Growing Forward 2
Business Risk Management
Sale of Canadian Wheat Board
OECD Support Estimates
Canada's agricultural and trade policy encompasses some aspects that are very market-oriented, such as Canada's participation in NAFTA and encouraging a savings program for producers that is designed to be decoupled from production. Other aspects, such as supply management in the dairy, egg, and poultry sectors, represent significant interventions in the market and limit the extent to which foreign suppliers can serve Canadian customers.
Agriculture and Agri-Food Canada (AAFC), the ministry that serves as Canada's counterpart to USDA, provides information, research, technology, policies, and programs to the agricultural sector. AAFC reports to Parliament and the Canadian people through the Minister of Agriculture and Agri-Food.
Growing Forward 2 (GF2) is Canada's most recent major initiative in the area of domestic agricultural support. Announced by the Federal, Provincial, and Territorial (FPT) agricultural and food ministers at their annual meeting in September 2012, GF2 is the sequel to a similar policy framework called Growing Forward and represents an expenditure of about 3 billion Canadian dollars (roughly 2.3 billion U.S. dollars) over a 5-year period (2013-18). Of this amount, 2 billion Canadian dollars will be financed on a cost-sharing basis between Canada’s Federal Government (60 percent) and the Provincial and Territorial governments (40 percent), and 1 billion Canadian dollars of programs focused on fostering innovation, competitiveness, and marketing will be financed solely by the Federal Government.
GF2 retains a suite of business risk management (BRM) programs that were part of the original Growing Forward. The four BRM programs are:
- AgriInvest – Encourages farm savings
- AgriStability – Stabilizes producer profit margins
- AgriInsurance – Provides insurance against natural perils
- AgriRecovery – Addresses the impacts of natural disasters
AgriInvest is described by the Canadian Government as “a self-managed producer-government savings account that allows producers to set money aside which can then be used to help risk manage small income shortfalls, or to make investments to reduce on-farm risks.” Participants may deposit up to 100 percent annually of the difference between their sales and purchases of allowable commodities, defined as Allowable Net Sales (ANS), into an account and receive a matching contribution from the FPT governments. The matching contribution equals one percent of the deposit and is capped at $15,000 per year. The account balance is limited to 400 percent of ANS. AgriInvest covers most primary agricultural commodities, except those governed by supply management (dairy, poultry, and eggs).
AgriStability partially covers declines greater than 30 percent in the margins of participating producers. The program is triggered when a participating producer’s margin (allowable revenue less allowable expenses) falls to less than 70 percent of its 5-year Olympic average "reference margin." Producers participating in the program must pay a fee of 4.50 per 1,000 Canadian dollars of insured margin and a fixed administrative cost fee of 55 Canadian dollars per account.
AgriInsurance encompasses benefits previously provided under the Crop Insurance program. The program aids farmers in mitigating risk by insuring losses to production and farm assets caused by natural perils. The program is similar to the U.S. crop insurance program, with the significant difference being that the program is delivered through governmental crown corporations and provincial administrations in Canada rather than the private sector as in the United States. Farmers build accounts through annual deposits based on a percentage of ANS, with matching contributions from the FPT governments.
AgriRecovery is a framework through which the FPT governments jointly assess the impacts of natural disasters on producers and the need for new initiatives to assist producers facing natural disasters whose needs have not been met by the other programs. AgriRecovery focuses on extraordinary costs that are necessary for the quick resumption of farming operations after a natural disaster or the mitigation of the adverse effects of such a disaster and are not covered by other government programs.
Supply management has been a feature of Canadian agricultural policy for over four decades and continues to be dominant in the dairy, poultry, and egg commodity sectors. Production and marketing systems under supply management have three main features:
- Price support policies based on production costs and return on equity and management
- Production limited to domestic demand at the cost-determined price
- Border measures to guard against foreign competition, including tariff rate quotas (TRQs)
The Government of Canada has expressed its support for the choice made by producers operating under supply management. This position has been communicated in many fora, including the Doha Round of multilateral trade negotiations at the World Trade Organization (WTO).
The Canadian Wheat Board (CWB) was a shared governance marketing organization that operated as the sole marketer (the “single desk”) of wheat and barley produced in western Canada. Acting as a single agent on behalf of farmers, the CWB had statutory authority to purchase and market all wheat and barley produced in Alberta, Manitoba, Saskatchewan, and the Peace River District of British Columbia, both for domestic use and export.
In July 2015, Canada’s Federal Government finalized the sale of the CWB to G3 Global Trade Group, a joint venture between SALIC Canada Limited and Bunge Canada. The former CWB was combined with Bunge Canada and is now part of a new firm called G3 Canada Limited, with facilities in the Provinces of Saskatchewan, Manitoba, Ontario, and Quebec. SALIC Canada Ltd. is a wholly-owned subsidiary of SALIC (Saudi Agricultural and Livestock Investment Company), a joint stock company owned by Saudi Arabia’s Public Investment Fund.
Agricultural support estimates calculated by the Organization for Economic Co-operation and Development (OECD) provide a common framework for evaluating the size of government support to agriculture by the OECD countries. The total support estimate (TSE) measures "the annual monetary value of all gross transfers from taxpayers and consumers arising from policy measures that support agriculture, net of the associated budgetary receipts, regardless of their objectives and impacts on farm production and income, or consumption of farm products." In 2009, Canada's TSE equaled nearly 11.5 billion Canadian dollars.
The TSE has three components:
- The producer support estimate (PSE), which indicates "the annual monetary value of gross transfers from consumers and taxpayers to support agricultural producers, measured at farm gate level."
- The general services support estimate (GSSE), which indicates "the annual monetary value of gross transfers to general services provided to agricultural producers collectively (such as research, development, training, inspection, marketing, and promotion)," and
- Transfers to consumers from taxpayers (TCT), which in the Canadian case have been zero in recent years.
In 2009, the PSE accounted for 77 percent of Canada's TSE, and the GSSE accounted for 23 percent.
In the same period, market price support (MPS) accounted for 57 percent of Canada's PSE; payments based on current area, animal numbers, receipts, or income, where production is required to qualify for the payments, accounted for 29 percent; and all other forms of producer support accounted for 13 percent.
MPS is calculated "by adding together the price transfers to producers from consumers and taxpayers, minus the contribution that producers make to these transfers." For an individual commodity, these price transfers are estimated by multiplying the market price differential (MPD) by the quantity of domestic supply, where the MPD is the difference between the domestic market price and the border (reference) price of the commodity. Thus, Canada's MPS estimates for milk, poultry, and eggs provide some indication of the level of support provided by supply management, which is likely to have the effects of widening the MPD and increasing domestic production. In 2009, milk accounted for 66 percent of Canada's MPS, followed by poultry (9 percent) and eggs (2 percent).
Payments associated with Canada's suite of BRM programs are classified in the category of producer support in the form of payments based on current area, animal numbers, receipts, or income, where production is required.
When compared with the value of agricultural production, Canada's level of producer support has been on a downward trend in recent years. The percentage PSE, which equals the amount of producer support divided by the sum of transfers from taxpayers to producers and the value of agricultural production, offers an insight into this trend. In 2006, 2007, and 2008, the percentage PSE equaled 22, 19, and 13 percent, respectively. This downward trend is due in part to recent increases in commodity prices, which reduce the need to compensate producers. When the global economic downturn caused commodity prices to fall in 2009, Canada's percentage PSE rose to 20 percent. Overall, Canada's percentage PSE is about 5 percentage points below the OECD country average but approximately double that of the United States.
|Total value of production (at farm gate)||29,401.54||31,461.01||31,570.03||32,547.05||37,021.37||42,108.57||40,278.84|
|Producer Support Estimate (PSE)||8,594.90||7,521.15||7,945.15||7,860.46||7,695.62||5,838.59||8,895.68|
|Support based on commodity outputs||4,099.14||3,358.23||3,577.32||4,548.62||3,759.14||2,998.76||5,136.94|
|Market Price Support (MPS)||4,099.14||3,358.23||3,577.32||4,548.62||3,759.14||2,996.32||5,136.94|
|Estimates for all other commodities||1,073.29||854.43||892.40||1,175.18||909.92||693.11||1,213.42|
|Payment based on current A/An/R/I, production required||3,076.76||2,664.10||1,937.65||1,635.12||1,679.66||1,391.59||2,587.36|
|Payments based on other criteria||1,419.00||1,498.82||2,430.17||1,676.73||2,256.81||1,448.24||1,171.39|
|Percentage PSE (PSE/(I+B+C)||25.36||21.11||22.11||21.92||18.79||12.99||20.20|
|General Services Support Estimate (GSSE)||2,364.77||2,538.51||3,075.85||2,713.01||2,923.66||2,846.31||2,604.18|
|Research and development||470.66||441.16||500.68||460.88||517.33||388.31||470.79|
|Marketing and promotion||597.08||705.72||1,101.19||675.62||639.28||799.19||645.34|
|Total Support Estimate (TSE)||11,045.07||10,059.66||11,021.00||10,573.47||10,619.28||8,684.91||11,499.86|
|Source: Organization for Economic Co-operation and Development, Producer and Consumer Support Estimates Database.|