The CFFO Commentary
Title: Business Risk Management Programs Needed for Farmers

By Nathan Stevens
August 13, 2010

The Ontario government recently renewed its commitment to the Risk Management Program for Grains and Oilseeds. There have been many different reactions to this renewal. Some are sceptical, some are pleased, and some hope that this will lead to an extension of this program into other commodities. Regardless of people’s reactions, your general farm and commodity organizations are working on new programs to help farmers in Ontario.

Safety nets are contentious because they directly affect a producer’s bottom line. In an era of open markets, low cost producers and subsidized major markets, there is often the need for government to intervene on the behalf of producers where and when necessary. When a program is designed, there is the need to determine whether a particular problem is one that producers need to handle themselves, or requires government intervention. Underlying these decisions is the imperative for industries to progress, adapt new technology, and become more efficient in the long run.

Government programming that fails to balance these needs creates situations that become deeper problems in the long run. If the program cuts out too quickly, many producers get caught without support and their businesses may fail. If the program masks market signals, then producers do not have to be smart marketers of their product. If the program masks market signals for long enough, the entire structure of an industry may become dependent on government for survival. It may even reach the point where producers view the program as an entitlement owed to them.

The Business Risk Management Program is not an entitlement plan. The strength of BRMP is that it is effectively an insurance plan that insures producers against market weaknesses in the same way that crop insurance protects against uncertainties in the weather. There are probably many producers considering whether they will stay in the program, as the payouts have generally been light. However, just like fire insurance, the hope is that the day never comes that you need to collect on your RMP. But is it really worth the risk of operating without it?

Your general farm and commodity organizations are lobbying for programs that producers can count on when times are tough. The minister has stepped up and provided one segment of producers with an extension of the pilot program for an additional year. We hope that more support for a wider number of farmers will be coming soon.

Nathan Stevens is the Research and Policy Advisor for the Christian Farmers Federation of Ontario. The CFFO Commentary represents the opinions of the writer and does not necessarily represent CFFO policy. It can be heard weekly on CKNX Wingham and CFCO Chatham, Ontario and is archived on the CFFO website: www.christianfarmers.org. The CFFO is supported by 4,300 farm families across Ontario