The CFFO Commentary: Future Safety Net Design Drawing Attention

By Nathan Stevens

The next Growing Forward agreement is starting to loom on the distant horizon and farm groups are developing new options that differ from the current program. James Rude of the Department of Rural Economy at the University of Alberta was recently in Guelph to share his insights into Canadian Business Risk Management Programs, and what the key priorities are for government and farmers.

In his view, Canadian safety net programs are attempting to accomplish two different goals with one broad program. The first is a desire to redistribute income in a more equitable fashion for farmers. The second is to address market failures when they occur. The result is the inability to adequately address either goal properly to the satisfaction of farmers.

Government has three main concerns with safety net programming. The first is that there ought to be a predictable amount of money spent on programming, especially within the context of budgetary deficits. The second is the need to recognize the impact government intervention in the marketplace may have on trade obligations. The third key concern is ensuring support programs have a minimal impact on the production choices made by farmers.

On the other hand, producers are dissatisfied with the level of complexity involved in Agristability. Rude asserted that farmers are more interested in an income transfer than in risk reduction. At the same time, they want program payments that reflect their individual operation and they want the payment quickly. These desires are at odds with each other. Rude asserted that if farmers really want timely income transfers then they would be best served by direct payments to farmers. However, this type of payment should be targeted and require cross-compliance with other policy goals, such as environmental standards.

Finally, Rude asked a very tough question regarding safety net design. Should business risk management programs address the issue of long-term decline in a commodity price or should they stabilize fluctuations that occur around the long-term decline?

In Rude’s opinion, the future holds continued trade-offs between socially acceptable safety nets and minimizing distortions for producers. To him, this means that the farming community is in for more of the same from government programming, unless there is a convincing argument put forward to head in a new direction.

Nathan Stevens is the Research and Policy Advisor for the Christian Farmers Federation of Ontario. The CFFO Commentary represents the opinions of the writer and does not necessarily represent CFFO policy. It can be heard weekly on CKNX Wingham and CFCO Chatham, Ontario and is archived on the CFFO website: www.christianfarmers.org. The CFFO is supported by 4,200 farm families across Ontario