First off, we want to build an understanding about what risk management programs work for beef producers and which ones currently don't. In a nutshell, price insurance works, but AgriStability still has many challenges in its current form. Why doesn't AgriStability work for beef producers? The answer has to do with the structure of the program and the structure of the beef industry. Reference margin limits are one of the key reasons AgriStability doesn't work well for cattle producers. Without getting into too many details, this has to do with the fact that many producers, especially cow-calf producers, have low eligible expenses on the program, and we often produce our own feed and have low labour costs. What this results in is that our margin has to drop further than other commodities' before triggering benefits for the program.
For a long time, CCA has been advocating for changes to the program to improve equity and effectiveness for beef cattle producers. This includes the removal of the reference margin limit—the problem Bob was describing earlier—removing payment caps and enhancing the trigger to 85% of the reference margin. We don't have more recent program participation rates, but in 2017 only 31% of farms participated in AgriStability, and we expect that very few of those were beef farms.
While we understand Minister Bibeau's referencing the importance of utilizing existing programs, it has to be understood that these existing programs, especially AgriStability, aren't largely used by beef producers. The main risk management tool for beef producers is livestock price insurance in the west, the RMP program in Ontario and ASRA in Quebec. It should be noted that our fellow producers in the Atlantic provinces don't have access to any appropriate tool. Our immediate recommendation to federal and provincial governments have been on these programs.
Focusing in on the livestock price insurance program, this is a program this is actuarially sound. This is something that we as an industry are very proud of. It's a tool that works very well at very little cost to Canadian taxpayers. Right now is when cow-calf producers like me typically buy price insurance. Unfortunately, the cost of premiums are tied to market volatility, and we all know market volatility has skyrocketed. Premiums for a calf would typically be around $10 to $15 per head, but because of COVID-19, the cost has risen to about $50 to $70 per head. As cow-calf producers, we have until May 28 to decide whether we are going to buy price insurance. For many, it's been too expensive.
We are asking federal and provincial governments to cost share the premiums with us for this year, similar to the way they do it for crop insurance. This will maintain participation in the program and allow producers who are facing significant market uncertainty to weather the storm.
On our farm, I consider price insurance to be the most important tool that we have access to. Without it, we have no control over the biggest risk that our operation is exposed to, which is market price risk. Being a younger operator with significant debt, my lenders require that I have a method to mitigate price risk. It allows young producers the ability to ensure a floor price on cattle and helps to secure the future of their growing beef operations. Furthermore, young producers are typically highly leveraged and don't have equity to fall back on during downturns in the cattle market, putting Canada's long-term food security at risk. This underscores the importance of managing price risk with a timely and bankable program, which livestock price insurance provides.
As you can see, price insurance is a very important tool, yet our Atlantic neighbours still operate without it, and this limits their ability to manage risk and grow the beef sector. The region has land and forage to grow the herd, but lacks this important risk management tool that supports herd expansion. Access to a price insurance program is key to achieving these expansion objectives.
Canadian and maritime beef producers would like to emphasize to the committee the utmost importance of establishing an eastern settlement index under the livestock price insurance program. It would contribute to the national price insurance coverage across Canada.
Ontario doesn't have livestock price insurance, but they do have their RMP program. They have requested a topping up of it, as last year they had processing capacity shortages that resulted in significant financial pressures on their industry. The program's funding cap severely limits its ability to provide adequate levels of support, particularly in challenging years.
For these reasons, we are recommending further dollars be allocated to assist with the main risk management tools utilized by Canada's beef producers: livestock price insurance and RMP.
Our third recommendation is to enhance the advance payments program by increasing the interest-free portion for beef cattle to $500,000, increasing the overall cash advance limit to $3 million and extending repayment terms for beef cattle to 36 months.
As the industry experiences reduced processing capacity and significant uncertainty in how long COVID-19 will last, these enhancements could provide added liquidity and flexibility for cattle producers to market their commodity at the best time and the best price, and could allow them to retain more breeding cattle in their cow herds.