June 21, 2021
The government has announced that Ontario farmers with low expenses will see increased AgriStability coverage as a result of the removal of the reference margin limit (RML), starting with the 2020 program year. In addition, the deadline to apply for 2021 has been extended to June 30.
For the RML removal, customers do not need to do anything differently when completing their Year-end Report and Claim Form. Agricorp will simply process forms with the RML removed from the payment calculation.
How removing the RML improves coverage
AgriStability provides whole farm coverage to help cover large declines in net income (production margin). If a farm's income falls below 70 per cent (payment trigger) of their recent average net income (reference margin), they may receive an AgriStability payment. A higher reference margin means more coverage and a higher payment trigger.
The RML looked at average expenses, and if they were lower than the reference margin, then the RML was used as the reference margin instead. This would have decreased the likelihood and amount of a payment. With the removal of the RML, the reference margin is once again based only on recent average net income.
The operations that were most impacted by the RML were those with lower expenses. To understand how removing the RML will affect various types of operations, please see the examples below:
Example #1: Cash crop farm
AAA Farm has 100 acres of corn and 10 acres of ginseng. Since expenses per acre for corn are typically lower than for ginseng, AAA Farm’s reference margin would have been lowered because of the RML.
Reference margin with RML: $834,167
Reference margin without RML: $1,191,667
AAA Farm had a challenging year because of crop loss due to weather conditions, as well as increased costs. As a result, their 2020 production margin was $350,000.
With RMLPayment trigger: $583,917 2020 AgriStability payment: $163,742
Without RMLPayment trigger: $834,167 2020 AgriStability payment: $338,917
Example #2: Beef operation
BBB Farm has 150 head of cattle and 1,000 acres of hay for sale and feed. Since there are normally lower expenses for growing hay, BBB Farm’s reference margin would have been lowered because of the RML.
Reference margin with RML: $477,333
Reference margin without RML: $534,000
Falling market prices for beef led to a loss of income for BBB Farm. As a result, their 2020 production margin was $260,000.
With RMLPayment trigger: $334,133 2020 AgriStability payment: $51,893
Without RMLPayment trigger: $373,800 2020 AgriStability payment: $79,660
Example #3: Grape operation
CCC Farm has 50 acres of grapes. The farm’s expenses in past years happened to be low, so CCC Farm’s reference margin would have been lowered by the RML.
Reference margin with RML: $141,633
Reference margin without RML: $202,333
CCC Farm faced increased costs to replant damaged vines, as well as falling market prices. As a result, their 2020 production margin was $40,000.
With RMLPayment trigger: $99,143 2020 AgriStability payment: $41,400
Without RMLPayment trigger: $141,633 2020 AgriStability payment: $71,143
Still time to apply for 2021
The deadline to apply or pay the fee for the 2021 program year has been extended to June 30, giving farmers more time and flexibility to make business decisions and assess their program coverage needs. To apply, submit a New Participant form, available on agricorp.com.
How 2020 AgriStability claims are processed
Customers still need to submit their 2020 Year-end Report and Claim form, as usual, if they have yet not done so.
Details of how payments were calculated will be in the documentation sent to customers with any applicable payment. Agricorp will review all claims processed before the government’s decision was announced to ensure payments accurately reflect the change.
