Canadian Agricultural Income Stabilization Program

Negative Margins and the CAIS Program

The Canadian Agricultural Income Stabilization (CAIS) program is designed to help you protect your farming operation from both small and large declines in income.

Negative margins are protected under the CAIS program. A negative margin occurs when allowable expenses are greater than allowable income for a program year. If your program year margin is negative, you may be compensated for up to 60% of any portion of your margin that is below zero.

Starting with the 2005 program year, coverage for producers with negative margins will increase. Producers with a negative reference margin were previously not eligible for CAIS. They are now eligible if they have positive margins in two of the three years used to calculate their reference margin. Previously, producers could receive only two negative margin payments in a five-year period. With the changes, there is no limit on the number of negative margin payments a producer can receive.

Note: Negative margins are protected at 60% regardless of the protection level you chose when you signed up for CAIS. The protection level you chose applies to the portion of your margin that is above zero.

Eligibility

You do not have to apply for negative margin protection.  Negative margins are a separate calculation and are automatically calculated by the CAIS Administration for every year that you submit a CAIS application.

In order to be eligible for a negative margin payment, you must meet certain criteria:

• 2 of 3 production margins used to calculate your reference period must be positive.
• you must have followed sound management practices; and
• the negative margin must have occurred because of reasons beyond your control.

Calculation of Payments on Negative Margins

You may be compensated for up to 60% of your negative margin. If you qualify for a CAIS payment and have a negative margin, you will receive a CAIS payment for the positive portion of your margin decline first. Your negative margin payment will be issued separately. Your payment may be adjusted if you did not participate in Production Insurance, or because of payment limits or caps on government contributions.

Example:
If you have a reference margin of $120,000 but your margin decline in the program year drops by $140,000, the portion of your margin below zero, or negative margin, will be -$20,000. Your CAIS benefits would include a payment for the positive portion of your margin decline, and another for the negative portion of your margin decline (up to 60%).

* This payment may be adjusted to account for Production Insurance participation or payment caps.

Payment Cap

The maximum you can receive from governments under the CAIS program is capped, or limited to, either $3 million or 70% of your margin decline, whichever is lower. Any amount over this limit will be deducted from your negative margin payment.

Production Insurance Participation

Although participation in Production Insurance is not mandatory in order to receive a CAIS payment, there is an incentive to participate in Production Insurance.

If Production Insurance was available and you did not insure your insurable commodities at the 70%* level, your negative margin benefit may be reduced. The CAIS Administration will forward information to the Production Insurance agency in your province, who will calculate the amount you would have received by participating in Production Insurance, minus the Production Insurance premium that you would have paid. This is called a Deemed Production Insurance Benefit. Your negative margin benefit will be reduced by 60% of this amount.

For more information on negative margins or about the CAIS program, please contact the CAIS toll-free line at 1-866-367-8506 or visit the program Web site www.agr.gc.ca/cais.