Payments are triggered under AgriStability when a producer's program year margin falls below 70% of their average reference margin. The following is an explanation of how margins are calculated.
What is a production margin?
The production margin is calculated by subtracting allowable expenses from allowable income.
Allowable income items are generally limited to sales of agricultural commodities and Production Insurance payments. Allowable expense items are generally expenses directly related to the production of agricultural commodities.
The production margin is calculated by subtracting only those expense items directly related to the primary production of agricultural commodities on the farm (for example, feed costs, fertilizer and pesticides).
What is a program year margin?
The program year margin is the production margin for the year for which the producer is applying for AgriStability.
- The program year margin is calculated by subtracting allowable expenses from allowable income for the year for which the producer is applying for the program.
- For producers who report on the cash basis of accounting, the production margin for the program year is then adjusted for changes in purchased inputs, accounts receivable, accounts payable, crops inventory, and livestock inventory. For more information, please visit the Inventory Valuation section.
- The program year margin may also be adjusted to reflect operations that are combined for whole farm purposes.
What is a reference margin?
A reference margin reflects the producer's margin history based on the production margin in previous years.
- The reference margin is calculated using an Olympic Average (taking the last five years of the producer's margin, removing the highest and lowest margins within that time period, and averaging the remaining three years).
- The reference margin may be adjusted to reflect operations that have undergone a structural change from previous years.
- The reference margin for producers who file to the Canada Revenue Agency on the cash basis may also be adjusted for changes in purchased inputs, accounts receivable, accounts payable crops and inventory and livestock inventory.
What is a margin decline?
A margin decline occurs when the producer's program year margin drops below the reference margin. AgriStability benefits will be paid when a producer's program year margin declines more than 30% below their reference margin.
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