Farm programs are much in the news these days. “I am from the government and am here to help you.” Have you ever heard that one before? Full disclosure — I am not an ag economist so this is largely opinion backed up with facts based on my experience as a two-bit farmer.
A bit of history
As a kid, I remember the days of the old PFAA payments. The Prairie Farm Assistance Act was passed in 1939. Yes, that was just after the Dirty Thirties were over. Many farm assistance programs work that way.
The PFAA payments were based on crop yield on a rural municipality basis — I think bulked up to larger regions. What I remember was the representative who came around to obtain information about crop yields. “Keep it down, Lou (my dad), so we can get the PFAA payment.” PFAA was paid on an acre basis with the maximum payment being $4 per acre ($73 per acre in 2021 dollars).
The PFAA program ran until at least the 1960s.
Start with the good news: Saskatchewan Crop Insurance
I use Saskatchewan because I have dealt with that program as a small farmer and know from experience. For my money, most farm programs should be scrapped and the money put toward further enhancements of crop insurance. The current program has undergone many shifts over the years and continues to evolve as farming evolves.
My experiences with Saskatchewan Crop Insurance have been mostly positive. The program is flexible and you can make your own choices about the level of coverage and, hence, the premiums. If the soil is bone dry take 80 per cent coverage, but if the soil is at field capacity moisture, take 50 per cent.
The premiums reflect the level of coverage a farmer selects. As a farmer establishes a good yield record, the premiums reflect that record — and 60 per cent of the premium is paid by governments and 40 per cent by farmers. What’s not to like about that.
The crop insurance program is not static. As new crops come along and experience is obtained, the new crop will be included in the program. The area of coverage is dictated by the adaptability of that crop to various soil climatic zones. The Saskatchewan Crop Insurance program is in a constant state of flux to reflect changes that are inevitable in our business.
For my money, if a grain farmer elects not to be involved in crop insurance, they should be left out of rescue programs that come along to deal with natural disasters.
The start of big farm programs: GRIP and NISA
The 1980s were bad times for grain farmers in Western Canada. Drought was the big issue and sky-high interest rates (not many kids will remember 15 to 20 per cent interest rates) were the kicker.
Again, the response came when the bad years were just about over. I recall a Farm and Home Week Program at the University of Saskatchewan and a session that dealt with government aid. GRIP (Gross Revenue Insurance Program) and NISA (Net Income Stabilization Account) were the big news events. I felt sorry for the federal bureaucrat tasked with delivering the “good news” to the audience. He was sent into the lion’s den. When questions started to fly he had to fumble around in the big, thick, three-ring binder, searching for an answer.
GRIP was ill-conceived and colleagues at the U of S ag economics department pointed out the many flaws. It stumbled along for about 10 years.
NISA was a great program. When farmers had a good year, they could put money into a savings account at any bank. The government matched that amount right away and juiced up the interest rate by about three per cent. There was a limit based on each individual farmer but the overall limit was $250,000. I knew big farmers who had the limit in their NISA accounts. The idea was that farmers would dip into that when trouble came along.
When trouble came along, the Feds were wondering why farmers were not dipping into their NISA accounts. Sorry, folks in Ottawa, the farmers who had big amounts in their NISAs have never been in trouble and are not going to be in trouble.
Even this old two-bit farmer enrolled in NISA. I am not a big fan of government programs but where else do you get an immediate 100 per cent return on an investment. It was not all gravy — when NISA was shut down we all had to withdraw and there was some income tax to pay on the share the government had put in. Fair enough, but in my opinion, NISA served no real purpose down on the farm. I guess we should not look a gift horse in the mouth, but that is my take.
The modern era: AgriStability, AgriInvest, AgriRecovery
AgriRecovery was intended to be a fund to provide help when a large, natural or market disruption occurred. Not sure how often that has been used.
AgriStability is a margin-based program that is very complex and hard to administer. An ag economist I had great respect for said it was not appropriate for farming because farming is not a margin-based business. We do not grow a bushel of grain, add up what it cost to grow that bushel and add a margin to sell the grain. AgriStability has been a problem child from birth. It is complex, hard to administer and current discussions seem to prove to me that it should be scrapped.
AgriInvest is a scaled-down version of NISA with no bonus added to the interest rate. True to form, when black clouds are forming over some farms, the politicians are wondering why farmers are not cashing out the balances in AgriInvest. I repeat — farmers that have the maximum in AgriInvest have never been in trouble and most likely never will be.
In recent press, I have seen discussions about programs for such things as Agricultural Climate Solutions ( ? $85 billion) and Living Labs networks. I place those in the category of fuzzy thinking and doubt if they will add much to the welfare of farmers. However, they will eat up many resources in the planning and create a bloated bureaucracy to administer.
The bottom line
In my opinion, what we need for grain producers is a good, all-risk crop insurance program, which we have. Also needed is a fund of money that is spoken for to help farmers survive when disaster strikes. Leave the rest of the money in the kitty. Both senior levels of government are going to need huge gobs of cash to dig out from the very big hole this pandemic has left us with.
In fairness, I think most elected members seriously try to do what they think is best for the welfare of their constituents. It is easy to stand back and criticize, but stop and think what you would do if you were elected. I have done that and always chickened out and did not run. As long as they get there by getting the most X’s on ballots, I will accept what happens.