- reforming Agri-Stability Agri-Invest farm programs
Proposal to spare farm kids of hardship, save rural communities, and reduce government cost.
This proposal sent to Canada and Manitoba's Ministers of Agriculture, Sept 8, 2020
AGRI-STABILITY rebirth as "AGRI-FAMILY-STABILITY"
1. Payouts made to the less-farm-active spouse, to firstly reduce hardship on children when farm income declines. Lenders are forbidden from holding it as security.
2. Use only the net sales of crops and livestock and derived products reported as farm income. Eligible sales capped at a maximum per actively working farm owner, e.g. $400,000 per sole proprietor and $1,000/acre of crops, $3,000/cow, etc. Ignore expenses.
3. Allocate a fixed credit, eg.1% of net sales, towards every farmer's potential payout. The credits can accumulate for eg.7 years, then drop the credit from 8 years prior.
4. Withdrawal is allowed when sales decline from the prior year.
Thus, the maximum payout over 7 years could be:
1% of 400,000 x 7 years x 2 farmers = 56,000 for a typical farm family partnership.
This would achieve uniformity of security for farm families, to an amount likely viewed as reasonable by other Canadians. Farmers would know how much is available for family needs if sales decline.
AGRI-INVEST reform to "AGRI-COMPENSATION"
Cease government's annual subsidization of industrial farm businesses, except to cover bank service charges so the accounts remain to enable compensation in extraordinary circumstances.
EARLY HISTORY OF NISA (evolved into AgriStability and AgriInvest)
Around 1981, I took on the exercise of imagining how to annually pay out the $651million Crow Benefit to farmers as compensation for increasing rail rates. Driving along Hwy 2, between my farm at Killarney and our Winnipeg home and my job as grain market analyst at Northern Sales Co, on the monotonous flats near Fannystelle, the thought came that we could use farmers' income tax returns, to calculate the relative agricultural productivity of each individual farmer, as the basis for allocation of the annual $651M. I was on the Winnipeg Chamber of Commerce Ag Committee for NSCo at the time so knew several of the people involved such as EdTwrycnwesrxiczzzz etc. I wrote it up with rationales, hired a typist/word processor service, and delivered to all of the esteemed panel involved, such as Lorne Parker, Garf Stevenson of Sask Pool, UGG's guy, other farm organization leaders, Clay Gilson and Ed T.... I recall proposing it to elder ArtWilson of CGCouncil who commented that Canada Revenue would never allow access to private income tax returns.
The first principle I proposed, however, was that since highways are clearly subsidized by governments, yet the trucks operating on them and fuel are not, that the same proportional subsidy of the total cost per tonne of cargo moved via the truck/highway mode, should be applied to the train/railways mode, so that the two modes would be equally proportionately subsidized. The first allocation from the $651M should thus go to trains/railways to subsidize to the same proportion as trucks/highways. Then the residual from the $651M would be allocated among prairie farmers on the basis of grain production as reported on income tax returns.
I had also written in the proposal, that the payouts should not be uniform each year but rather be withheld and only paid out in bad years for the Prairie region, similar to how the prior Western Grain Stabilization had operated.
I lost the argument, being an individual with an unique concept and no lobby behind me. The Crow benefit was instead paid out as a larger one time lump sum, using the concept developed decades earlier by Gilson for crop insurance, on the basis of the relative grain productivity potential of the Prairie soils and climates, to the owners of land only, with those who owned the best lands (most easily farmed efficiently) receiving the highest cash payout, and those with the most difficult soil getting the least, regardless of how productive anyone was as an individual. (Public subsidy was paid to serve stagnant capital, not to reward active productivity. Canadian taxpayers gifted a giant sum, in general to persons in the top 10% wealth.)
Then 13 years later, in the mid 1990's, a few of the persons involved in that early 1980's Crow debate were employed again on the farm supports task force at which NISA was assembled. They apparently recalled that same core idea I had delivered in writing in envelopes to them promoting the use of reported sales on farmers income tax return. One of them was later acknowledged as NISA's main creator. They cleverly added the concept of personalizing the years for triggering payouts, but unwisely required cash-strapped farmers to pay a substantial participatory premium into it (those who suffered the most were excluded.)
They also added the distortion of requiring certain classes of input expenses (mostly agchem) be deducted, but not other inputs such the wear-out of machinery. To further distort, they decided to discard 40% of the years, by eliminating the best and the worst years out of every five years, and gave it the Greek gods approval by calling it an "olympic" average! The result of these two unnecessary distortions is lack of predictable reliability for the common farmer, but complex manipulate-able opportunity for the accounting industry that participated in its design, for their benefit and that of their astute deep-pocketed clients. Given that the accounting game in subsidies is to receive more than one's fair share from the limited government funding pot, these distortions allow for manipulation of enterprises to game it. For example, the accounting advisors might plan for one financially disastrous year every five, to trigger a large payout, by heavily loading agchem expenses such as excess P fertilizer into that year and plant mostly a low revenue crop such as rye that is beneficially sacrificial for the rotation. Yet on the revenue side, be careful to not have any high peak year because the olympic average would just discard it in the determination of coverage level. It is very likely some of the shrewd farm accounting firms who advised these complexities have been exploiting them for their client's reward. A few farms must be doing very well from AgriStability, because most apparently feel they are not, yet the taxpayer is paying large funds that obviously are disappearing somewhere.
After all these years of its NISA to Agristability evolution, I think we should return towards an original concept. Indeed, lets focus on the public taxpayers supporting only the needs of farm kids when hardships occur, and ignore the desires of shareholders, bankers and accountants.
Grant Rigby, farmer
Draft of Sept 8, 2020