Triggering a Payment
If your program year margin falls 30 per cent below your reference margin, due to any combination of production loss, adverse market conditions or increased costs, AgriStability could provide a payment.
Your program year margin is calculated each year. When the program year declines by more than 30 per cent of the reference margin, an AgriStability payment will be triggered. The payment provides 70 cents for every dollar of decline
below the trigger point.
Program Year Margin
The current year’s financial profile for the farm or ranch is called the program year margin. It is based on the income and expenses directly related to the farming operation and includes accrual adjustments.
Allowable income and expenses ensure AgriStability coverage is restricted to production or price declines, rising input costs and market losses.
The program year margin also includes accrual adjustments that measure changes in the value of a producer’s accounts receivable, accounts payable, purchased inputs, deferrals and commodity inventories. Inventory changes are valued using fair market values. Essentially, if the farm’s inventory value increases, it increases the program year margin; if the farm’s inventory value decreases, it decreases the program year margin.
Your historical financial information is used in the Calculation of Benefits to accurately reflect your farming operation.
The program year margin is compared to the reference margin from the previous five years. The reference margin is determined by excluding the highest and lowest margins in the previous five years and averaging the remaining three.
If your farm or ranch is newly enrolled in AgriStability or has been operating for less than five years, the reference margin will be based on the three most recent margins (if available). If three years are not available, the reference margin will be based on industry averages and standards. New participants will only be required to submit the previous three years of historical financial information as well as the supplemental information.
Limited Reference Margin
AgriStability benefits are calculated using the lower of:
- the conventional reference margin; or
- the average allowable expenses in the same years used to calculate the conventional reference margin.
If the allowable expenses are used, the reference margin is limited. The reference margin limit (RML) will never be less than 70 per cent of the conventional reference margin.
A negative program year margin occurs if your allowable expenses exceed your allowable income after adjustments for changes in inventory valuation, receivables, payables and purchased inputs. Negative margins are protected under the AgriStability Program.