6. Resilience to natural disasters in Canada

Canada is a large country, with a small population relative to its land area. Although the agricultural and agro-food sector represents only 3.5% of Canada’s economy, agro-food products comprise 11% of exports – 46% of which are primary agricultural products. Canada is one of the world’s largest suppliers of beef, dry peas, lentils, pork, rapeseed, and wheat. Production systems vary across the country’s regions, with dairy production concentrated in eastern Canada, specialty crop production prominent on the Atlantic and Pacific coasts, extensive cereal and oilseed crop production characterising the Western Prairies, and livestock production spread throughout the country (OECD, 2015[1]).

Given its vast territory and wide range of climates, Canada is exposed to a range of natural disasters and extreme weather events, including floods, hurricanes, landslides, storms, tornadoes, droughts and wildfires. Over the period 1980-2018, floods were the most costly events in terms of total estimated damage (CAD 8.4 billion), but winter storms and wildfires also caused more than CAD 5 billion in damage over the period (Public Safety Canada, 2019[2]). Agriculture can be impacted by any of these events, so having adequate frameworks for preventing and responding to such disasters is essential for the resilience of the sector. In the past, the events that have had the most severe impact on agriculture were floods and droughts. During some years, extreme weather events like early frosts have also been very damaging to crops, but generally would not have been considered disasters.

For the past few decades, the Canadian Government has refined its policy approach to managing disaster risk for the agricultural sector. Over successive policy frameworks, policy makers have increased support for initiatives that either prevent adverse events from impacting the sector, or else mitigate their effects. This focus on prevention has coincided with lower levels of ad hoc disaster payments to producers, as financial support to cope with adverse events is available instead through either ex ante tools such as crop insurance or through programmes and response frameworks that are defined before disaster strikes (OECD, 2019[3]). This reduced emphasis on purely financial tools as a means to manage risk has wider implications for the long-term resilience of the sector.

This case study will examine the implications of Canada’s agricultural policy framework with respect to natural disasters on the resilience of the country’s primary agriculture sector. The case begins by first examining the current policy landscape, including a discussion of relevant risk management strategies and measures according to the different risk layers. This is followed by an analysis of the policy approach along each of the five key resilience dimensions, as well as concluding comments.

Canada’s agricultural policy framework emphasises risk management and investments in strategic initiatives (focusing largely on general services, such as knowledge generation or market development) as keys to improved sector resilience and sustainability. The country’s agricultural policies have moved for the most part toward a strongly market-based focus since market price support programmes for grains, oilseeds, cattle and hogs were discontinued in the mid-1990s.1 As price support policies for crops were dismantled, the country strengthened business risk management (BRM) programmes and general services. As with its predecessor Growing Forward 2 (GF2), the current policy framework – the Canadian Agricultural Partnership (CAP) 2018-23 – is comprised of a suite of BRM programmes and non-BRM programmes (also referred to as Strategic Initiatives) that are cost-shared between the Federal-Provincial-Territorial (FPT) governments. Strategic Initiatives help support the resilience and sustainability of the sector. These non-BRM programmes and projects cover diverse aspects of the agricultural sector, such as marketing, trade, scientific research, innovation, environmental sustainability, climate change, value-added agriculture and agri-food processing and public trust. At the primary producer level, five BRM programmes are provided under CAP:

  • AgriStability, a whole-farm margin programme providing support in years of significant income declines.

  • AgriInvest, a savings tool that provides matching contributions to producers who make annual deposits to a savings account, to help manage moderate declines in income or make investments in farming operations to mitigate risk.

  • AgriInsurance, cost-shared insurance to reduce the financial impact of production or asset losses due to natural perils, which is delivered by the individual provinces.

  • AgriRecovery, an FPT co-ordinated disaster relief framework.

  • AgriRisk Initiatives, a programme that supports the industry to investigate risk, develop and implement new tools, as well as to engage the support and participation of the private sector in risk management (OECD, 2019[3]).

This suite of BRM programmes aims to find a balance between ex ante and ex post measures, while limiting the use of ad hoc forms of assistance.

The Canadian federal government’s approach to managing catastrophic risk in agriculture has evolved in recent decades, including a shift in the government’s role in responding to natural disasters. Under Canada’s risk management policy framework of the early 2000s, catastrophic risks had no specific defining criteria, and consequently, all types of events that negatively affected farm income (including market downturns) could potentially be considered a “catastrophe” meriting ad hoc assistance. As a result, lobbying by producer organisations and media campaigns to pressure governments into providing ad hoc assistance were often successful. From 2000 to 2008, “catastrophic” ad hoc assistance was granted for a variety of events, including drought, low grain prices, avian influenza, and a hog buyout programme (Antón, Kimura and Martini, 2011[4]).

Under the Growing Forward (GF) (2007-12) and particularly moving into the Growing Forward 2 (GF2) (2013-18) FPT frameworks, Canada’s approach to agricultural disaster events focused BRM programming more on severe risks that were beyond the capacity of producers to manage, while also allowing space for market-oriented adaptation and adoption of new risk management tools. This shift in approach was partially motivated by previous OECD findings that emphasised the improved efficiency of focusing efforts on the catastrophic risk layer. This refocusing of BRM programmes required a new approach to defining and managing catastrophic risks via a clarification of the objectives of BRM programmes (and some adjustment in their triggering thresholds), and an increasing focus on improving preparedness to extreme events. Simultaneously, more resources were devoted to non-BRM programming to help producers better manage and adapt to risks.

One of the most significant ways in which BRM policy with respect to natural disasters was adjusted was by clarifying the role of the government in responding to these type of events through the implementation of the AgriRecovery Framework beginning in 2006. AgriRecovery is not a programme, but is rather the decision framework used to determine whether or not a disaster relief programme should be designed and delivered to affected producers. The AgriRecovery Framework outlines the steps to be taken to determine if an assistance package is warranted, and details the criteria that must be met for each step. In contrast to the treatment of catastrophic events under previous policy frameworks, only certain types of events are eligible for consideration under AgriRecovery – disease outbreaks, pest infestations, extreme weather, and contamination of the natural environment. Furthermore, in order for an event to trigger an initial assessment, it must be judged to be non-recurring, abnormal, and result in extraordinary costs (that is, costs that farmers would not normally face, but must be incurred in order to resume operations or mitigate the impacts of a disaster, such as replanting of damaged trees). If an event meets these criteria, then a formal assessment is carried out to determine if ex post assistance is needed.

Events are assessed on a case-by-case basis, so no explicit quantitative impact thresholds are defined ex ante for producers.2 That being said, assessments are carried out (jointly between FPT governments) according to pre-defined criteria. The event must be a collective experience affecting a large number of producers, result in significant negative impacts on farmers’ capacity to produce or market their products, result in significant extraordinary costs, and be beyond the capacity of producers to manage after accounting for assistance available through existing programmes like AgriInsurance and AgriStability. In fact, AgriRecovery does not provide assistance to cover production or revenue declines. Instead, the other programmes in the BRM suite – AgriInsurance and AgriStability – are the primary source of financial assistance to producers for income losses in disaster situations (Agriculture and Agri-Food Canada, 2018[5]). If the assessment confirms the need for assistance given significant extraordinary costs, then a response package is developed (compensating affected producers for up to 70% of extraordinary costs, which excludes compensation for production or revenue declines) and implemented with the aim of mitigating the impacts of the disaster and ensuring that farming operations can resume as soon as possible in the wake of a disaster. Assessments carried out under AgriRecovery also commonly provide recommendations on how similar losses can be avoided in future. In some cases, as a result of an AgriRecovery assessment, information is shared with the relevant Province or Territory to promote the development of new tools to deal with similar losses.

Outside of the BRM policy suite, Canada’s federal government has also launched other initiatives to improve disaster management in agriculture. In 2016, FPT governments drafted the Emergency Management (EM) Framework for Agriculture in Canada, which established their intention to prepare for the immediate aftermath of extreme events by integrating disaster response and risk reduction plans into broader national emergency management frameworks. The EM framework elaborated the four pillars on the EM continuum – prevention and mitigation, preparedness, response, and recovery – and emphasised that effective EM is the shared responsibility of government, industry, and other stakeholders in order to achieve improved resilience for the sector as a whole.

Canada’s policy adjustments under successive frameworks have progressed in more clearly defining stakeholder responsibilities relative to different magnitudes of risk, although additional refinements could be pursued (OECD, 2019[3]). In conjunction with producers’ baseline capacities to manage on-farm risk, the resulting policy toolkit offers producers an array of options designed to help them manage risk of different magnitudes – including absorbing the negative effects of shocks and responding to a changing risk landscape by adapting or transforming their operations – as illustrated below according to the different risk layers (Figure 6.1).

There is evidence that Canadian farmers are investing in building on-farm resilience capacities, and commonly employ on-farm risk management strategies. First, farmers are increasingly investing in developing business management capacities through training and education, evidenced by the rising share of producers completing trade or college level educational programmes – 35% in 2016, versus just 26% in 1996. These programmes typically provide training in both technical skills (such as machinery operation and repair) and farm business management, helping producers to develop the skills necessary to support entrepreneurship and on-farm resilience (Tran and Shumsky, 2019[6]). This capacity for entrepreneurship is also demonstrated through Canadian farmers’ widespread adoption of new innovations for improved sustainability, including planting improved varieties or implementing farm management practices like no-till (OECD, 2015[1]). Other skills gained through these programmes, such as contingency planning or decision-making based on early warning systems, can help producers absorb or mitigate the impacts of catastrophic events.

Canadian farmers also utilise a number of financial strategies to cope with and respond to natural disasters. First, the average Canadian farm has sufficient liquidity to be able to cope with an unexpected event (Farm Credit Canada, 2017[7]). Although this may not be sufficient to manage catastrophic events, such liquidity provides at least a short-term bridge until other assistance is delivered. National statistics indicate that, on average, Canadian farms have more than sufficient assets to cover current financial obligations, but not always in a sufficiently liquid form to cover short-term debt obligations3 (Statistics Canada, 2020[8]). Second, income diversification is widely employed by Canadian farm households – in 2014, nearly 50% of average farm household income was earned off-farm (Statistics Canada, 2019[9]). Finally, previous OECD work has also indicated that a majority of Canadian farmers consider crop diversification to be an effective risk management strategy (Antón, Kimura and Martini, 2011[4]), although more recent data on the number of crops grown per farm is not available.

Canadian farmers use some market instruments to manage risk, including trading of futures contracts, along with private insurance products. However, these are mostly intended to hedge against price fluctuations rather than losses incurred from natural disasters. That being said, some private sector tools are available in the risk management landscape that have implications for natural disaster preparedness, including software platforms for risk management planning.

Within the policy sphere, ex ante risk management policies available to help producers prepare for and manage risk include financial tools that producers can access to help cope with natural disasters, allow them to make investments in their operations to help them adapt to current conditions or anticipate future ones, or insure their production against losses. The bulk of government ex ante assistance is provided through the AgriInsurance programme. Through this programme, insurance products covering yield and quality losses are available for most commodities, with the government subsidising premiums at a rate of around 60% (Office of Audit and Evaluation, 2017[10]). Plans are subsidised by FPT governments, and are delivered at the provincial level – the different provinces typically offer plans to cover their most relevant products, so they can vary significantly by province. The majority of the country’s crop production is covered by the programme (around three-quarters of non-forage crop value in 2014/15), and producers can select from different levels of coverage available in their province.

The AgriInvest programme is a farm financial management tool. Governments provide annual matching contributions (up to 1% of Allowable Net Sales, but not to exceed CAD 10 000) to producers who make deposits to their accounts. The balances can be used to help manage income declines at any time, including in the wake of a disaster event, or to make investments to improve farm preparedness to adverse events. The programme is widely used by Canada’s farmers, with 75% of producers participating in the programme in 2014. However, the average annual matching contribution is quite low, ranging from CAD 2 000 to CAD 3 500 between 2007 and 2014, and the average account balance is estimated at CAD 23 000 (Del Bianco, 2018[11]; Office of Audit and Evaluation, 2017[10]). Thus, despite the matching funds provided by the government contributions, on average farmers are not accumulating individual AgriInvest balances that are high enough to deal with catastrophic losses. In addition, previous OECD work indicated that producers do not draw down AgriInvest funds during periods of shock or income decline, suggesting that the programme plays little role in helping farmers to manage income risk (Antón, Kimura and Martini, 2011[4]).

Similarly, some provisions of the tax code can also serve as an ex ante mechanism for reducing risk, as they allow producers to either smooth income variability over a period of years, or else support capital investments through accelerated depreciation provisions (OECD, 2020[12]). For example, Canadian farm businesses can claim a capital cost allowance tax deduction over a period of several years, which can be used for purchases of some types of farm equipment, allowing producers to make on-farm investments that may enable them to better confront future risks. Provinces and territories may offer additional tax incentives to producers to incentivise investment or reduce input costs.

Ex post policies provide additional tools to manage the impacts of natural disasters in Canada. These policies fall into two categories – those that are triggered ex post but are defined prior to an event (and require producers to express their participation in advance as well), and those that are decided ex post. With respect to the first group of policies that are triggered in the aftermath of an event, the primary policy tools used in Canada are protection against substantial revenue loss using AgriStability, and tax deferral provisions. The AgriStability programme provides whole-farm support (in contrast to AgriInsurance offering commodity-based coverage), for large margin declines (a decline of 30% or more relative to a farm’s historical reference margin), regardless of the underlying reason. The programme previously provided tiered levels of coverage, with support eligible from 85% of the reference margin under the highest level. However, programme evaluations deemed that this design could crowd out other risk management strategies, and a single 70% threshold was adopted as a result. This lower threshold also better reinforces the delineation of the catastrophic risk layer. However, despite the comprehensive coverage offered, participation in AgriStability has declined in successive policy frameworks. Several factors may have played a role in this declining participation. First, strong sector performance in recent years in the form of record net cash income has reduced producer reliance on AgriStability. Additionally, benefits are delivered at a substantial delay with respect to when the decline in margin is experienced, because benefit calculation requires first obtaining and processing individualised producer information. This delay reduces the programme’s effectiveness in helping producers cope with the negative impacts of catastrophic events. The tax code also contains some provisions that are triggered ex post, which can help producers to absorb the effects of catastrophic risk. In one example, livestock producers can utilise the Livestock Tax Deferral provision to defer a portion of the proceeds from their sale of part of their breeding herd due to drought or flood to the following year.4

With respect to policy tools that are decided ex post, the AgriRecovery framework described above is invoked to determine whether or not ad hoc assistance packages are warranted to help farmers manage exceptional losses not already covered by other existing BRM programmes. Although the decision on whether or not to offer an assistance package is decided after the fact, it is important to note that this decision is informed by a consistent, pre-defined process as laid down in the framework.

As part of the CAP Framework, the government also supports improved on-farm risk management through no-regret policies such as expenditures on public goods, taking the position that proactive investment in the sector can help mitigate risk and reduce the incidence and impact of severe losses from natural disasters. These initiatives include investments in research and innovation, knowledge transfer, provision of market information, and publication of information on weather and climate risks (including early warning systems).

The FPT governments prioritise investing in research, which can substantially improve farmers’ capacities for managing risk. At 9.7% of total support to agriculture, public expenditure on agricultural innovation systems in Canada is high by international comparison – well above the OECD average of 3.6% (OECD, 2018[13]). At the same time, total public R&D in agriculture in Canada has been declining as a share of agriculture value added, and is now under 2% (OECD, 2019[14]). Under the Strategic Initiatives umbrella, AgriScience and AgriInnovate aim to speed the development and adoption of innovations, including innovations that reduce and mitigate the impacts of catastrophic risks, and production risk more broadly. This includes research into new vaccines to mitigate risks to animal health; investments in foundational science to make crops or livestock more resilient to pests and climate hazards; new science or tools from genetics, biotechnology, geomatics, artificial intelligence, or nanotechnology that can improve environmental performance or strengthen production resilience; and support for farm adoption of decision support tools, farm management software, or precision agriculture tools that underlie improved on-farm resilience. Outside of funding to agricultural R&D provided by federal policy, other public institutions also fund agricultural research, including universities, the National Research Council and provincial governments.

Knowledge transfer initiatives play a large role in ensuring that these technologies and practices are taken up by the industry. These activities predominantly take the form of extension and agricultural training programmes, which are typically partially funded by AAFC or provincial ministries of agriculture and delivered by educational institutions or farm organisations. Publicly-funded extension complements initiatives run by banks, credit unions, commodity associations, private sector accounting firms, and not-for-profit farm organisations to improve farmer knowledge of risk management. For example, Farm Management Canada (FMC) is a national organisation dedicated to providing farm management advice to the country’s producers, funded by both AAFC and private partners. FMC produces resources, information, and tools that facilitate sound farm-level management decision-making.

Programmes that provide market or weather information are also in place to help producers make informed farm management decisions. AAFC produces sector outlooks and forecasts periodically, according to the needs of a given sector, and these provide some overview of risks currently facing the sector. Early warning systems are in place to advise producers on the development of a number of hazards, including pests. AAFC has recently begun publishing weekly extreme weather indices for a number of variables (e.g. temperature, precipitation), and also forecasting conditions in the coming month (AAFC, 2019[15]). In conjunction, AAFC publishes a bi-weekly Agroclimate National Risk Report that details current conditions in each province and also provides a forecast of conditions in the week to come.5 These condition assessments are partially informed by reports from a volunteer network of growers and industry partners around the country, as well as a vast array of weather data sets and models. Aside from the condition reports, AAFC publishes a dedicated Drought Monitor report to track the development of this hazard across the country. In addition to providing information on current and forecast drought conditions, the Drought Watch programme also provides a variety of guides detailing farm management practices to help producers prepare for and mitigate impacts from drought and other extreme weather events, including guidance on erosion, water conservation, and pasture management under dry or other adverse weather conditions. Digital technologies, such as artificial intelligence and satellite imagery are also increasingly being integrated into crop monitoring and forecasting information processes and products (Villeneuve, 2018[16]).

Outside of the specific agricultural risk management framework, other federal departments and agencies have a role in mitigating or responding to catastrophic events, including Environment and Climate Change Canada, Public Safety Canada, Transport Canada, Infrastructure Canada, and the Canadian Food Inspection Agency. For example, in the event of a large-scale natural disaster, the government of Canada provides financial assistance to provincial and territorial governments through the Disaster Financial Assistance Arrangements (DFAA) administered by Public Safety Canada. These funds are paid directly to the provinces, but could potentially benefit affected farms or agricultural sector stakeholders.

The orientation of the agricultural risk management policy framework in Canada continues to evolve from a reactive approach to one that instead prioritises ex ante measures. With respect to disaster response and preparedness, this has meant increasing support for proactive risk management and research into tools or strategies that will improve the long-term viability of the sector, as well as adjusting how disasters are defined and addressed. At the same time, some measures may have unintended negative consequences on long-term sustainability, increase exposure to some types of natural disasters, or transfer risk that should be borne by farmers to the public budget.

One of the keys to improved sector resilience to natural disasters is preparation for future catastrophic events. Over the past few policy frameworks, the Canadian Government has increasingly focused on policies and programming that help to support preparedness and resilience to natural disasters, rather than solely financial assistance delivered after an event. Most recently, this change in approach was motivated by falling participation in AgriStability, as noted above. In conjunction with this shift in approach, spending on disaster response programming has fallen. Although various factors may have contributed to this decline (including the random nature of high-impact disaster events potentially causing fewer large-scale disasters over the period (Office of Audit and Evaluation, 2017[17]), or rising incomes and improved on-farm management of risks as indicated above), those reduced expenditures freed up resources to allow Canada to allocate more agricultural policy funding to innovation (OECD, 2015[1]). Through greater resources for Strategic Initiatives and FPT cost-shared programmes, FPT governments are investing in improved farm-level management, knowledge systems, and information and early warning platforms that help producers to avoid or mitigate the impacts of adverse events.

In conjunction with these proactive investments, the government has made progress in better defining the boundary of the catastrophic risk layer and disciplining ad hoc assistance. First, the kinds of events that are eligible for assistance under the AgriRecovery Framework are now more clearly specified, as well as the conditions for when targeted assistance initiatives could be warranted. Additionally, thresholds within AgriStability have been adjusted and simplified to provide coverage only for more severe contractions in margins. Today, most financial assistance in the wake of disasters is delivered through programming that is defined ex ante, and expenditures on ad hoc assistance are limited. At the same time, some ambiguity remains in the definitions for AgriRecovery (e.g. what constitutes “significant extraordinary costs”) that may not provide clear signals to producers and other stakeholders (Ker et al., 2017[18]). While this is intended to ensure that the framework is sufficiently flexible to respond to a range of different circumstances, the lack of clarity may make it difficult for producers to understand where their responsibilities for disaster risk management lie.

This shift to disaster proactivity is further underpinned by ongoing efforts to better understand and prepare for the wider risk environment. Some PT governments, as well as industry associations and commodity groups, undertake scenario analysis and foresighting exercises to assess risk and possible future threats. Horizon scanning for potential future threats is also undertaken, but to a much lesser extent.

In considering the resilience of an overall agricultural system, stakeholders should assess trade-offs for different time frames, actors, and outcomes. The current policy framework has made progress in prioritising future resilience to natural disasters by emphasising preparedness and contingency planning. Beginning with Growing Forward in 2007, Canada’s agricultural policy frameworks have increasingly shifted resources from ex post assistance measures toward investments in science, research and innovation initiatives that aim to help producers adjust their operations to better confront catastrophic risks.

But other trade-offs exist within Canada’s approach that may result in uneven outcomes for resilience to natural disasters in either the short or the long term. First of all, the institutional setup may deliver uneven incentives for producers in different parts of the country. This is because agricultural policy is not solely the jurisdiction of the national government – rather, provincial and territorial governments have developed their own programmes within the scope of the national framework. Additionally, there are some provincial risk management programmes which fall outside of the FPT frameworks (Ontario and Quebec). While this system may on the one hand ensure that programmes are better targeted to local conditions, it may also create conditions where interest groups have more influence over the policymaking process and use this leverage to engage in rent-seeking behaviour that does little to improve the capacity of farmers to respond to disasters (Ker et al., 2017[18]). While this diversity of provincial approaches and programming may affect the incentives to prepare for risks among producers in different parts of the country, Canada is currently making efforts to ensure a more holistic approach to risk where possible, including by enhancing data sharing between provinces and programmes.

There are also indications that there may be trade-offs between outcomes under the current BRM suite and the sector’s ability to mitigate the effects of natural disasters. In particular, the crop insurance literature has found that subsidised insurance (such as that which is offered through AgriInsurance) incentivises growers to expand production onto marginal land – a high risk/high reward practice that can increase producer exposure to natural hazards like floods (Claassen et al., 2011[19]; Miao, Hennessy and Feng, 2016[20]). Indeed, recent analysis has indicated that shifting crop yield distributions from a subset of Canadian farms is consistent with producers adopting these types of higher risk/higher return production practices (Ker et al., 2017[18]).

Similarly, the adoption of certain beneficial environmental management practices, such as wetland conservation, would contribute to the improved sustainability and long-term resilience of the sector and mitigate the impact of certain future natural disasters (particularly floods) (Pattison-Williams et al., 2018[21]). However, these practices may also be disincentivised by current programmes, which make the adoption of these types of practices more costly for farms, trading off long-term benefits of ecosystem services for short-term financial benefits. For example, simulated returns of a representative cropping farm in Alberta indicated that the BRM suite exacerbated economic disincentives to the adoption of certain beneficial management practices that involve land use change (such as buffer strips or wetland restoration), with the authors concluding that participating in BRM programmes “may result in reduced uptake of many environmentally friendly production practices or land use changes” (Jeffrey, Trautman and Unterschultz, 2017[22]). These findings suggest that there could be some trade-off between farm capacity to cope with risk in the short-term and the farm’s longer-term environmental sustainability or capacity to provide ecosystem services that could ameliorate the impact of natural disasters. This linkage could be better considered in future policy frameworks. For example, there could be further scope for additional BRM programmes to include cross-compliance mandates for adoption and implementation of certain beneficial management practices.

At the same time, some efforts are underway to create better linkages between risk management and environmental outcomes that would mitigate the effects of natural disasters. In one example, the Province of Saskatchewan has launched the “Climate Resilience Measurement Framework” initiative, which seeks to improve the province’s resilience to climate change by measuring progress on targets across five key areas (natural systems, economic stability, physical infrastructure, community preparedness, and human well-being) to build absorptive, adaptive and transformative capacity in each area. While the initiative is not specific to agriculture, it does contain a number of different measures intended to improve the sector’s long-term resilience, including an indicator for crop diversification as a means of enhancing soil health, mitigating exposure to pests and diseases, and managing sector financial risk.

Defining disaster risk frameworks through collaborative approaches is important to ensure that all stakeholders are aware of their responsibilities for managing risk. A wide array of stakeholders – including producer associations, provincial ministry advisory boards, agricultural wetland/marshland conservation commissions, university training centres, private sector participants, individual farmers and academics – participate in developing Canada’s agricultural policy frameworks, including disaster response frameworks.

For instance, the 2016 EM Framework establishes ex ante the roles and responsibilities of all actors in agricultural emergency situations, providing clarity on the actions stakeholders should undertake to successfully manage emergencies. Among other responsibilities outlined in the EM Framework, producers are tasked with establishing and maintaining risk management plans, adopting best management practices, and reporting adverse events; provincial and territorial governments should develop and provide exercise simulations and trainings and oversee activities that prevent or mitigate the impact of events in their jurisdiction; and the federal government is responsible for providing scientific advice and fostering an enabling environment for the creation of best management practices and biosecurity plans and measures, contributing to research and development that can provide large-scale benefits in reducing the impacts of emergencies, and raising awareness and engaging partners on understanding risks and the need for prevention (AAFC, 2016[23]).

Collaborative approaches can also be used to establish risk ownership for industry-specific risks, including through Value Chain Round Table events (OECD, 2019[14]). For example, the Animal Health Canada Working Group, which includes members from industry and FPT governments, has a governance model based on an industry-government partnership for animal health management and emergency responses, which covers decision-making, resource sharing and programme management. As a result of the Working Group, the meat processing industry has proposed a governance structure review to ensure that responsibilities for managing animal production risks are properly established.

Outside of policy development and understanding of risk ownership, FPT governments also regularly communicate with producer associations and stakeholders regarding possible future developments in potentially catastrophic risks, including pest infestations, or the evolution of disease outbreaks as a consequence of climate change. These discussions can also occur as part of broader government consultations at the provincial level, in concert with other relevant provincial ministries. Outside of these outreach efforts, government actors also regularly communicate via social media, news conferences, stakeholder networks, and websites to ensure that both producers and the general public stay informed about risk management policies, programmes, and developments.

Periodic re-assessments of policy outcomes also help ensure that risk management frameworks remain effective in a shifting risk landscape. AAFC’s Office of Audit and Evaluation conducts reviews of all programmes every five years to determine if programmes are meeting their objectives and continue to be relevant towards overall departmental policy objectives. These reviews generally lead to adjustments aimed at improving programme effectiveness. For example, a 2013 report on the approach to AgriRecovery resulted in a number of adjustments to improve the timeliness of assistance intended to help producers cope with and recover from catastrophic events, and a 2017 evaluation provided some additional insights (Office of the Auditor General of Canada, 2013[24]; Office of Audit and Evaluation, 2017[17]).

The policy framework for responding to catastrophic risks can also be revised outside of statutory assessment processes. For example, under the AgriRecovery process, extreme events are assessed to determine if they meet the criteria to warrant assistance. As part of this assessment process, evaluators identify ways that current programmes could be adjusted in order to help the sector better prepare for similar events in the future. For example, in 2012, a warm spring and then sharp frost event severely damaged fruit trees across Ontario. Although evaluators determined that existing BRM programmes provided sufficient assistance to help producers manage the impact of the event, they also made recommendations on how similar negative outcomes could be avoided in the future through enhancing stakeholders’ preparedness and mitigation efforts – in this case, through improvements to existing tree-fruit insurance plans, or by providing support through Strategic Initiatives for on-farm investments in mitigation technologies (Ontario Ministry of Agriculture, Food and Rural Affairs, 2016[25]). Furthermore, restrictions on accessing AgriRecovery for recurring events provide further incentives for all stakeholders to adjust policies and adopt the assessment recommendations accordingly. In another example, an FPT review including input from an external expert panel analysed the effectiveness of the whole BRM framework in 2018 (including response to catastrophic risk), and its alignment with policy objectives and principles. The review determined that there was a need to develop new tools – not necessarily administered by government bodies – to cover risks not targeted by the BRM suite.

While the BRM policy suite provides tools to help producers to manage or recover from catastrophic risks, other policy initiatives support farmers in enhancing their entrepreneurial skills to both absorb shocks and adapt or transform operations in response to a changing landscape. Various programmes funded through Strategic Initiatives aim to develop the capacities of farmers to experiment, innovate and adapt to reduce exposure to natural disasters – indirectly by funding the development of new technologies and innovations, and directly by supporting the adoption of these innovations. One notable example is the Living Laboratories Initiative, which fosters agricultural innovation through the use of a collaborative experimentation model, partnering farmers and researchers to co-develop, test and refine new on-farm practices or technologies. The programme’s goals include helping Canada’s agricultural sector adjust to climate change, reduce water contamination, improve soil and water conservation, and maximise habitat capacity and biodiversity (AAFC, 2019[26]). By tapping into farmer expertise, this approach tests innovations in real world conditions, encourages problem-solving by producers, and can encourage uptake of innovations. This approach may be particularly relevant to speeding innovation uptake, as more than two-thirds of the country’s producers indicate that obtaining knowledge and experience from fellow farmers informed their decisions about implementing new products, processes or practices (FPT Governments, 2018[27]). Other federally-funded CAP programmes have also indirectly helped producers to improve their farm management capacity. In particular, various projects funded through the AgriRisk initiative have generated data or tools designed to improve overall farm management. While the overarching AgriRisk Initiatives programme supports the development of new risk management tools by funding research and development, microgrants for academic research proposals, and administrative capacity building, the R&D stream in particular prioritises the development of tools by not-for-profit organisations (such as industry organisations or co-operatives) that could help producers better manage certain defined risks. One such initiative that received support through AgriRisk was the Agrometeo weather information platform for Quebec, which provides data to help inform farm-level decision-making in extreme weather situations.

Farmer capacity for experimentation and adaptation is also supported at the provincial level. For example, the Manitoba Agriculture Diversification Centre research stations carry out a number of activities that contribute to the long-term sustainability and adaptability of farms, including conducting trials on new commodities or crop varieties to determine if and how they can be adapted to Manitoba’s agroclimatic conditions (Manitoba Agriculture Diversification Centres, 2019[28]). Elsewhere, the CAP-funded Enabling Agricultural Research and Innovation Program supports investments in either the development or adaptation of innovations in the province of New Brunswick (Government of New Brunswick, 2018[29]). Additionally, FPT cost-shared programmes address other key resilience capacities. For example, the British Columbia Agri-Business Planning Program offers grants for specialised business planning assistance in a variety of areas, including assessment and development of a business and financial risk management strategy, or specialised disaster recovery planning to farm businesses affected by natural disasters (Province of British Columbia, 2019[30]).

On-farm resilience is also reinforced by a clear understanding of risk management responsibilities, including knowledge of the boundary defining the catastrophic risk layer. The different programmes of the BRM suite all have provisions that help to define this layer (including clearly defined damage thresholds), and thus provide an incentive to develop more effective long-term risk management strategies. Although ad hoc assistance programmes are commonly associated with lack of definitions and clear signals, the Canadian vehicle for managing ad hoc assistance – AgriRecovery – largely avoids this problem by reinforcing the boundary of the catastrophic risk layer in a number of ways. First, declines in production or revenue alone are not sufficient to warrant assistance. In fact, even if a response programme is developed, it cannot include financial assistance for these losses, as they are already eligible for assistance under other BRM programmes. Second, programmes under AgriRecovery are cost-shared 60/40 between the federal and provincial-territorial governments – a practice that incentivises both levels of government to invest in risk reduction, improving overall resilience and reducing the need for ex post payments (Clarke and Dercon, 2016[31]). Finally, in line with the OECD holistic framework, which indicates that catastrophic events are rare, recurring events are not eligible for assistance through the AgriRecovery framework,6 serving as a further incentive for long-term risk mitigation. The fact that AgriRecovery is a relatively small programme in terms of expenditures within the BRM portfolio suggests that these efforts to enforce the boundary have been successful. At the same time, it is not clear that the current programme boundaries are providing adequate market signals to incentivise producers to engage in improved on-farm preparedness– particularly given that there is evidence that in some instances, the availability of subsidised crop insurance may have encouraged more risk-taking behaviour (Ker et al., 2017[18]).

Ensuring that all farmers have the necessary risk awareness, financial capacity to cope with adverse events, and knowledge of resources available to help them make informed enterprise management decisions in some cases requires more targeted programming – particularly toward young farmers. Canada recognises the potentially differing capacity levels of young farmers to confront catastrophic risks, through both special provisions in existing programmes, and by providing initiatives that specifically target that demographic. For example, the new AgriDiversity programme offers support for skills, leadership and entrepreneurial development to reduce barriers to entry for underrepresented groups in the agricultural sector, including young farmers, but also people with disabilities, women, and Indigenous peoples (OECD, 2019[3]). With respect to developing entrepreneurial capacities of young farmers, some specific provincial-level programmes are available. For example, Nova Scotia’s “Small Farm Acceleration” programme provides business planning support to young farmers, and also provides working capital to help producers carry out activities identified in the business plan (Province of Nova Scotia, 2019[32]). Young farmers also in some cases have access to special financial products or more favourable financing terms. For example, under the federal Canadian Agricultural Loans Act, young farmers (with fewer than six years in operation) can provide a lower down payment of 10% versus the 20% requirement for existing farms. Certain provincial programmes also offer low interest loans to young farmers. Farm Credit Canada (FCC), a crown corporation, offers programming suited to young farmers. FCC provides customised financing through its Starter Loan and Young Farmer Loan programmes, both of which offer preferential interest rates and have no loan processing fees. These beneficial lending terms and improved access to credit can both reduce financial risk for young farmers, and also improve their resilience by allowing them to make investments in their operations to improve their ability to manage or adapt to changing conditions.

Spending on information, knowledge, and extension has been growing over the past decade, and improving farmer access to information, technologies, and best practices has been a key pillar of Canada’s transition to a largely ex ante risk management framework. Spending on general services has increased in both absolute and relative terms, reaching CAD 2.1 billion in 2016-18, and accounting for 27.5% of total support to agriculture (OECD, 2019[3]). At the same time, it is not clear the extent to which these programmes target resilience-building rather than productivity-increasing activities.

Programmes funded through the Strategic Initiatives portion of Canada’s CAP support various areas that have implications for improved management of catastrophic risks in the medium- and long-term, including climate change, environmental conservation and animal health. Recent investments in research, development, commercialisation and adoption through the AgriInnovation programme (the precursor to the current “AgriInnovate” and “AgriScience” programmes), for example, have produced substantive outcomes that are oriented toward the future success of the industry. As of March 2016, projects funded through AgriInnovation yielded 37 new products, processes, or technologies that either minimised catastrophic threats to crops, optimised livestock efficiencies, or improved overall food health and safety, and produced an additional 15 innovations related to improved environmental sustainability, including adapted beneficial management practices or new decision-support tools (Office of Audit and Evaluation, 2017[33]).

Several public goods have been valuable in helping producers make informed farm-level decisions in response to natural disaster risks, including sources that advise producers on current conditions (early warning systems), and those that help them to plan and prepare for disaster events (such as knowledge networks). AAFC’s National Agro-Climate Information Service’s Drought Watch provides a variety of early warnings and climate variability information products and services to the sector, including data on current conditions, information on how weather and climate conditions may impact agriculture, and advice on farm management practices to help producers prepare for and mitigate risk to crops, livestock and land during drought conditions. Other systems that notify producers of upcoming risks with respect to flooding, wildfire, and water availability are managed in collaboration with provincial ministries and municipalities, and risks related to plant health or pest impacts are also monitored. With respect to preparing for potential emerging catastrophic risks, the Canadian Food Inspection Agency and AAFC contribute to an information network on emerging risks related to animal health, which provincial governments then communicate to farmers and industry organisations. At the same time, some additional integration or co-ordination of these efforts could be warranted. In particular, some provincial and territorial initiatives (such as early warning systems or farm decision-making platforms) could be useful for the country as a whole as a means to help producers either mitigate or adapt to risks. Policy makers could explore opportunities to scale-up successful programming to national level for the benefit of all Canadian producers, or identify means through which information collected in one province could be useful in informing response or policy in another. A common mechanism of evaluating and benchmarking these tools could identify and more easily facilitate these types of spillovers.

Functional and resilient infrastructure also facilitate producer-level resilience to natural disasters. At the federal level, Infrastructure Canada engages in programming for rural economic development. Provincial governments are also active in investing in rural infrastructure that benefits the agricultural sector, including enhanced broadband access, expanded weather station networks (with Manitoba and Quebec providing two notable examples) and increased biosecurity at border points. In some cases, municipalities have made investments in infrastructure upgrades that specifically benefited farmers as well.

Canada’s approach to managing catastrophic risk has evolved over the past few decades and agricultural policy frameworks, reflecting the government’s goal of shifting to a more proactive policy framework and reducing dependence on reactive policy responses. Beginning with GF2 and continuing through the CAP, greater resources have been devoted to Strategic Initiatives and FPT cost-share programmes that contribute to improved long-term on-farm resilience to natural disasters, by helping farmers prepare for, respond to, and adapt to both their current and future risk environments. In particular, Canada encourages agricultural resilience by emphasising the role of innovation as a proactive risk management strategy, by helping producers to avoid or mitigate the impact of natural disasters. At the same time, current incentive structures reflected in the total BRM package tend to favour productivity-enhancing innovations rather than resilience-building advancements. These two goals need not always be in conflict, with some practices or innovations – such as investments in soil health – potentially furthering both aims. Regardless, more attention should be paid to this balance in future policy frameworks. Capacity building, including training and extension, are also critical to better sector preparedness, although not all producers have the same access to these services, as they are delivered by provincial governments.

At the same time, BRM programmes have been refined to more effectively and efficiently help farmers cope with adverse events. Most prominently, the country has made an effort to reduce ad hoc assistance, and instead ensure that financial assistance to help producers cope with and recover from adverse events is delivered through statutory programmes. In particular, the reform of ad hoc ex post assistance under the AgriRecovery framework represents an important attempt to both discipline ad hoc assistance while also providing a feedback mechanism for improved risk management programme design. The boundaries established by the framework ensure that AgriRecovery does not overlap with other programmes, and that systems are better prepared for future events.

Despite progress in disciplining ad hoc assistance, sector resilience could be enhanced through policy adjustments in a few key areas. First, the benefits of Strategic Initiatives and cost-shared FPT programmes could be better realised if successful programming could be easily identified and adopted on a larger scale. Although many instances of successful and innovative Strategic Initiative programmes were identified, these efforts are currently fragmented. Some stronger form of national strategy or co-ordination mechanism could be a beneficial means of ensuring that efforts are not being duplicated in multiple areas, that all producers can benefit from useful innovations in tools or approaches, and that information or results generated through these initiatives is used to inform other advancements in policy where relevant. While locally-tailored tools and approaches remain valuable, in order to more effectively promote the goal of improved resilience overall, policy makers should consider making national-level investments where the greatest value-for-money gains can be achieved after holistically analysing available policy options.

Second, there is an opportunity to explore how linkages between BRM programmes and environmental outcomes could be strengthened to improve the long-term resilience of the sector. Farmland could play an increasingly important role in delivering nature-based solutions to help mitigate the impacts of future natural disasters (including through buffer strips and wetland restoration) – particularly as climate conditions become increasingly variable. Accordingly, there is a need to ensure that the impacts of BRM programmes on environmental outcomes are both well-understood and then taken into account in programme design.

Third, additional evaluation of the performance of the risk management policy toolkit may be needed. Presently, the risk management framework is comprehensive, with policies in some cases extending beyond the catastrophic risk layer. Although the programmes are designed to ensure that producers are not receiving double compensation for losses, there is some overlap in programming, in that there are multiple programmes that could compensate a producer’s losses for a given adverse event, increasing the potential for crowding out on-farm resilience and risk management strategies or market solutions. To avoid crowding out in particular, there is a need to critically assess the appropriate threshold for intervention that triggers support for production and income losses under AgriInsurance and AgriStability (programmes that are intended to provide support for catastrophic events). There may also be scope to reconsider the need for so many BRM programmes to be supported by the government. For example, the small average annual farmer contribution to AgriInvest savings accounts (despite the incentive of matching funds) suggests that producers use other risk management tools or strategies to manage normal and middle-range risks, and the lower-than-anticipated proportion of producers withdrawing on their accounts in the face of larger declines also reinforces this view (Del Bianco, 2018[11]).

While the thresholds between risk layers have been more clearly defined in Canada over time, it should be noted that farmer production decisions will reflect those thresholds and the whole package of available policy measures. In this regard, there is some evidence that Canada’s current overall BRM programme design has incentivised further risk-taking behaviour. As such, the boundaries between normal, marketable, and catastrophic risks may need to be periodically reassessed to determine how much risk should be transferred to the public sector and how much should be the responsibility of producers, with stakeholders bearing in mind that too much reliance on the public sector likely harms long-term farm resilience by incentivising riskier behaviour.

Nevertheless, Canada’s process for policy evaluation and evolution provides a good example of how policies can be improved iteratively, supported by evaluation and participatory processes. Policy assessment combined with an understanding of the value of stakeholder dialogue and feedback has been important to the evolution in design of both the overall policy framework and individual programmes and initiatives. Past policy revisions have been underpinned by a serious consideration of evaluation results and adjustments in programme design to resolve identified issues. Recent policy development efforts have integrated farmer and industry viewpoints, and have also established clearer understandings of risk management responsibilities.

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Notes

← 1. Supply management continues for the dairy, poultry and egg sectors, and generates significant market price support for dairy products, which accounted for 40% of dairy gross farm receipts in 2016-18 (OECD, 2019[3]).

← 2. The AgriRecovery Framework does include quantitative criteria, but these are not public information.

← 3. The current liquidity ratio of the average Canadian farm in 2018 was greater than 2, indicating that current assets more than covered current liabilities. However, the average acid test liquidity ratio (liquid assets minus inventories) of 0.433 indicates that these assets may be in formats that may be difficult to immediately covert to cash form. For more information on these concepts, see (Statistics Canada, 2015[35]).

← 4. Producers must be located in designated drought or flood regions, which are experiencing forage yields less than 50% of the long-term average as a result of droughts or floods.

← 5. See, for example, AAFC (2019[34]).

← 6. There are a few exceptions to this provision, including if FPT governments are currently determining whether or not there is an alternative long-term solution, or if they have assessed the situation and determined that it is uninsurable or unable to be effectively addressed through existing government or private sector programmes (Agriculture and Agri-Food Canada, 2018[5]).

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