Another program we would like to focus on is the western livestock price insurance program, WLPIP. This a forward market-based insurance-style program that allows producers to manage risk within their own operation. CCA's position is that the tool should become a permanent risk management tool, not dependent on renewal under each agricultural policy framework. We know that youth in the cattle industry benefit greatly from the utilization of this program. The ability to ensure a floor price on cattle has supported young producers to secure financing for their beef operators. Furthermore, they are typically highly leveraged and don't have equity to fall back on in a downturn in the market. This underscores the importance of managed price risk with a timely and bankable program, which livestock price insurance provides.
Currently in maritime Canada, they still operate without a program that manages price risk in a timely fashion. The Maritime Beef Council, covering New Brunswick, Nova Scotia and Prince Edward Island, has a strategy to expand cattle inventories and beef production. Having access to an insurance program is key to achieving their objectives. Canadian and maritime beef producers are eager to see the creation of an eastern settlement index pilot under WLPIP, which would contribute to national price insurance coverage across Canada. CCA believes the eastern settlement index should receive federal backstopping and administrative cost support as provided under the WLPIP.
Improved hay and forage insurance across the country is also needed. Forage insurance products are often distinct from annual crops, in that coverage and settlements are based on areas rather than on the actual production on an individual farm. The lack of individual farm insurance coverage for forages may act as a deterrent to participation and represents a source of inequity between perennial and annual crops. Pasture and forage insurance programs should also be equipped with a mechanism that helps producers account for increased feed prices during these times.
Last, I'd like to talk about improving the livestock tax deferral provision. Extreme weather challenges such as drought, flooding and fires can all impact producers' ability to maintain or sustain their herds. These events often force producers to sell animals such as calves or breeding stock earlier than anticipated, resulting in more than one sale per fiscal year. While the livestock tax deferral tool is available to producers, uptake is low and significant herd reduction must take place before the program provides benefit. Delays or regions deemed ineligible by Finance Canada in determining when income deferral can be applied to drought situations have made that mechanism not always useful for management decisions. CCA believes that amendments to the deferral are needed to make the tool more functional, including the option to self-elect when the tool can be utilized, and ensuring that all classes of cattle are eligible under the deferral.
With significant volatility in the world markets due to COVID, along with typical risks from weather and production, access to well-designed and sufficiently funded business risk management tools has never been more critical for the cattle producers. With these tools in place, the Canadian beef industry is well positioned to keep growing the economy and support strong rural communities and conservation outcomes from the agricultural landscape.
We look forward to answering your questions.