Who Will Participate in the New BRM Program ? Rakhal Sarker, Shashini Ratnasena and Farzana Enam Rasna Department of Food, Agricultural & Resource Economics University of Guelph October 26, 2012

Introduction Canada has a long tradition of Safety Net Programs – Originally designed to protect the income of efficient producers The design & richness of the programs changed through time to accommodate changing needs of the agri-food sector – ASA (1958) ASA(1975) FIPA(1991) GRIP & NISA – APF CAIS – GF1 BRM- AgriStability – GF2 BRM2-AgriStability (R) Richness of the program More producers participate, the higher the sample size for relevant data 2 Perceived benefits to producers Participation rate

Key Features: Current vs New BRM Programs 3

0% Negative Margin Tier 3 Tier 1 100% 85% 70% Tier 2 Figure 1(a): AgriStability Payment Tiers Consider two Farms with very different sizes growing Grain & Oilseed in Ontario. Reference Margin How Does the Current AgriStability Program Work? No Coverage Replaced by AgriInvest 80% 60% 70% 4

0% Negative Margin 100% 70% Replaced by AgriInvest (50:50 cost share) & other private risk mgt. tools 30% Producer share AgriStability 70% Government share 30% Producer share 70% Government share Cost share as current year margin declines below reference margin Producer’s Reference Margin Consider two Farms with very different sizes growing Grain & Oilseed in Ontario. Figure 1(b): Cost sharing under AgriStability in Growing Forward agreement How Will the New AgriStability Program Work? 5

Results Number of Farms Qualified/Expected to Qualify to Receive AgriStability Payments under the Current & New BRM Program Structures 6

Results In aggregate, fewer farms will qualify for the new BRM program payments in Ontario. The rate of decline, however, will vary across sectors. – The largest drop is expected in the grain & oilseeds sector (37.3%) – The second largest in beef (14%) – The smallest drop will be in Hog sector (13%) 7

Results- Grain & Oilseed Farms Figure 2: The Eligibility Rate of Receiving AgriStability Payments under Current & New BRM Program Structures Small Large Medium 8

Results: Farms’ Participation in Current & New BRM Programs- Grain & Oilseed Sector Considering the size categories, the largest adjustment will take place in hobby, small, large & very large grain & oilseed producers 9

Results- Beef Farms Figure 3: The Eligibility Rate of Receiving AgriStability Payments under Current & New BRM Program Structures Small Large Medium 10

Results: Farms’ Participation in Current & New BRM Programs- Beef Sector Most of the drops will take place in small sized farms The medium & large sized farms will be relatively less affected by BRM2 11

Results- Hog Farms Figure 4: The Eligibility Rate of Receiving AgriStability Payments under Current & New BRM Program Structures Small Large Medium 12

Results: Farms’ Participation in Current & New BRM Programs- Hog Sector Since hobby farms practically disappeared from the hog sector, the new BRM program will not have any impact on these farms All other hog farms are likely to be less affected by the new BRM program 13

Concluding Remarks Fewer farms will participate in the new BRM program The extent of drop varies widely across sectors Grain & oilseeds sector will be affected more than beef or hog sectors in Ontario – Hobby, small, large & very large farms will be more influenced than the mid-sized farms – Beef & hog sectors, the drops will be small among mid-sized and large farms 14

Concluding Remarks Only a few large farms will participate Will limit agencies’ ability to receive readily available data from the growing & increasingly more relevant segment of Ontario agriculture “Past is not always a good predictor of the future” “Past is not always a good predictor of the future” 15

THANK YOU Happy to answer any questions 16