Canada Policy

Growing Forward
Business Risk Management
Supply Management
Canadian Wheat Board
OECD Support Estimates

Canada's agricultural and trade policy encompasses some aspects that are very market-oriented, such as Canada's participation in NAFTA and encouraging a savings program for producers that is designed to be decoupled from production. Other aspects, such as supply management in the dairy, egg, and poultry sectors, represent significant interventions in the market and limit the extent to which foreign suppliers can serve Canadian customers.

Agriculture and Agri-Food Canada (AAFC), the ministry that serves as Canada's counterpart to USDA, provides information, research, technology, policies, and programs to the agricultural sector. AAFC reports to Parliament and the Canadian people through the Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board.

Growing Forward

Growing Forward is Canada's most recent major initiative in the area of domestic agricultural support. Announced by the Federal, Provincial, and Territorial (FPT) agricultural and food ministers at their annual meeting in July 2008, Growing Forward replaces the Agricultural Policy Framework (APF). In addition to the demand-driven Business Risk Management (BRM) programs described below, Growing Forward commits 1.3 billion Canadian dollars (about 1.3 billion U.S. dollars) over a 5-year period (2008-13) on a cost-sharing basis between Canada's Federal Government (60 percent) and the Provincial and Territorial governments (40 percent). At their annual meeting in July 2011, the FPT agricultural and food ministers recognized the need for their respective governments to agree on a new policy framework, Growing Forward 2, before April 1, 2013.

Business Risk Management

Growing Forward consolidates and modifies a group of major programs formerly contained within the APF by introducing a new suite of business risk management (BRM) programs. Implementation of the BRM elements began on April 1, 2008. The four BRM programs are:

• AgriInvest, which encourages farm savings,
• AgriStability, which stabilizes producer profit margins,
• AgriInsurance, which provides insurance against natural perils, and
• AgriRecovery, which address the impacts of natural disasters.

These programs replace the Canadian Agricultural Income Stabilisation (CAIS) and Crop Insurance programs, while preserving their main elements.

AgriInvest participants may deposit 1.5 percent of the difference between their sales and purchases of allowable commodities, defined as Allowable Net Sales (ANS), into an account and receive a matching contribution from the FPT governments, with an account balance limit of 25 percent of ANS for the program year and the two preceding years in which ANS was calculated under the program. Farmers then build their accounts through annual deposits based on a percentage of their average ANS and manage their accounts by using the funds to cushion income shocks (such as when margins, which are defined as gross revenue minus expenses, decline by 15 percent) or to pay for on-farm investments, especially those serving to mitigate risk. AgriInvest covers most primary agricultural commodities, except those governed by supply management (dairy, poultry and eggs).

AgriStability partially covers declines greater than 15 percent in the margins of participating producers. This program is more generous toward producers with negative margins than its predecessor (CAIS), allows for advance and interim payments, and has a simplified and more flexible application process. AgriStability is triggered when a participating producer's margin falls to less than 85 percent of its 5-year Olympic average "reference margin." Producers participating in the program must pay a fee of 3.80 per 1,000 Canadian dollars of insured margin.

AgriInsurance encompasses benefits previously provided under the Crop Insurance program. The program aids farmers in mitigating risk by insuring losses to production and farm assets caused by natural perils. The program is similar to the U.S. crop insurance program, with the significant difference being that the program is delivered through governmental crown corporations and provincial administrations in Canada rather than the private sector as in the United States. Farmers build accounts through annual deposits based on a percentage of ANS, with matching contributions from the FPT governments.

AgriRecovery is the mechanism through which the FPT governments jointly assess the impacts of natural disasters on producers and the need for new initiatives to assist producers facing natural disasters whose needs have not been met by the other programs. Previously addressed through ad hoc measures, AgriRecovery aims to streamline the assessment and payment delivery to producers after an event.

Supply Management

Supply management has been a feature of Canadian agricultural policy for over four decades and continues to be dominant in the dairy, poultry, and egg commodity sectors. Production and marketing systems under supply management have three main features:

• Price support policies based on production costs and return on equity and management,
• Production limited to domestic demand at the cost-determined price, and
• Border measures to guard against foreign competition, including tariff rate quotas (TRQs).

The Government of Canada has expressed its support for the choice made by producers operating under supply management. This position has been communicated in many fora, including the Doha Round of multilateral trade negotiations at the World Trade Organization (WTO).

Canadian Wheat Board

The Canadian Wheat Board (CWB) is a shared governance marketing organization that operates as the sole marketer (the "single desk") of wheat and barley produced in western Canada. Acting as a single agent on behalf of farmers, the CWB has statutory authority to purchase and market all wheat and barley produced in Alberta, Manitoba, Saskatchewan, and the Peace River District of British Columbia, both for domestic use and export. The CWB negotiates sales and passes the returns back to farmers and provides risk management and support programs to farmers. It also supports its marketing program through other activities, such as market development, strategy, research and analysis, and policy advocacy.

Canada's current Minister of Agriculture and Agri-Food has pledged to pass legislation ending the CWB's marketing monopoly and establish market choice for western Canadian wheat and barley producers on August 1, 2012. In June 2011, the CWB announced that it would hold a nonbinding farmer vote on whether to continue its role as the single Canadian seller of wheat and barley from western Canada.

OECD Support Estimates

Agricultural support estimates calculated by the Organization for Economic Co-operation and Development (OECD) provide a common framework for evaluating the size of government support to agriculture by the OECD countries. The total support estimate (TSE) measures "the annual monetary value of all gross transfers from taxpayers and consumers arising from policy measures that support agriculture, net of the associated budgetary receipts, regardless of their objectives and impacts on farm production and income, or consumption of farm products." In 2009, Canada's TSE equaled nearly 11.5 billion Canadian dollars.

The TSE has three components:

1. The producer support estimate (PSE), which indicates "the annual monetary value of gross transfers from consumers and taxpayers to support agricultural producers, measured at farm gate level."
2. The general services support estimate (GSSE), which indicates "the annual monetary value of gross transfers to general services provided to agricultural producers collectively (such as research, development, training, inspection, marketing, and promotion)," and
3. Transfers to consumers from taxpayers (TCT), which in the Canadian case have been zero in recent years.

In 2009, the PSE accounted for 77 percent of Canada's TSE, and the GSSE accounted for 23 percent.

In the same period, market price support (MPS) accounted for 57 percent of Canada's PSE; payments based on current area, animal numbers, receipts, or income, where production is required to qualify for the payments, accounted for 29 percent; and all other forms of producer support accounted for 13 percent.

MPS is calculated "by adding together the price transfers to producers from consumers and taxpayers, minus the contribution that producers make to these transfers." For an individual commodity, these price transfers are estimated by multiplying the market price differential (MPD) by the quantity of domestic supply, where the MPD is the difference between the domestic market price and the border (reference) price of the commodity. Thus, Canada's MPS estimates for milk, poultry, and eggs provide some indication of the level of support provided by supply management, which is likely to have the effects of widening the MPD and increasing domestic production. In 2009, milk accounted for 66 percent of Canada's MPS, followed by poultry (9 percent) and eggs (2 percent).

Payments associated with Canada's suite of BRM programs are classified in the category of producer support in the form of payments based on current area, animal numbers, receipts, or income, where production is required.

When compared with the value of agricultural production, Canada's level of producer support has been on a downward trend in recent years. The percentage PSE, which equals the amount of producer support divided by the sum of transfers from taxpayers to producers and the value of agricultural production, offers an insight into this trend. In 2006, 2007, and 2008, the percentage PSE equaled 22, 19, and 13 percent, respectively. This downward trend is due in part to recent increases in commodity prices, which reduce the need to compensate producers. When the global economic downturn caused commodity prices to fall in 2009, Canada's percentage PSE rose to 20 percent. Overall, Canada's percentage PSE is about 5 percentage points below the OECD country average but approximately double that of the United States.

Last updated: Tuesday, November 27, 2012

For more information contact: Steven Zahniser