Note: The AgriStability deadlines outlined in this article relate to the Ontario deadlines and may differ from the deadlines in other provinces. Additionally, the RMP program is an Ontario-based program. As always, we recommend you consult with your Collins Barrow advisor before proceeding.
Have you ever questioned whether you are maximizing the benefits available from all the government farm programs available to you? Many changes have occurred to these programs in the last few months that you should be aware of:
AgriStability/CAIS:
The program that was formally known as the Canadian Agricultural Income Stabilization Program is changing its name to AgriStability starting in 2007. The AgriStability program is essentially exactly the same as CAIS except that only 85% of your decline in margin will be supported versus the 100% that was supported before.
If you were previously enrolled in AgriStability/CAIS, you should have received your 2007 Fee Options Notice by now. To ensure that you stay enrolled in AgriStability/CAIS, it is important to pay this fee. The original deadline to pay the fee was December 31, 2007 but you can still pay it before April 30, 2008 with a 20% penalty. If it is not paid before April 30, 2008 you will not be eligible to participate.
It is especially important to ensure that you are enrolled in AgriStability this year if you are also enrolled in the new Risk Management Program (see below) because you will not be eligible for this program if you are not also in AgriStability.
In some rare circumstances, you may not have received your Fee Options Notice yet. In these cases, you will have 30 days from the time you receive the notice to pay the fee instead of the April 30, 2008 deadline with the 20% penalty as noted above.
Please also note that if you have not been previously enrolled in AgriStability/CAIS, it is too late to apply for the first time for 2007.
The deadline to submit your final 2007 AgriStability/CAIS applications is June 15, 2008 for partnerships/proprietorships and June 30, 2008 for corporations.
If you have completed six months of activity in fiscal 2008, you may want to consider submitting a 2008 Interim AgriStability application. This will allow you to receive 50% of your total estimated 2008 AgriStability payment based on an estimate of your 2008 full-year's margin before your year-end is completed.
AgriInvest:
The AgriInvest program is designed to replace the first 15% decline in margin that is no longer supported by AgriStability/CAIS. It works almost exactly the same as the old NISA program that existed before 2003.
If you were previously enrolled in AgriStability/CAIS or the Cost of Production Program (COP), you should have already received an AgriInvest KickStart application indicating the initial payment that you can get from AgriInvest. To get the payment, you have to respond to the letter confirming that you were farming in 2007 and will participate in the program in 2007. The deadline to respond is June 30, 2008 or 30 days from the time you get the letter (whatever is later). You can elect to get the KickStart payment right away or deposit it for later withdrawal. It is taxable in the year you receive it.
Please remember that if you were not farming in 2007 and elect to receive an AgriInvest payment then you will likely be required to pay the money back.
If you were not previously enrolled in AgriStability/CAIS or the Cost of Production Program (COP), you will need to send in an AgriInvest KickStart application before April 14, 2008 to be enrolled in the program.
You do not have to be enrolled in AgriStability/CAIS or any other government program to be enrolled in AgriInvest.
If you commit to being enrolled in AgriInvest in 2007, you will need to submit your 2007 income and expenses on a T1163 (Statement A) as part of your tax return before September 30, 2008. This same statement is also used to report your income and expenses for AgriStability/CAIS.
If you opt-out of AgriInvest in any year, you will not be able to get back into the program for two years following the opt-out year.
AgriInvest will calculate a deposit you need to make each year based on 1.5% of your "Allowable Net Sales" and issue a Deposit Options Notice (DON). You will then have 90 days from the date on this DON to make the 1.5% deposit which the government will match (similar to NISA) into your deposit account.
The "Allowable Net Sales" calculation used to calculate the AgriInvest deposit is different from the "Production Margin" calculation used for the AgriStability/CAIS payments. The AgriInvest "Allowable Net Sales" calculation only includes seed, livestock and a percentage of purchased feed and custom feeding expenses whereas the "Production Margin" also includes 100% of the feed costs as well as other variable expenses such as containers and twine, fertilizer, pesticides, veterinary, trucking, hydro, etc.
Another thing to consider is that operations that have a mixture of supply managed and non-supply managed commodities will have their "Allowable Net Sales" adjusted for the supply managed component. For example if you had $50,000 in milk income and $50,000 in cattle income (50% of income from supply management) and $50,000 in hay/livestock expenses, your "Allowable Net Sales" calculation would be $50,000 + $50,000 - $50,000 = $50,000. They would then reduce this $50,000 by the 50% of income from supply managed commodities - which would be $25,000.
However, even though the "Allowable Net Sales" is reduced in the above example, the farm would still qualify for AgriInvest. Therefore, if you have a combination of supply managed and non-supply managed commodities, it is likely worthwhile for you to enroll in AgriInvest even though you may not be participating in any other government programs.
Risk Management Program (RMP):
The Risk Management Program is similar to the old Market Revenue program in that payments are based upon grain and oilseed prices falling below an average of the past ten years.
The deadline to have enrolled for the RMP for 2007 was December 31, 2007. However, producers who did not participate in RMP for 2007 can still enroll for 2008. The deadline to apply for 2008 is May 1, 2008.
No premiums were required to participate in the Risk Management Program in 2007. However, starting in 2008, you will have to pay a premium. AgriCorp will calculate the premium and send you an invoice for it that must be paid before July 10, 2008 to stay enrolled.
In addition to paying the premium, the Risk Management Program (RMP) also requires you to also stay enrolled in both AgriStability/CAIS (see above) and Production (Crop) Insurance.
Moreover, the program also requires you to make a commitment to participate in unspecified marketing and/or or financial planning courses that will be offered in the future.
Producers that enrolled for RMP in 2007 will have until May 1, 2008 to opt out of the program for 2008. However, if you opt out you will not be able to participate in 2009 as well.
Another thing to consider with the RMP is what "coverage" level you want. Producers who participated in 2007 will be automatically renewed at the 100 percent coverage level. Participants who want to reduce their coverage level should notify Agricorp by May 1, 2008. Reducing the coverage level will reduce your premium but also any potential payments you might receive.
To help make your decision as to which coverage level you should choose, please find attached a page outlining the 2008 Risk Management Program Premium Rates. For example, for soybeans, the 100% coverage level premium would be $0.12/bushel. If you reduced this coverage level to 85%, the premium would be only $0.01/bushel. However, if you chose the 85% coverage level you would only receive a payment if the market price falls below $7.81/bushel vs. $9.19/bushel under the 100% coverage level.
Because grain and oilseed prices have generally been very good lately, it is unlikely that you will receive a significant Risk Management Payment for most crops for the 2008 year and maybe 2009 as well. Therefore, you may want consider reducing coverage or even opting out of the program. If you are considering opting out, please find attached an article from the Ontario Corn Producers' magazine that outlines some of the reasons to stay in the program.
Ontario Cattle Hog and Horticulture Payment (OCHHP):
This OCHHP program was a one-time payment that was only available to farmers who had at least half of their sales from any combination of cattle, hogs or horticulture in either 2005 or 2006.
You were not able to apply for this payment. Payments were issued automatically to producers that had already previously received a Cost of Production (COP) payment in the summer of 2007. You had to have previously received the Cost of Production (COP) payment to be eligible.
The mailing of these cheques started February 29, 2008. If you have not received this cheque yet and you feel you meet the above eligibility requirements, please contact us so we can look into why you did not qualify.
It should be noted that unlike AgriInvest, you will not have to repay any benefits you get from the OCHHP program if you were no longer farming in 2007.
Summary:
Dealing with all of these government programs can be a very complicated and frustrating process. Therefore, please do not hesitate to contact our office if you need some help.
For more information contact:
Thomas G. Blonde, B.Sc.(Agr.), CA
Collins Barrow Chartered Professional Accountants
Wellington-Dufferin District
E-Mail: tblonde@ebelora.com
Phone: (519) 846-5315
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