AgriStability protects you when your net farming income falls below 70 percent of your recent average. To determine if you have a decline in your net farming income, two margins are calculated.
Calculating your production margin
Production margin = Allowable income – allowable expenses + inventory adjustments
Allowable income and expenses are directly related to the production of a commodity. The income and expenses you reported on your tax form are used to calculate your production margin.
To reflect any changes in the value of your inventory, inventory adjustments are calculated and added to your production margin. Fair market values are used to value your inventory adjustments. The minimum reference margin is 70 per cent of your average of production margins. Your reference margin is now guaranteed to be at least the 70 per cent minimum – no matter how low your expenses are.
Calculating your reference margin
Your reference margin is an olympic average of your last five production margins (dropping the highest and lowest values) or an average of your adjusted expenses from the same three years – whichever is less.
New to farming?
|Years of farming||Calculating your reference margin|
|Three to five years||Your reference margin is based on your previous three production margins.|
|Less than three years||Industry average margins (per unit) are used to construct up to three production margins for your operation. Your reference margin is the average of these three production margins.|
Changes in your operation?
If you significantly change commodities, expand or downsize your operation, you can expect your production margin to be different. In that case, your historical production margins are also adjusted, and then your reference margin is calculated using these adjusted figures. This ensures an accurate comparison between your farm’s net income for the current year and in previous years. If you expand your farm, your reference margin is increased. If you downsize, your reference margin is decreased.
If your production margin is less than 70 per cent of your reference margin, you trigger a payment.
How your payment is calculated
Your payment trigger is 70 per cent of your reference margin. If your production margin falls below your payment trigger, AgriStability will pay you 70 per cent of the difference.
The example below assumes a reference margin of $100,000, a corresponding payment trigger of $70,000 and a production margin of $60,000.
Payment = (Payment trigger – Production margin) x 70%
Payment = ($70,000 - $60,000) x 70%
Payment = $7,000
For more information, call Agricorp to speak with an AgriStability specialist.
The maximum payment you may receive under AgriStability in a program year is $3 million.