Business Risk Management Report

In late 2021, Farmers for Climate Solutions (FCS) assembled a Task Force of experts to examine how Canada’s business risk management (BRM) programs could be reformed to help farmers increase on-farm resilience and reduce emissions. This Task Force, and an associated Advisory Body, consisted of agricultural economists, researchers and policy advisors with expertise in Canadian BRM programs.

The Task Force reviewed the academic literature, examined the history of Canadian BRM programs, and looked at experience in other jurisdictions and sectors to answer the following research questions:

MAJOR FINDINGS

The Task Force found that BRM programs impact production decisions and greenhouse gas emissions in Canada. The following are some of the major findings of the research project.

Climate Impact

1. Subsidized BRM programs may incentivize farmers to adopt riskier practices, a phenomenon termed “moral hazard”. Subsidized BRM programs may reduce the likelihood that farmers adopt practices that reduce their climate-related risk, such as diversifying crop rotations, improving soil health and adopting climate-friendly beneficial management practices (BMPs).

2. BRM programs have a greater climate-related impact on the extensive margins (bringing land into and out of agricultural production) than on the intensive margins (decisions around crop mix, inputs and farming practices).

3. Crop insurance programs provide an incentive to convert marginal land, wetlands, grasslands and treed areas to crop production, which can cause significant GHG emissions.

4. BRM programs may encourage specialization, which can increase climate-related risk. This seems to be especially true for AgriStability.

Program Delivery

1. AgriInvest is not achieving its stated objectives and makes little contribution to better risk management in Canadian agriculture. AgriInvest is providing little public benefit and is therefore at risk of elimination if it is not reformed.

2. The delivery of BRM programs varies significantly between provinces. Examples of innovative programs that encourage farmers to reduce their climate-related risk exist in some provinces. Such programs should be considered for adoption by other provinces.

3. Data collection varies significantly between provinces. Some provinces collect data on crop history, input use and farming practices at the field level, while some do not. Lack of data may constrain certain policy options in the future.

4. This research project was hampered by lack of access to data on BRM program participation and the characteristics of BRM participants. The analysis of AgriStability was especially constrained due to lack of access to data

NEXT STEPS

Federal, provincial and territorial (FPT) governments are currently negotiating the next Agricultural Policy Framework (APF) which will guide Canadian agricultural policy, including BRM programs, from 2023 to 2028. FPT Ministers have stated that the number one priority of the next APF should be “tackling climate change and environmental protection to support GHG emission reductions and the long-term vitality of the sector.” Ensuring that BRM programs help farmers manage the range of risks presented by climate change and encourage the transition to climate-friendly practices will be essential to achieving this goal.

To this end, Farmers for Climate Solutions is bringing together a new expert Task Force who will build on the work of the BRM Task Force, and identify ways in which the next APF can contribute to climate change mitigation and adaptation. Their recommendations are set to be published in April 2022, in preparation for the next FPT Ministers meeting set for spring 2022.

Experts working with farmers to recommend policy solutions

The Task Force is chaired by two farmers, and brings together researchers, economists and policy experts.

Leadership

IAN MCCREARY, Chair │ Grain and livestock farmer, McCreary Land & Livestock Ltd., Saskatchewan

BRENT PRESTON │ FCS Interim Director

Analysis Team

AARON DELAPORTE │ Senior Research Associate, Food, Agricultural and Resource Economics Department, University of Guelph

ALFONS WEERSINK │ Professor, Food, Agricultural and Resource Economics Department, University of Guelph

DANIEL SCHUURMAN │ Research Assistant, Food, Agricultural and Resource Economics Department, University of Guelph

KAT LORIMER │ Research Associate, Smart Prosperity Institute

RYAN TOUGAS-COOKE │ Research Associate, Smart Prosperity Institute

TRISTAN SKOLRUD │ Associate Professor, College of Agriculture and Bioresources, University of Saskatchewan

PETER SLADE │ Associate Professor, College of Agriculture and Bioresources, University of Saskatchewan

Advisory Body

JEAN-PHILIPPE GERVAIS │ Vice President and Chief Economist, Farm Credit Canada

AL MUSSELL │ Research Lead and Founder, Agri-Food Economic Systems

RICHARD GRAY │ Professor and Canadian Grain Policy Research Chair, University of Saskatchewan

CHAD LAWLEY │ Professor of Agribusiness and Agricultural Economics, University of Manitoba