System to provide comprehensive protection

A new income stabilization and protection program, which would establish the first permanent system for disaster assistance, has been designed to offer Canadian farmers comprehensive and equitable protection for both large and small income declines.

The proposed program, undertaken as part of the Agricultural Policy Framework (APF), would provide affordable levels of coverage that producers could tailor to their particular circumstances. The Canadian Agricultural Income Stabilization Program (CAISP) would target government funds effectively to those in need, while conveniently combining in one program both income stabilization and disaster assistance.

Producers of different commodities in all parts of Canada would have a common program to provide more effective stabilization and protection. CAISP, which requires signed agreements by federal and provincial and territorial governments in order to come into effect for the current production year, will make it easier for farmers to plan for the future and thrive in the competitive global environment. The program would also provide strong protection from trade challenges.

It is one of two core business risk management programs whose costs would be shared by federal and provincial or territorial governments under the APF. The other proposed program would provide expanded production insurance that includes more commodities and more options than the current crop insurance program. While some provinces have already begun introducing additional production insurance plans, most of the work will be done over the next two years.

Graph A illustrates the three tiers of cost-sharing under the integrated income stabilization and protection program. The first 15 percent of a drop in income below the historical reference margin would be cost-shared equally between government and the producer. The next 15-percent loss would bring $2.33 from government for every farmer dollar. The portion of decline below 70 percent of the reference margin, considered an income disaster, would bring $4 from government for each farm dollar.

Under the proposal to integrate income stabilization and disaster protection, farmers would be spared the uncertainty of relying on the ad-hoc emergency assistance programs which have been put together in various forms every few years. The new program would cover margin losses no matter what factors are involved and allow farmers to fit their coverage to their individual needs, giving them flexibility to decide each year how much risk protection to secure.

Governments and farmers would share in the costs of replacing lost income. For smaller losses, farmers and governments would share the burden equally. As losses steepen, an increasing portion of the costs would shift to government, with its share becoming four dollars to every one dollar provided by the producer when income declines reach more than 30 percent (see Graph A).

Subject to agreement by provincial governments, CAISP would be in place for this production year. However, farmers wouldn't have to make any decisions until at least the fall, after they receive a letter inviting them to participate in the new program and to select a level of protection from income declines for the 2003 production year. Farmers in such sectors as dairy and poultry, who are governed by the supply management system, would be eligible only for the component of the program providing protection for losses exceeding 30 percent.

NISA (the Net Income Stabilization Account program) and CFIP (the Canadian Farm Income Program), which are to be supplanted by the new integrated program, remain in force for the 2002 production year. Farmers will retain ownership of the funds currently in their NISA accounts, including the portion provided by government. Producers would have up to five years to withdraw all the money from their NISA accounts, which allows them to spread out their tax liability.

See the next two pages for more details. For additional information about the proposed new program, please visit the APF Web site at www.agr.gc.ca/puttingcanadafirst, or call 1-800-665-6472.