Governments are currently in the process of finalizing all elements of the agricultural policy framework. This framework will guide the development of all aspects of government support for the agricultural sector over the next five years. The APF covers not only business risk management, but provides for protecting the environment, increasing our innovation and science efforts and better equipping farmers under the renewal element in a single, solid platform that will help Canadian agriculture maximize new opportunities at home and in the world market.
The crop insurance program will be an essential component of the APF. Its importance has been demonstrated once again with its quick payment of record levels of payouts in recent years. The APF will maintain successful elements of the current crop insurance program as well as offer additional flexibility and funding to expand and enhance the program. Specifically, full implementation of the APF will: encourage greater participation through the development of a broader range of program options and benefits; offer all farmers access to the maximum coverage level, 90%; provide farmers across Canada with the same level of federal premium support; target the greatest level of government support to severe production loss situations; and increase the federal government’s share of support from about 50% to 60% of the total government contributions.
Most provinces have or are about to announce their 2003 crop insurance program changes and therefore the projected premium costs for 2003 are becoming more clear.
Premium costs in Alberta, Saskatchewan and Manitoba will all be increasing for 2003. The amount and reason for the cost increases vary by province, however, all three provincial governments and the federal government have agreed that the producers’ share of total premium costs will not change for 2003.
Each year the provinces determine crop insurance premium rates based on actuarial formula. The 2003 premium rates will be increasing because of higher coverage due to the updated yields, recent large losses and the resulting change in a province’s cumulative financial position. Despite these increases, premium rates are still significantly lower than the levels throughout much of the 1990s. Governments are also contributing more, 60%, toward premiums in the current year compared to about 50% a decade ago. When good crops are produced, producer’s average premium decrease; in years where more losses occurred, the average premium increase to ensure the sustainability of the crop insurance program.
In addition, the total premium costs will also be increasing due to rising participation levels resulting from program enhancements to existing programs and the introduction of new programs. Both Alberta and Saskatchewan will be introducing new and expanding existing programs for 2003. Alberta’s premium cost estimates reflect participation increases of as much as 30% to 40% over the record levels obtained in 2002, for their forage and pasture programs.
Higher insurable prices in 2003 compared to the values used for 2002 will also factor in increased premium costs. As a result of these higher insured prices, producers will have more protection in the event of a crop loss. This higher level of protection means that farmers and governments will pay more premiums but producers have the option of selecting lower price levels to help keep premium costs affordable.
Based on the factors discussed above, the latest 2003 premium estimates for the Prairie provinces and a Canadian total are compared with 2002 values in the attached table.
Total Crop Insurance Premiums ($ millions)