The Risk Management Program (RMP) is a three-year pilot program launched in August 2007 and designed to help Ontario grain and oilseed producers compensate for low commodity prices. Both grain and oilseed crops sold and those that are fed to livestock are eligible for the program.
The program is funded partly by producer premiums and partly provincial funds. The RMP payments are triggered when prices for grains and oilseeds fall below a specific support price. When RMP is joined with Production Insurance (PI) and CAIS it is part of a theoretically effective risk management package offered to Ontario producers.
To participate in RMP, producers must comply with the following:
- Grow at least one of the 21 eligible grain and oilseed crops.Â
- Enrol and pay the required RMP premium for the entire acreage of each grain or oilseed crop grown for each of the pilot years. This premium requirement is waived in first year of the program (2007).
- Obtain AgriStability/CAIS coverage by paying the AgriStability/CAIS fee for the corresponding pilot years.Â
- Participate in the Production Insurance program, where available, for each grain and oilseed crop grown for the 2008 and 2009 crop years *Â
- Participate in marketing and or financial planning courses; however the details of this requirement have not been determined.
* NOTE: The deadline to enrol in PI for the 2008 winter wheat crop for full coverage is November 1, 2007. However, you can elect to instead enrol in the spring for partial coverage before May 1, 2008, in which case only the yield (and not reseeding) will be supported.
Application and Deadline
The deadline to submit the RMP application is November 15, 2007.
If you were previously enrolled in Production Insurance or Market Revenue, Agricorp should have already mailed the Risk Management Programs applications directly to you. If you have not received a personalized application yet for whatever reason, please call Agricorp toll free at 1-888-247-4999 or visit their website at www.agricorp.com to get a copy.
It is very important that the application be completed and submitted before the November 15th deadline to be enrolled in the program, as there is no guarantee that Agricorp will have any leniency if it is filed late.
Should I Enroll?
If you are already enrolled in AgriStability/CAIS and Production Insurance for all your grain and oilseed crops, then it is advisable to enroll in the Risk Management Program as it is easy to apply and the incremental cost is minimal.
The decision becomes more complicated if you are not already enrolled in AgriStability/CAIS and/or Crop Insurance. You will have to factor in the cost of the premiums associated with each of these programs as well as the compliance costs (which can be significant). Since every farm is different, there is no easy answer to this question. Therefore, it may be advisable to contact a professional advisor, such as your local Collins Barrow office, to determine whether the costs outweigh the potential benefits of enrolling.
Payments
Payments are triggered when the market price for grain and oilseed crop falls below a predetermined support level (which is an estimate of the cost of production for each crop). For 2007, the support levels of selected major crops are as follows:
- Grain corn: $4.08/bu
- Soybeans: $9.19/bu
- Winter wheat: $4.71/bu
- Spring wheat: $5.47/bu
- Canola: $8.86/bu
- Spring grain: $3.24/bu
- White beans: $30.48/cwt
Two payments will be made each year - typically one in the fall and one in the spring (unless it is something like winter wheat). Each payment will be based on 50% of the participant's 10-year average farm yield times the participants acreage times the difference between the support level and the applicable market price. This amount will then be multiplied by 40% to reflect the portion of the program that is supported by Ontario (Since the federal government is not currently supporting the program).
The market price for each commodity used in the above calculation is the average of forward contract prices for the six months prior to harvest (typically fall payments) or the average of cash/spot prices for six months during and after the harvest (typically spring payments). The sources for these prices for selected major crops are as follows:
- Grain corn/soybeans: Daily averages for Chatham delivery.
- Winter and spring wheat: Daily averages for the Board terminal delivery.
- Canola/Spring grain/White beans: Average of monthly prices for delivery at a cross section of Ontario elevators.
Payments are capped at $130,000 per individual, or up to $390,000 for three individuals in a corporation or partnership per crop year.
Example of Payment Calculation:
- Average Farm Yield of the Past Ten Years (150 bu/acre) (Corn Crop)
- Crop Year Acreage (100 acres)
- Support Level (per above) $4.08/bu
- Average Market Price $3.08/bu
- Support Level - Average Market Price = $1.00
- Payment = 150 bu/acre * 100 acres * $1.00 * 50% * 40% = $3,000
Note: The above will be paid every six months with the support price changing to reflect the changes in forward and cash/spot prices during the year, per above.
Premiums
Premiums for RMP are based on the difference between the support level and historical market price for each grain and oilseed crop. The difference is then multiplied by 12%, which is 30% (participant's one third of the total premium) times 40% (province's traditional share of BRM programs). Note: There is NO federal portion, as the federal government is not supporting the program at this time.
The premiums for 2007 have been waived but starting with the 2008 crop year, the annual premium must be paid before any payment is issued.
Timeline
Timelines for the first year of the RMP pilot program are as follows:
- November 1, 2007 - Deadline for full 2008 winter wheat PI coverage (to receive both reseeding and yield coverage).
- November 15, 2007 - Deadline to submit RMP applications
- November 30, 2007 - Deadline to join AgriStability/CAIS for 2007
- December 31, 2007 - 2007 AgriStability/CAIS fee deadline (to avoid late fee)
- December 2007-February 2008 - First 2007 RMP payments are issued
- February-March 2008 - Agricorp mails RMP renewal package
- April 30, 2008 - 2007 AgriStability/CAIS final fee deadline (with late fee)
- May-June 2008 - Second 2007 RMP payments are issued
- May 1, 2008 - Deadline for spring seeded grain and oilseed PI coverage (and yield coverage only for winter wheat if you did not previously enroll before November 1).
- May 1, 2008 - Deadline to select RMP coverage for 2008
- June 30, 2008 - Deadline to report acreage for 2008 (for PI and RMP)
- July 10, 2008 - Deadline to pay premiums for 2008 crop year (for PI and RMP)
Agricorp will mail information about selecting coverage, reporting acreage, and paying premiums to enrolled producers in advance of the above deadlines. For further information on the new RMP, contact Agricorp or your local Collins Barrow office.