonable premiums. An effective crop insurance program is one in which it is economically feasible for all grain producers to enrol. Suggested improvements to the program would include providing an option to buy up coverage at a reasonable premium rate to make the program more realistically reflect actual costs of production, that is, to have coverage beyond 80%. Arriving at a reasonable premium rate for this amount of coverage would require that government provide a bigger share of the premium than they are currently providing. Using the area average for yields, weather data, and coverage levels don't work. There is a need to collect more data at farm sites to ensure that these variables reflect reality. Crop insurance would have to ensure that all crops were insurable and that costs used to determine things like reseeding benefits reflected the most recent price and cost. SARM feels that if these improvements were made, then buy-in from crop producers would increase considerably.
We also see a need for an improved forage insurance program. Forage crops are not like annual crops, and therefore a forage insurance program specifically designed for forage crops is critical for livestock producers. Alternative insurance models that incorporate multiple weather variables such as precipitation, frost, humidity, heat, and wind are needed. That means adding more on-farm stations that measure more variables than just rainfall and temperature. Today's improved technology should make providing more real-time weather stations more cost-effective.
SARM would also like to suggest that forage insurance consider utilizing alternative variables to calculate program payments. For example, animal unit months, or AUMs, is a measurement that is currently calculated on pasture land by the Saskatchewan Assessment Management Agency. This measure takes into account the grazing capacity of these lands.
Lastly, we feel that AgriInsurance must include a program for livestock. The livestock industry in Saskatchewan and across Canada is asking, via the Canadian Cattlemen's Association, for a price insurance program for livestock with cost-shared government and producer premiums available at all stages of cattle production. SARM supports the Saskatchewan cattle groups and the CCA in this request.
Regarding the AgriRecovery program, we believe that disaster program like it must be continued under Growing Forward 2 to cover extreme situations such as market crashes and weather issues. Disasters such as these are unpredictable and out of a producers' individual control, no matter what management measures they take.
SARM's major concern with the current AgriRecovery program is how a disaster is defined. The definition of a disaster must be clarified and parameters outlined so that producers know what kinds of disasters will be covered. The current program provided disaster assistance for floods in 2010 and 2011, but southwest Saskatchewan experienced drought for four consecutive years around 2006 and received no assistance from the federal government. AgriRecovery should clearly convey to producers the definition of a disaster and outline the parameters defining what will and what will not be covered.
SARM understands the intent of the AgriRecovery program is to provide disaster relief when disasters strike, by filling gaps that are not covered by existing programs. And SARM believes that funding provided to producers from the program should not take away from payments received from any other programs under the BRM umbrella. For example, if a producer triggers a payment from the AgriStability program due to a margin reduction, then AgriRecovery funding should be above and beyond payments from AgriStability. AgriRecovery payments should not be included in a producer's income when calculating whether they are eligible for other payments.
All BRM programs, including AgriStability, should be simple to administer, both for the producer and for the government, to ensure the timeliness of payments and low administration costs. Producers need to hire accountants to apply for AgriStability, and the staff on the program administration team must be highly skilled to process these applications. Current complexities on both ends result in frustration, confusion, continued delays in payment distribution, and excessive cost. Also, the current AgriStability program is not bankable, which makes it difficult for producers to make annual plans as well as to attain financing, as lenders and institutions cannot define what financial coverage producers will receive.
We also see a flaw in the way AgriStability currently accounts for hay and feed grain inventories, as it doesn’t reflect how a livestock producer actually uses these products and it penalizes some when calculating margins. Livestock producers feed this inventory to their livestock, so it shouldn’t be considered part of inventory. It should be assigned a value and considered an eligible net sale, not a part of inventory. We realize that such a change would require an audit and verification process.
We continue to see issues with margin calculations. As AgriStability remains a margin-based program based on an average of previous years, it still results in a depressed margin for producers facing past years of hardship and disaster. For those with compounded years of drought or flood, it becomes increasingly difficult to trigger a payment because of the depressed margins that are their reality.
The last program we would like to comment on is AgriInvest. Many producers view the current AgriInvest program as beneficial, as it is easy to access in times of need. It is also predictable and bankable. In many cases, farms and ranches are getting bigger, so adjusting the contribution rates allowable under this program should reflect the realities and expenses of larger operations. Currently, this program is capped; producers can only deposit up to 1.5% of their allowable net sales into an AgriInvest account. SARM would like to see this increased to allow a producer to contribute up to 2.5% of allowable net sales.
In conclusion, SARM would like to stress the importance of making sure that business risk management programs under Growing Forward 2 work for all farmers. Administrative costs must be minimized, payments must be quick, and the data used to calculate payments must reflect reality to ensure that the support being offered is effective. What we are suggesting might not require additional funding. We are suggesting a reprioritization of existing funds to make BRM programs less administratively heavy and to redesign programs to make them more responsive to the needs of farmers. SARM doesn’t want to see BRM programs stifle innovation; instead, we want them to work in conjunction with funding for research, technology, and innovation.
SARM thanks the committee again for the opportunity to present. I would be pleased to answer any questions you may have.