Information on the Business Risk Management Programs and the Livestock Tax Deferral Program for Ontario farmers affected by drought (2012)
Crop Insurance (also known as Production Insurance):
Producers with crop insurance should report damage to Agricorp as soon as it occurs by calling 1-888-247-4999. A damage report is then filed and the local crop insurance adjuster will be notified. The adjuster may contact the producer to schedule a farm visit to inspect the crop damage.
Producers with crop insurance should not abandon, destroy, reseed, replant, harvest or use damaged acreage for another purpose without Agricorp's consent. The producer must take all reasonable steps to prevent further damage to the crop and other insured crops until Agricorp indicates otherwise.
Crop Insurance under the Forage Rainfall Insurance Plan - Insufficient Rainfall
The forage rainfall plan uses rainfall as an indicator of quantity and quality of forage. Under the Insufficient Rainfall Option, if the measured rainfall at the station chosen by the participant during the insured period is less than 80 per cent of the long-term average rainfall in the area, a claim may be paid.
Given claims under the forage rainfall insurance plan are determined by measured rainfall at the rainfall station, producers participating in this plan do not have to report crop damage to their specific forage crop. Agricorp posts rainfall station data on their website: http://www.agricorp.com/en-ca/Programs/ProductionInsurance/ForageRainfall/Pages/RainfallData.aspx
Agri-Stability participants who are experiencing financial distress and are in need of immediate help can apply for an interim Agri-Stability payment.
OMAFRA has recently committed that farmers in Prescribed Drought Regions will not have their reference margins reduced under the program’s structural change adjustment if the production in the program year was reduced because of the challenges from the lack of rain and dry conditions, and/or they were forced to sell breeding stock due to hay and pasture shortages.
Agri-Invest participants, with funds in their Agri-Invest account, may make a withdrawal from their Agri-Invest account held at their financial institution at anytime. Withdrawals are first paid from the Fund 2 portion of the participant’s account which holds the government contributions and all the interest. Based on Canada Revenue Agency tax guidelines, Fund 2 withdrawals are taxable in the year the withdrawal is made and must be reported as investment income, not farming income for tax purposes.
Agri-Recovery is a disaster relief framework that outlines a coordinated process for federal, provincial governments to follow in assessing each disaster event and determine whether or not existing programs provide a sufficient government response to the event. The Agri-Recovery framework establishes an implementation process, program coverage guidelines, and federal/provincial cost sharing arrangements. If through the Agri-Recovery assessment process it is determined that additional government assistance to help farmers is warranted, Agricultural Ministers may decide to provide targeted assistance.
On July 30 OMAFRA formally requested to AAFC that an Agri-Recovery assessment of the drought impact on Ontario livestock producers looking for feed and all implications associated be undertaken. A task team of federal and provincial government officials will refine the scope of their assessment, review the extent of the financial losses, the response of existing programs and any remaining financial shortfall. The task team is to report their findings to the Agricultural Ministers within 45 days (from July 30). If the Agricultural Ministers decide to provide Agri-Recovery assistance, based on the finding of the task team, the amount of the assistance will be based on the size of the gap remaining after compensation provided by other programs is accounted for regardless of whether an individual producer participated in those other programs.
Livestock Tax Deferral Program
The Livestock Tax Deferral Program allows farmers who sell part of their breeding herd due to drought conditions in designated regions to defer a portion of sale proceeds to the following year. Each year, a list of designated regions prescribed as drought and/or excess moisture and flood regions is announced.
Drought regions are designated on the advice of the Minister of Agriculture and Agri-Food Canada to the Minister of Finance. OMAFRA has called on AAFC to accelerate the listing of affected regions in Ontario as Prescribed Drought Regions.
To be considered, the region must have estimated forage yields of less than 50 per cent of the long-term average, and the region must be large enough to have an impact on the industry. Impacts on individual municipalities would not result in a designation. Canada Revenue Agency requires that designated areas have recognized geo-political boundaries (e.g. municipalities or counties) for administrative purposes.
A preliminary designation can usually be done in September if it appears that the criteria will be met. Since forage yield information is not final until later in the year, preliminary designation is made primarily on the basis of spring moisture and summer rainfall, supplemented with estimates of forage yield. Assessments of areas are reviewed in discussions with federal and provincial staff. Final decisions and any needed adjustments are made when all forage yield information is available, usually in December.
To defer income, the breeding herd must have been reduced by at least 15 per cent. Thirty per cent of income from net sales can be deferred if the breeding herd has been reduced by at least 15 per cent, but less than 30 per cent. Where the herd has been reduced by 30 per cent or more, 90 per cent of income from net sales can be deferred.
Proceeds from deferred sales are included as income in the next tax year, when they may be at least partially offset by the cost of reacquiring breeding animals. In the case of consecutive years of drought or excess moisture and flood designation, producers may defer sales income to the first year in which the area is no longer designated.
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