Could a Canadian-style farm insurance scheme work in the UK?
With the UK nations now having blank sheets of paper to develop new domestic agricultural policies, Alistair Driver looks at one idea currently receiving a lot of prominence.
It might be very early days yet, but already Whitehall appears to be casting its eye towards North America when it comes to formulating a new post-Brexit farm policy for the UK.
That at least is the impression given by Farming Minister George Eustice, who is starting to nail his colours to a particular mast.
Mr Eustice, who has pledged to work with the industry to put together a new farm policy, has signalled his intention to move away from the ‘clunky’ area-based direct payment regime with all the ‘environmental conditions dumped on top of it’.
Instead, he wants to explore risk management tools, such as futures markets and the Canadian model of farm insurance, backed up with grant aid and a ‘more holistic approach to protecting the environment’ built around catchment-based areas.
He said: “It would be better to separate out our objectives for a farm policy. We want to protect food security and enhance farm profitability. What is the best way to do that? Is it through crop insurance and grant aid to get the most modern technology on farms?”
Read More
What is the Canadian model?
Canada is in the middle of its five-year (2013-2018) Growing Forward 2 farming and food policy, worth CA$3 billion (£1.74bn) provided by federal, provincial and territorial Governments.
The central Government administers three programmes with CA$1bn (£580m), aimed at generating market-based economic growth in the agricultural sector.
AgriCompetiveness: Supports industry-led projects to boost competitiveness through, for example, developing leadership skills and encouraging business development.
AgriMarketing: Helps the food and agriculture industry create and maintain access to markets at home and abroad.
AgriInnovation: Supports research and development innovation and helps industry bring the results of research to the market.
The rest of the programme is administered by 13 provinces and territories in Canada with funding shared between central and provincial Governments and farmers. While details vary regionally, the broad programmes include:
AgriInvest: Helps farmers manage small income declines and supports investment to mitigate risks or improve market income. Farmers make annual deposits based on a percentage of their allowable net sales and receive matching Government contributions worth up to CA$15,000 (£8,700) per year. Funds can be withdrawn at any time throughout the year.
AgriStability: Provides support when the current year’s margin falls below 70 per cent of the farm’s reference margin.
AgriInsurance: Stabilises producers’ income by minimising the economic effects of production losses caused by natural hazards. Plans help to cover production losses and loss of product quality and both yield and non-yield based plans are offered. Covers traditional crops and horticultural crops, while provinces are now being encouraged to develop livestock plans.
AgriRecovery: Covers extraordinary costs producers face in recovering from natural disasters, such as plant or animal disease, pest attacks or weather-related events.
AgriRisk Initiatives: Supports research and development, implementation and administration of new risk management tools for the agriculture sector.
Mr Eustice appears to like the principle farmers have to put money in to get public funding back.
A Canadian-style insurance policy, he said, would reward farmers who invested in their businesses ‘to produce more for the country’.
Mr Eustice said: “You do not need an active farmer test. It naturally rewards farmers who are putting money on the line to produce food.”
Canadian perspective
Hugh Maynard, who owns Canadian agricultural consultants Qu’anglo Communications and Consulting, said the current programme represented a move away from direct payments, either as disaster relief, market compensation or income insurance.
He outlined how key initiatives, such as the ‘Agri accounts’ had their pros and cons. These are funded by farmers, the federal Government and provinces, which each put in one-third of the money, but farmers can manage withdrawals when they need it.
Mr Maynard said: “Initially, it is a good deal for farmers when they set up the accounts with bonus payments and all that political incentive to change stuff.
“The question is how they fare when there are prolonged drops in markets or successive weather-related problems and farmers do not have the money to put into the fund once they have been emptied.
“There are also concerns about young farmers not having sufficient funds at the beginning of their careers if there is a major problem to be dealt with.
“Also, some provinces allow farmers to take money out for any reason, such as building a new barn, so what happens when all the money has been spent on the barn and there is a flood?”
The Government’s motivation was to reduce farmer dependence on handouts, but small farmers would be hardest hit, Mr Maynard added, as many were only still in business because the previous programmes stabilised incomes, even if they were only part-time.
UK industry view
George Dunn, TFA chief executive
“It is interesting George [Eustice] has nailed his colours to that particular mast. Our view, based on anecdotal comments members on our executive committee have heard from Canada, is it is not a panacea and farmers should not believe everything they hear and read about it.
“Rather than trying to do some super-national insurance scheme, which could be very complicated and difficult to apply in individual circumstances, a better way to ensure we are resilient and deal with volatility in the long-term is a three-pillar model.
“This includes an outcome-focused agri-environment scheme; an infrastructural grant scheme to encourage development of farm businesses; and funding to promote British farm products.”
Meurig Raymond, NFU president
“I have studied the US [farm insurance] model and farmers who can least afford the insurance do not put their premiums in, so when prices fall off dramatically, it is the ones who need it the most who struggle.
“There is a lot of bureaucracy involved and I think the Canadian model is even more bureaucratic. I have personally yet to find a model which is simpler than the present one in supporting farmers.
“We are going to have this debate with our membership over the next two or three months and, in-house, we are studying these models in the US and Canada to see if there is something which might be useful for the UK.”
Most Recent
Farmers Guardian and FarmersGuardian.com are trademarks of Farmers Guardian Ltd, a subsidiary of AgriBriefing Ltd.
All material published on FGInsight.com and FarmersGuardian.com is copyrighted © 2020 by AgriBriefing Limited. All rights reserved.
