Protecting your farm: A SWOT analysis of BRM programs for Canadian farmers
Protecting your farm: A SWOT analysis of BRM programs for Canadian farmers
From unpredictable weather to market swings, Canadian farmers face a multitude of risks that can make or break their year — or their entire business.
Enter Business Risk Management (BRM) programs. Keep reading for a breakdown of the strengths, weaknesses, opportunities, and threats presented by these programs.
In the business of agriculture, risk is a constant companion. From unpredictable weather to volatile markets and pandemics, Canadian farmers face challenges that can make or break a year or — at its worst — even a business.
This reality makes risk management more than best practice for farmers, it’s a necessity.
This is where business risk management (BRM) programs and Agriculture Risk Management Resources (ARMR) come into play. Today’s agricultural producers face unique pressures and need tailored strategies that truly help your operation.
Let’s take a closer look at the strengths, weaknesses, opportunities, and threats (SWOT) associated with BRM programs to help you better understand the options available — and how ARMR can elevate your approach to risk management.
What are BRM programs and why do they matter?
BRM programs are government-supported tools that are designed to help Canadian farmers manage financial uncertainties that have the potential to impact their operations. The support these programs offer is critical, as they help make sure farmers can weather through challenges, recover from financial losses, and, ultimately, maintain their operation.
At their core, BRM programs aim to:
- Protect against volatility
- Improve resilience
- Promote sustainability
It’s important to note that BRM programs are designed to provide relief in instances of disaster — not to compensate for a slightly weaker financial year. Farmers should view them as a safety net for severe, unexpected disruptions.
Three key programs you should know about
While there are multiple programs and private insurance options available in Canada, three play the most significant roles in helping farmers protect their operations:
AgriStability
AgriStability is a federal, provincial, and territorial BRM program designed to protect the entire farm by covering important decreases in the farm’s margin. The program provides support when a farm experiences large income losses — either because of a decrease in production or in the price received for products — or cost increases that reduce the margin. If the farm’s margin dips by more than 30 percent compared to its historical margin, AgriStability covers 80 cents for every dollar lost beyond that threshold.
Crop insurance (or production insurance)
Crop insurance operates provincially, with slightly different structures depending on location. Its primary goal is to protect against yield declines due to natural disasters or disease. Farmers enroll in this program based on their expected yield. If yields fall short (e.g., due to weather events, disease, or pests) the program will compensate for the difference depending on the selected coverage level.
AgriInvest
Also a federal program, AgriInvest functions more like a savings account, offering a matching contribution to help farmers build a financial buffer for leaner times. Farmers can deposit one percent of their annual net sales, and the government matches that contribution (up to maximum of $10,000).
Keep in mind that other government-funded programs may provide other types of coverage. These vary from province to province. Additionally, there are a variety of private insurance programs that can help provide added security.
The strengths of BRM programs
Canada’s BRM programs have supported farmers through challenging times, showcasing their effectiveness in several ways:
Established and effective
Programs like Production Insurance and AgriStability are recognized and valued for their ability to protect against severe losses. Some are tailored to reflect the past performance of individual farm, and others offer coverage based on performance in a region or province, in an attempt to ensure relevant and effective coverage.
Cost-effective protection
The programs often provide comprehensive coverage at a reasonable cost, combining margin-based protection with production insurance to protect farms from financial setbacks.
Provincial adaptability
Provinces are granted the flexibility to customize their programs and develop companion programs to address regional needs. This enhances the relevance and efficiency of BRM programs in the province.
Post-disaster resilience
AgriRecovery has been instrumental in helping Canadian farms recover from major losses, aiding in their ability to return to productivity.
Encouraging efficiency
By prioritizing sustainable operations, BRM programs discourage prolonged reliance on subsidies for unprofitable ventures. This promotes an overall healthier agricultural industry.
The weaknesses of BRM programs
Despite their strengths, these programs are not without their challenges. Here are a few of the most significant ones:
Complexity and communication issues
Farmers often struggle to understand programs like AgriStability due to confusing messaging and the complexity of its mechanism. In turn, this uncertainty chips away at confidence in the program.
Coverage limitations
The $3 million payment cap has become outdated, especially for larger farms. Additionally, coverage disparities between farms with different cost structures leave some operations, like smaller or mechanized ones, at a disadvantage.
Limited scope for multi-year challenges
Single-year solutions, like AgriStability, fall short in addressing prolonged disasters. Think of multi-year droughts, which is a growing concern in the face of climate change.
AgriInvest’s insufficiency
AgriInvest was initially marketed as a savings tool. Now, it’s too limited in scope to serve as a robust risk management solution or investment tool.
Slow response time
One of the main complaints received by farmers about certain BRM programs like AgriStability is the time required before receiving a payment after a bad year. This leaves certain farms with cashflow issues while they are waiting, which can lead to more long-term issues and costs. Some mechanisms like the Advance Payment Program or interim filing can help to reduce this issue.
Opportunities for improvement
Addressing the above-mentioned weaknesses offers an opportunity to improve BRM programs so they better serve Canadian farmers. Here are some areas of improvement:
Modernize AgriStability
By streamlining the program with improved technology, data reporting could be accelerated, coverage calculations enhanced, and payments expedited. This could help reduce frustration and increase uptake.
Scale payment caps
Revisiting the $3 million cap and aligning it with farm size would help better support larger operations while maintaining equity across the sector.
Incentivize best practices
Programs that reward farms for adopting innovative risk-reduction strategies — like sustainable production processes and advanced financial management — could create a more resilient agricultural landscape.
Better coverage for diverse farms
Developing supplementary coverage tailored to diversified operations could help address the one-of-a-kind risks Canadian farms face. This could help make the programs more inclusive.
Threats to managing risk with BRM programs
Looking ahead, there are a number of threats that may hinder the effectiveness of BRM programs, like these:
Low farmer engagement
Limited participations in BRM programs leaves many farms exposed to unnecessary risks. This, in turn, could negatively impact the sustainability of the sector.
Coordination challenges
Federal and provincial collaboration is often strained, which slows the implementation of much-needed improvements to program delivery.
Escalating climate risks
The frequency and intensity of extreme weather events is on the rise and threaten to inflate program costs. This could potentially shift an even greater financial burden onto farmers.
Trade and geopolitical risks
Prolonged trade disruptions, particularly with the United States, could destabilize Canadian agriculture.
Overcomplication of program due to environmental ties
While integrating environmental results into BRM programs is a wonderful goal, doing so has the potential to introduce unnecessary complexity. It also could take away from the core purpose of these programs.
You’re not alone
Don’t be intimidated by the information above — risk management is not a road Canadian farmer’s need to travel alone. This is where MNP’s ARMR services come in.
Our advisors can help you:
- Evaluate your risk profile and determine you best combination of BRM tools.
- Optimize program applications to maximize your benefits.
- Optimize your coverage based on your farm size, commodities, and long-term goals.
- Develop proactive strategies to improve your financial resilience.
We take a full-service approach to make sure you get the benefits you’re entitles too. With the help of our Ag Risk Management Projector, we can model different scenarios and determine the financial impact of different BRM program and insurance options before you commit.
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