Mr. Speaker, in the 2005 budget, the federal government committed to replace the deposit under the Canadian agriculture income stabilization program, CAIS, with “a better means of effectively engaging producers in joint management of business risk under CAIS”. As the CAIS program is a cost shared initiative, the Minister of Agriculture and Agri-Food discussed the issue with his provincial and territorial counterparts in July and it was agreed in principle to replace the deposit requirement with a fee based approach in time for the 2006 program year.
The fee based approach will respect the basic program principles that producers must be actively engaged in managing their business risk and share in the cost of the program. However, the approach will not require producers to tie up large amounts of operating capital—the principal producer concern related to the deposit. Options for replacing the deposit were developed in consultation with the industry advisory groups set up to support the program and there was general acceptance of a fee based approach.
Ministers agreed in principle on a fee that would approximate the differential between the cost of borrowing funds to make a full deposit under the program and the interest that would be obtained on that deposit. The fee would be calculated at 0.45% of the historical reference margin (a measure of farm profit) that the producer chooses to protect under the program, or $4.50 for every $1000 of protection. A farm with a reference margin of $100,000 would pay $450 for full protection, a substantially lower financial commitment than setting aside $22,000 in an account to gain similar protection.
Early in 2006, producers will receive a notification of their coverage options and the related fees, as well as the deadline for application