AgriStability protects you when your net farming income falls below 70% of your recent average. To determine if you have a decline in your net farming income, two margins are calculated.
AgriStability is a vital part of a farm's risk management plans, especially in times of disaster. If you are new to AgriStability, rejoining or already enrolled, check out the following slide show for an overview of how the program works and the benefits of participation.
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 reported on your tax form are used to calculate your net income (production margin).
To reflect any changes in the value of your inventory, inventory adjustments are calculated and added to your production margins. Fair market values are used to value your inventory adjustments.
Calculating your reference margin
Your reference margin is your historical average of net farming income. It is calculated based on an Olympic average of your last five production margins (dropping the highest and lowest values).
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 net income (production margin) to be different. In that case, your historical production margins are also adjusted, and then your average net income (reference margin) is calculated using these adjusted figures. This ensures an accurate comparison between your farm's current year and previous years. If you expand your farm, your reference margin is increased. If you downsize, your reference margin is decreased.
Triggering payments
If your net income (production margin) is less than 70% of your average net income (reference margin), you trigger a payment.
How your payment is calculated
Your payment trigger is 70% of your average net income (reference margin). If your net income in a year falls below your payment trigger, AgriStability will pay you 80% of the difference.
The example below assumes an average net income (reference margin) of $200,000, a corresponding payment trigger of $140,000 and a net income (production margin) of $100,000.
Payment = (Payment trigger – Production margin) x 80%
= ($140,000
– $100,000) x 80%
= $32,000
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.
AgriStability estimator tool
To help farmers understand how AgriStability works, Agriculture and Agri-Food Canada (AAFC) has developed an AgriStability estimator showing how program benefits are calculated and how different scenarios can affect a farmer's operations.
To use the estimator, farmers can enter high-level estimates. These estimates can be drawn from the Statement of Farming Activities that farmers file each year to the Canada Revenue Agency, or farmers can also use information from their previous AgriStability Calculation of Program Benefits statements.
For answers to questions about the estimator, visit the help guide on the AAFC website.
Tax-Aligned Reference Margin option
Farmers who select the tax-aligned reference margin option can benefit from:
-
Better payment predictability. Agricorp would use your tax data sooner than usual, giving you the coverage details you need to predict your payment position – before you do any claim paperwork.
-
Less paperwork if they don’t have a claim. If you are not in a payment position, you won’t need to do the claim paperwork at all, saving you time and money.
If you select this option, Agricorp will calculate your estimated reference margin using the historical income and expenses you filed for taxes (cash or accrual) with no accounting adjustments.
- Cash filers will no longer have adjustments made to account for purchased inputs, deferred income, accounts receivable and payable and crops and livestock inventory when calculating reference margins – reducing the information they have to provide
- Accrual filers with livestock will no longer have a breeding herd adjustment applied to their reference years.
If you select the tax-aligned reference margin option, Agricorp will send you a Coverage Notice Estimate with your estimated reference margin and payment trigger. This estimate means you’ll get clarity on your claim status faster – and better payment predictability.
As usual, Agricorp will send you information about filing a claim in January, whether you’re in a claim position or not.
If you do predict you are in a payment position, you will need to submit your Year-end Report and Claim Form to start the claim process. In this case, your program year margin will be calculated on an accrual basis.
To sign up for the tax-aligned reference margin option, complete the
Tax-aligned Reference Margin Selection Form and email it to
[email protected] by the
deadline.
