Canadian Pork Council Continues Pushing For Changes To AgriStability
by Cory Knutt, Discover Westman (Canada)
24 August 2020
Canadian Pork Council (CPC) Chair and Manitoba producer Rick Bergmann recently sent a letter to the country's agriculture ministers, asking for changes to be made to AgriStability. Below is a copy of the letter:
On behalf of Canadaís 7,000 pork producers, I am writing to urge you to make targeted enhancements to fix AgriStability. Producers are facing unprecedented volatility and loss due to COVID-19, and fixing AgriStability is essential to helping farmers stay in business as they struggle to produce the high-quality, affordable protein that Canadian families want and need.
The year 2020 was supposed to be a positive year for the thousands of farm families that produce pork. Following years of market disruption, driven by factors outside of our control, such as the US-China trade war, market fundamentals were improving, and it looked like it would be a profitable year.
Then COVID-19 hit. After a brief period of sharp price increases for their hogs, producers saw some of the steepest, most profound declines the market has ever recorded. Forecasts made in June 2020 project that pork producers will lose $20/hog for every hog they sell in 2020, for Canadian pork producers the total loss will be more than $500 million.
The impact of COVID-19, including the increased volatility of the markets and the other risks that farmers face, are not felt equally by all producers. For example, vertically integrated producers and processors can mitigate some of the market volatility. Other producers can use private risk management tools, like hedging, but the availability and accessibility of these tools are limited.
Regional differences also impact producers in various ways. For example, Quebec prices hogs differently than the rest of the country, mitigating the impact of COVID-19 but even that system is under pressure. Western Canadian producers are very exposed to extreme volatility and loss and will likely lose more than $45 a hog compared to the 5-year average. Losses for isowean producers, those that sell piglets to be grown by others, can be even more significant. Some isowean producers have seen their piglets become worthless and have struggled to find any buyers at all.
Governmentís response to COVID-19 may have helped some small businesses, but the program response is not enough to address the significant loss facing pork producers. For example, the wage subsidy can help, but salaries, wages and benefits, represent approximately 8% of an average farmís operating expenses so the wage subsidy is often not enough to make a difference on a hog farm.
That is why the imperative is so great to fix AgriStability. It is supposed to support producers who need it most when they need it most. Unfortunately, it is a broken program that offers too little support to make a difference when farmers are facing a financial disaster like they are with COVID-19.
Farmers across Canada have long called for the payment trigger so that they are not pushed to the brink before AgriStability kicks in. Pork producers support efforts to have the trigger raised to 85% so that farmers can have confidence the program will be there when they need it. Pork producers are concerned that the cost of increasing the trigger to 85% has created a barrier to movement at the FPT table. As a result, while the pandemic drags on and more farms are pushed to near financial collapse, there has been little action from governments to help them stay in business. Inaction cannot be an option, the consequences on Canadian farm families will be too severe, and therefore we believe the time has come to consider alternatives.
There are other ways to fix AgriStability. Its fundamental challenge is that it does not provide enough support when farmers are facing significant loss. A simple solution would be to leave the trigger at 70% but increase the compensation rate to 85%. Doing so would retain AgriStability as a disaster program, respect Canadaís trade obligations, significantly reduce the cost to governments, but still provide additional support to those who are facing extreme loss. Increasing the compensation rate to 85% will make a significant difference for those producers who need it most. It will increase payments by 20%, but ensure those payments are only received by those facing substantial loss.
There is a growing consensus that the impacts of the pandemic will be felt for years to come. Producers need to know that the government will be a partner with them throughout the entire period of increased volatility and loss. Therefore these critical, targeted changes must be made for the remaining two years of the Canadian Agricultural Partnership program. Inaction will severely impact 25-billion-dollar industry and the hundred thousand Canadians employed in the pork value chain.
The Canadian Pork Council is willing to work with governments to explore how they can offer the backstop that pork producers need. We look forward to continuing to work with governments on these changes, but the time for discussion is running out. Without meaningful action, governments will soon be faced with the impacts of hog farms of all production types going out of business. Governments need to act now before the consequences are too severe.
Canadian Pork Council Chair and Manitoba producer