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Canada’s income stabilization plan started but still evolving
Farm World Intern-Illinois

URBANA, Ill. — The key to making a “whole farm program” work is the wording, according to Douglas Hedley, a recently retired assistant deputy minister with Agriculture and Agri-Food Canada.

“All products are included unless specifically withdrawn - voluntarily - for some reason, but nothing is ever excluded,” Hedley said of the Canadian Agriculture Income Stabilization program (CAIS), Canada’s new whole farm program, during a lecture at the University of Illinois College of Agriculture, Consumer and Environmental Sciences (ACES).

Hedley delivered the first Gardner Endowed Chair Agricultural Policy Lecture, Canada’s Experience with Farm Revenue Insurance: Lessons for Future U.S. Farm Policy? to a group of professors, farmers, Farm Bureau personnel and a few students on April 6 in the ACES Library.

Canada’s road to a whole farm program began about 20 years ago when “commodity-specific programs faced risk of countervail,” Hedley said, adding that this combined with other factors such as rivalry between provinces for commodity subsidies and “farmers farming the programs not the market” created the need for such a program.

Originally, they tried a Gross Revenue Insurance Program with the intention of creating revenue insurance across several crops. However, there were many flaws in this program, and it was replaced almost immediately by Net Income Stabilization Account.

The NISA, as they called it, was designed by farmers and marked the first real attempt at a whole farm program. It remained in place from 1990 through 2002 and although it had its share of problems, provided the experience necessary for building CAIS.

In 12 years of trial and error with NISA, they learned that income tax filing was the best way to gather necessary background information; farmer contribution into individual accounts worked best and payments should be based off individual performance.

All of these aspects were applied in the initial formation of CAIS, which is designed, Hedley said, “to meet the World Trade Order green box criteria to the maximum extent.”

To meet green box criteria, subsidies must not distort trade, must be government funded and must not involve price support.

In this program, payments are based on individual production. “Governments are buying a portion of the risk across all commodities, leaving the relative risk to the farmer the same as it would be in the marketplace,” Hedley said.

Producers are able to select their level of coverage expressed as a percentage of their reference margin, or historical average, to be covered in the current year.

Canada, Hedley said, is one of few countries that “tried to untangle paragraph seven” of the World Trade Order and follow its requirements. Following the rules of this paragraph means that only income loss greater than 30 percent can be reported and the maximum compensation to be received is 70 percent of that loss.

They also implemented a non-stacking rule to prevent the use of a subsidy to get a different subsidy. Because of this rule, reference margins exclude government payments and only show market income.

Looking to the future, Hedley said, “the CAIS program could become a premium-based insurance, or it might fully integrate with crop insurance.”

This farm news was published in the April 19, 2006 issue of Farm World.