June 11, 2019 by Ryan Kitchen

Capitalizing on the AgriStability deadline extension

Traditionally, farmers had to sign up in order to participate in the AgriStability program by April 30 (just prior to seeding). The program is designed in such a way that you have to sign up and pay your fees before your production season begins to be declared eligible for the upcoming year. However, the government recently announced a one-time extension of the deadline from April 30 to July 2, 2019. For most farmers, seeding will be completed and production will be well underway by this later date, giving farmers a far greater sense of this year’s market. If your farm business encounters major difficulties between now and July 2, AgriStability can help compensate for any anticipated losses. 

This deadline extension is an attempt to account for the unpredictability in the market due to the Canada-China trade dispute. China essentially closed the market on canola exports, which has brought down the price for producers across Canada. With many farmers worried about the ability to get their existing canola to market, as well as the future of the canola market, there may be a greater need for the benefits of the AgriStability program. The deadline extension gives farmers an opportunity to hold off on enrolling until they have a better sense of their needs. In light of this new opportunity, it is an ideal time to reconsider AgriStability.

How the program works

The AgriStability calculation is based on your reference margin, a calculation based on your own operation’s previous five years versus your current year margin (to calculate the latter, take your current eligible income less your eligible expenses, plus all of your accrual adjustments, including inventory). When your current year margin drops below 70 per cent of your reference margin, an AgriStability payment is triggered. In other words, when a farmer’s recent years have been successful and they experience a significant dip in earnings, there's a good chance they will collect from the AgriStability program.

The program’s potential

Most farmers already have crop insurance, which protects their production. AgriStability is more far reaching, as it is intended to also protect the entire farm against price fluctuations and increased input costs. In light of the serious threats facing farmers, AgriStability is a relatively low-cost insurance. On average, it only costs a couple hundred dollars to be enrolled in AgriStability, but the potential for payment could be quite significant. Compared to other forms of insurance, AgriStability is arguably a more affordable way to protect your farm business from disaster.

Resisting opportunity

When AgriStability was introduced, there was a high participation rate, as it was the only way for producers to protect themselves from potential disasters. Many producers would sign up for the program, pay their program fees, pay their professionals fees and still never qualify for any payments. This caused some frustration among farmers, as they weren’t seeing any return on their investment in the program – and many producers elected to drop out of AgriStability altogether.

The canola crisis

If you are a farmer with extra inventory because of the canola crisis, you could be in a position to benefit from the AgriStability program. In all likelihood, you are looking at less revenue (from a cash perspective) because you’ve been unable to sell your product. The actual quantity of your inventory might be greater than it was one year ago, but because your opening inventory and your end-of-year inventory are determined based on their value at those times, there might be a decrease in the value of your inventory. If the price of canola ends up dropping significantly, you're more likely to collect an AgriStability benefit because your margin is affected by both lower sales and the lower value of your inventory.

Looking ahead

The real potential of the AgriStability program is its ability to compensate farmers when the costs of their inputs (e.g., fuel, carbon taxes, etc.) increase and the price of their commodities drops. For many farmers, that is exactly what will happen in 2019. If you’re hoping to protect yourself from this kind of crisis, you have until July 2 to enroll in the AgriStability program.

Meet the Author

Ryan Kitchen Ryan Kitchen
Yorkton, Saskatchewan
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