Full text of DOI:10.1111/j.1744-7976.2001.tb00323.x

Canadian Agricultural Safety Net Programs
and Pressures for Change
David Culver, Deborah Niekamp and Margaret Zafiriou
Agriculture and Agri-Food Canada
Paper presented at the Joint AAEA/CAEA Annual meetings, Chicago, Illinois,
5–8 August 2001.
This paper contains the views of the authors and does not necessarily reflect those of
Agriculture and Agri-Food Canada and the Government of Canada.
INTRODUCTION
Recent developments on the agricultural policy front in Canada suggest that we are entering
a new stage of agricultural support in Canada. While policy makers continue to work on
improving the design and coverage of safety net programs to help producers manage risk,
increasingly, policy discussions center around the longer-term competitiveness and strength
of the sector and the importance of science, new technology, skills and innovation for suc-
cess. Important to the discussions are environmental issues and food safety concerns as well
as new products and technology that are altering the shape of the agriculture and agri-food
sector (e.g. GMOs and fuel from biomass).
The purpose of this paper is to briefly describe current agricultural safety net programs
in Canada and to present issues that are creating pressures for change in future policy direc-
tions. The paper begins with a description of current safety net programs and objectives1 and
the environment in which they were developed. It then continues with a discussion of current
pressures for change in agricultural policy.
CURRENT SAFETY NET POLICIES
The safety net policies that are currently in place in Canada were introduced during a period
of deficit fighting and increasingly globalized trade in the 1990s. During this decade, domes-
tic inflation was brought under control, federal and provincial fiscal deficits disappeared and
several important international trade agreements were signed (Canada-U.S. Free Trade
Agreement, North American Free Trade Agreement, World Trade Organization Agreement)
that introduced new trade disciplines, including a dispute settlement mechanism and mea-
sures to improve market access for agriculture and agri-food products. Canadian support to
agriculture fell relative to that of other OECD countries, especially compared to the United
States and the European Union (Figure 1) where objectives of agriculture policy developed
along different lines than those in Canada,2 and particularly for wheat (Figure 2).
Federal support to agriculture is delivered through five safety net programs that fall
under the Farm Income Protection Act (FIPA). This Act, introduced in 1991, encouraged a
more “market-oriented” and “self-reliant” philosophy that was at the same time intended to
Canadian Journal of Agricultural Economics 49 (2001) 509–527
509

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Figure 1. Producer subsidy equivalents by country, 1986–88, 1998, 1999 and 2000
Source: OECD, Monitoring and evaluation 2001, May 2001.
be trade- and production-neutral (decoupled), equitable across provinces and environmental-
ly sustainable with minimum overlap or duplication of purpose. Labeled a “whole farm
approach,” FIPA governs programs that stabilize income from all commodities rather than on
a commodity-by-commodity basis.
Funding for safety nets is negotiated between the federal and provincial governments
every three years and outlined in a federal–provincial Safety Net Agreement Framework. The
objectives of safety net programs, as stated in the most recent Safety Net Agreement
Framework (July 2000), include “encouraging risk management by producers” and “stabiliz-
ing income” (Richardson 2000).
The five current safety net programs include:
• Net Income Stabilization Account (NISA)
• crop insurance
• provincial companion programs
• cash advance programs
• Agriculture Income Disaster Assistance (AIDA)/Canadian Farm Income Program (CFIP)
The Net Income Stabilization Account (NISA), helps producers achieve long-term
farm income stability on an individual basis. Producers may deposit money annually into
their NISA accounts based on eligible net sales and receive matching government contribu-
tions. In lower-income years, producers may make withdrawals from the funds they have set
aside. Withdrawals are triggered when gross margins fall below a three-year average (gross
margin trigger) or when family income falls below a minimum family income level (mini-
mum income trigger) (Gellner and Rattray 2001). NISA covers most commodities except

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Figure 2. Producer subsidy equivalents for wheat in Canada, the United States and the European Union
Source: OECD, Agricultural policies in OECD countries: monitoring and evaluation 2001, and estimates
by Agriculture and Agri-Food Canada.
nonhorticulture products in Quebec and supply-managed commodities such as chicken,
turkey, eggs and fluid and industrial milk. The federal government contributed $230 million
to match individual NISA accounts in 2000–01.
Crop insurance is a provincially delivered program to which the federal government
contributes, on a cost-shared basis, according to FIPA guidelines. Producers, provincial gov-
ernments and the federal government contribute to premiums and administrative costs in
insuring crops against natural hazards such as drought, flood, hail, frost, excessive moisture
and insects. Payments are triggered when a producer’s yield falls below 70–80% of the
farm’s average historical yield. Crop insurance is a voluntary program that covers most crops
across the country. In 2000–01, federal contributions to the crop insurance program amount-
ed to $273 million.
Provincial companion programs provide safety net funding to the provinces to design
programs that address unique provincial differences in agricultural structure. A wide gamut
of programs are funded under this program. Federal funding of companion programs amount-
ed to $192 million in 2000–01.
Fall and spring cash advance programs provide interest-free loans to crop producers to
help with spring seeding or fall harvesting. Marketing can then be done gradually to protect
producers against lower prices at harvest time. The loans are repaid as the crops are marketed.
The federal government spent $39 million on interest-free loans in 2000–01.
With the dramatic decline in hog and grain prices in 1998 and 1999, a federal-provin-
cial cost-shared program was introduced called the Agriculture Income Disaster Assistance
(AIDA) program, to provide disaster relief. This program was initially funded for two years
and was similar to disaster programs already in place in British Columbia, Alberta, and Prince
Edward Island. Under AIDA, producers were compensated for up to 70% of their previous

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Figure 3. Net cash income and direct program payments, Canada, 1989–2004
Source: Estimates by Statistics Canada and Agriculture and Agri-Food Canada.
(three years or Olympic-average middle three out of five years) average gross margin if the
gross margin for the current year fell below this average. AIDA was designed to be integrat-
ed with NISA in many provinces in an effort to eliminate duplication of payments. Federal
funding for AIDA was $196 million in 2000.
AIDA has been replaced by the Canadian Farm Income Program (CFIP), a second-gen-
eration disaster program that works on the same principals as AIDA. Minor adjustments were
made to the program such as better integration with NISA and a redefining of gross margin
to allow for the inclusion of all labor (family and nonfamily) as an allowable expense. The
federal and provincial governments spent $635 million for CFIP in 2000–01.
As a result of these programs under the federal–provincial Safety Net Agreement
Framework, direct program payments to Canadian producers are expected to rise to $3.8 bil-
lion in 2001 from $1.1 billion in 1997 (Figure 3).
CURRENT ISSUES THAT WILL IMPACT FUTURE SAFETY NET PROGRAMS
While the budget constraints, trade environment and disciplines of the WTO agreement will
no doubt continue to drive agricultural policy and program design in Canada, there are a num-
ber of domestic factors within the agriculture and nonagriculture sectors that are putting pres-
sure on governments to alter safety net programs in Canada. These pressures are also present
in a number of other member countries of the Organisation for Economic Co-operation and
Development and are presented below. These include:
• structural change in agriculture
• the diverse needs of farm operators and their families
• the decrease in uniqueness of the agriculture sector
• environmental and food safety issues.
The following sections will discuss each of these issues in turn and outline implications for
future safety net policy in Canada.

CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
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Figure 4. Number of census farms in Canada and average crop area and herd sizea, 1921–96
Source: Statistics Canada, Census of Agriculture.
a Averages are calculated on per reporting basis for crop area and herd size.
STRUCTURAL CHANGE IN AGRICULTURE
Increased Concentration and Specialization of Production
The agriculture sector has undergone significant structural change in the post-war period.
Since World War II, the number of census farms in Canada has declined, while the average
farm size, crop area and herd size has increased (Figure 4). These changes occurred as a result
of productivity improvements in agriculture and the migration of rural farm families to the
cities. Productivity improvements occurred as a result of technological advancements that
transformed Canadian agriculture, from early developments in seed breeding and farm mech-
anization to more recent developments in biotechnology and precision farming. These
advancements continue to improve farm productivity, giving farmers the opportunity to
expand while reducing their labor requirements per acre and per head. The hog sector in par-
ticular witnessed significant gains in economies of size since 1976, with the average farm
reporting increases in hog numbers from 100 hogs in 1976 to 525 hogs in 1996.
Technological advancements also encouraged increased specialization. Operators on
more specialized farms are more adept at capturing economies of size and scale, thereby low-
ering their production costs. But with increased specialization come increased risks. The
extent to which a farm is specialized affects the operator’s ability to respond to changing mar-
ket conditions. More specialized farms, which depend to a greater extent on a particular com-
modity, are much more vulnerable to price risk. To offset this risk, an increasing number of
farm operators use risk management tools such as production contracts, hedging strategies
and forward pricing in addition to traditional safety net programs. In 1999, a large percentage
of fruit and vegetable farms and greenhouse and nursery farms were highly specialized3
(Figure 5). These farms must make use of risk management tools to offset the risks associat-
ed with a high degree of specialization.

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Figure 5: Percentage of highly specialized farmsa by farm type, 1999
Source: Statistics Canada, Whole Farm Database, 2001.
a
Farm type is determined by the commodity whose sales represent 51% or more of total agricultural
sales of the farm. A farm is highly specialized when 90% or more of sales are derived from that com-
modity.
With farms becoming larger and more specialized, farm production is increasingly con-
centrated on large and very large farms. In 1981, large farms represented 22% of farms and
accounted for 64% of total agricultural production in Canada (Figure 6). In 1996, they repre-
sented 40% of farms, but accounted for 84% of production. Very large farms ($500,000 and
over), in particular, grew in both importance and contribution to production, moving from
19% to 36% of total production while representing 1% of farms in 1981 and 4% in 1996.
Large Farms: The Beneficiaries of Safety Net Funding
The increase in concentration and specialization of production over time has had an impact
on the distribution of direct program payments.4 In line with their objectives (i.e., risk man-
agement and farm business income stabilization), safety nets go to those who produce and
those facing significant financial risk. As a result, large and very large farms are the main
beneficiaries of safety net policies and receive a share of farm payouts commensurate with
their contribution to farm production.
In 1999, large and very large farms ($100,000 and over) received 80% of direct program
payments yet represented only 31% of census farms (Figure 7). (NISA withdrawals are also
concentrated on large and very large farms, Figure 7a). They did, however, at the same time
account for 87% of production.
Small and medium farms (revenues $10,000 to $99,999), on the other hand, which rep-
resented 35% of census farms, accounted for only 12% of production and received 19% of
the direct program payments. Farms of this size generally are smaller in terms of assets and

CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
515
Figure 6. Change in Concentration of productiona, 1981 and 1996
Source: Statistics Canada, Census of Agriculture.
a Revenue classes and production are adjusted to constant 1995 dollars.
are less likely to support a family based solely on income from the farm. Many of these cen-
sus farms are unprofitable (28% reported operating losses in 1999 compared with 14% of
larger farms) and families on these farms rely heavily on off-farm income sources.
The remaining 34% of farms were “hobby” farms with gross farm revenues under
$10,000. They accounted for only 1% of production and received only 1% of direct program
payments. Being small in size, these farms are generally operated by families and individuals
with full-time jobs outside agriculture who are not reliant on agricultural safety net programs.
The Diverse Needs of Farm Operators and Their Families
From the discussion above, it is clear that agriculture is a diverse sector with diverse needs.
For example, not all farms are large, commercially viable operations that can support a full-
time farm operator. Farms and their operators differ by size, type, resources, skills, experi-
ence and business attitudes and entrepreneurship. Safety net programs do not address all of
the needs a farm operator might have to successfully operate a farm. For example, young
farmers just starting out have unique capital requirements and may lack business experience.
They require policies that help with training or farm loans. Retiring farmers, on the other
hand, who are in the process of downsizing and planning to pass the farm on, require programs
that help in succession planning. For those operators with small and medium-sized farms,
with limited resources, low levels of education and few off-farm employment opportunities,
training and extension programs may best serve their needs. Given the technological devel-
opments that have made primary production increasingly complex, a farm operator requires
expertise in marketing, investment, financial management, production and cost control, as
well as managing people (Trant 1976). With only half (51%) of young farmers (under 35
years) in Canada having some post-secondary education, there is an increasing concern that

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Figure 7a. Distribution of census farms, production and program payments, 1999
Source: Farm Financial Survey, 1999, and estimates by Agriculture and Agri-Food Canada.
Figure 7b. Distribution of farms participating in NISA, production and government contributions, 1999
Source: Estimates by Agriculture and Agri-Food Canada, and NISA Database.

CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
517
more training will be required, since research shows that formal training in agriculture
improves a farmer’s chances of succeeding. The farm typology framework, discussed below,
helps identify some of the diverse needs of farm operators and their families that require alter-
native policies and programs outside of the current safety net framework.
Farm Business – Farm Family Typology Framework
A farm business and farm family typology, developed at Agriculture and Agri-Food Canada,
and similar to that introduced by the Economic Research Service (ERS) of the U.S.
Department of Agriculture (USDA, ERS 2000) provides a framework with which to analyze
the diverse needs of the agriculture sector. This typology takes into account five factors:
• the farm’s size
• the stage in the farm (operator’s) life cycle, career or age
• the degree to which a farm (family) depends on off-farm employment income
• the farm family’s economic well-being (income)
• the farm’s asset base
• the farm’s organizational structure (i.e., nonfamily corporation).
As with the ERS, Agriculture and Agri-Food Canada found that the groups differ in
terms of their contribution to agricultural production, product specialization, program partic-
ipation and benefits and dependence on farm income. Table 1 shows the eight mutually exclu-
sive types of farm businesses and farming families (retirement, lifestyle, low income, small,
medium, large and very large business focused, and nonfamily farms)5 as well as their distri-
bution by number, sales, and direct program payments. Table 2 shows these farm businesses
and farming families and their sources of income by typology.
In 1999, some 16% of farms were classified as retirement farms because the operator was
over 60 years of age and receiving pension income with no children directly involved in the day
to day management of the farm. These farms generally have high net worth yet are in the process
of downsizing as the operator prepares to pass the farm on to successors. However, a consider-
able percentage of these farms are large and receive substantial direct program payments.
Table 1. Distribution of farms and families associated with farms by typology, Canada, 1999
Typology of farm businesses
and farm families
Market
revenue
Program
payments
Number of farms
(actual)
27,928
13,601
18,885
(%)
16
8
(%)
6
1
(%)
8
2
Retirement
Lifestyle
Low income
Business focused:
Small farms
Medium farms
Large farms
Very large farms
Hutterite colies, etc.
Total
11
3
4
14,686
21,632
69,952
10,521
514
9
13
37
6
0
100
1
5
42
39
2
2
7
52
23
2
170,719
100
100
Note: The Farm Financial Survey includes farms with gross farm revenues of $10,000 and above.
Source: Statistics Canada, Farm Financial Survey, 1999.

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Table 2, Sources of family income for families associated with farms by farm typology, Canada 1999
Typology of farm businesses
and farm families
Farm
income
Off-farm
income
Family
income
($ per farm)
14,140
($ per farm)
24,830
85,500
($ per farm)
38,960
85,110
Retirement
Lifestyle
(690)
Low income
Business-focused:
Small
(2,240)
7,900
5,670
7,380
19,410
49,620
174,210
27,830
32,110
18,410
30,030
35,210
51,530
68,030
204,240
Medium
Large
Very large
Note: Farm family income data from the Farm Financial Survey includes the operator’s share of net
operating income and the nonfarm income of the operator filling out the survey.
Source: Statistics Canada and Agriculture and Agri-Food Canada.
Lifestyle farms, which accounted for 8% of farms in 1999, are generally operated by
“hobby” farmers who rely almost exclusively on off-farm income. They generally receive rela-
tively few program payments because of their small contribution to total agricultural production.
Low-income farming families, with total family income under $20,000,7 operated farms
that represented 11% of farms in 1999. They earned little from either farm or off-farm
sources. Despite program payments of $2,500 per family, these farms still reported losses of
$2,200 (Table 2). Off-farm income of $7,900 was relatively small and helped offset farm
losses. However, because of their relatively large net worth (average $367,000), low-income
farming families are not generally eligible for other government (nonagricultural) social
transfers. Current safety net support is therefore not particularly effective for these families,
given their low farm revenues.
The remaining farms in the farm typology are “business-focused” in their approach, gen-
erally profitable, and more dependent on farm income. These farms represented 65% of cen-
sus farms in Canada in 1999. They can be divided further by farm size, which influences both
program needs and benefits. As seen in Table 1, large and very large business-focused farms
contribute the most to agricultural production in Canada and are the major beneficiaries of
Canadian agricultural safety net funding. Since safety net programs are designed to stabilize
the returns to farm production, these larger farms are the major consumers of safety net pro-
grams because they produce the bulk of farm production. The unique needs of farming fam-
ilies operating small and medium-sized farms who are less dependent on farm income will
have to be addressed through alternative policies, such as transition or skill development poli-
cies, for example. Increasingly, agricultural policy discussions are centered around these
types of issues arising from the diverse needs of the sector.
Decrease in Uniqueness of the Agriculture Sector
Family Income: Farm and Nonfarm
One of the main reasons for support to agriculture in the past was to address the income dis-
parity between farm and nonfarm families and in particular, to eliminate low income (poverty)

CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
519
Figure 8. Farm family income as a share of all family incomea, 1971–97
Source: Statistics Canada, Survey of Consumer Finances.
a
Farm families are those husband–wife families (excluding unattached individuals) where one indi-
vidual reports some net farm income.
in agriculture relative to the general population. Over time, however, farm family income has
approached that of nonfarm families and low income among farm families has become less
of a problem.
Figure 8 shows how the ratio of farm family income to all family income has increased
over time from 94% in 1980 to 98% in 1997 (Figure 8).8 Farm family income includes net
farm self-employment income as well as off-farm income.
When farm family income is broken down by farm size, the gap between farm and non-
farm family income becomes a function of farm size. Figure 9 shows how families on medi-
um-sized farms reported total family income that was below that of nonfarm families in
1998.9 Many medium farms are too small to generate substantial income from the farm, yet
are too large for farm operators and their family members to earn substantial off-farm income.
This compares with families on large farms who generate higher farm income and small
farms who report substantial off-farm income. The result is that families on medium farms
earn less family income than do nonfarm families. In 1998, some 21% of farm families oper-
ated medium farms and earned a total family income of $54,796, compared with the $59,398
earned by nonfarm families.
The difference between farm and nonfarm families has narrowed when the incidence of
low income is taken into consideration. In the 1969 “Task Force on Agriculture in the
Seventies,” almost one-third of farms were living in poverty, a major concern among policy
makers, requiring a policy response. However, developments in social policy in Canada dur-
ing the 1960s and 1970s, such as the introduction of Medicare and Canada–Québec Pension
Plans (CPP/QPP), helped address some of these concerns and the incidence of low income
declined over this period as a result.

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CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
521
Table 3. Incidence of low incomea among farm and all families, Canada, 1961–98
Year
Farm families
All families
(%)
33
20.5
16
14.7
12.8
(%)
n.a.
11.8
14.4
14.8
13.1
1961
1975
1985
1996
1998
a As determined by Statistics Canada’s low-income cut-offs for various years.
Source: Statistics Canada, Survey of Consumer Finances and Survey of Labour Income Dynamics.
The incidence of low income is measured by the share of (farm) families with income
below a low income measure such as the low-income cut-off or LICO.10 Estimates from the
1970s show that improvement was made on this front since the share of farm families11 with
low income fell from 21.8% in 1973 to 12.8% by 1978 (Table 3). This compares with only a
modest improvement made by all Canadian families with low income from 13.4% in 1973 to
10.3% in 1978 (Darcovich, Gellner and Piracha 1977).
More recent data show that between 1985 and 1995, there was a continued improvement
in the incidence of low income for farm families relative to nonfarm families12 (Table 3) as
the share of farm families with income under the LICO fell from 16% to 9% and rose from
14% to 14.4% for nonfarm families. More recently (1996 to 1998) it has continued to decline.
The Increasing Importance of Off-farm Income
One reason for the narrowing in the gap between farm and nonfarm family income is the
growing contribution of off-farm income. Off-farm income includes income from wages and
salaries earned off the farm as well as nonfarm self-employment income, investment income,
pension income, government (social) transfer income (employment insurance, CPP/QPP,
Child Tax Benefit, etc.) and other income. It has grown in importance over time for most farm
families (Figure 10). In 1975, off-farm income represented 53% of total farm family income.
By 1997, this share rose to 76%. And while all components of off-farm income have
increased, wages and salaries from off-farm employment and government social transfers
have contributed the most.
By farm size, off-farm income is most important for families on small farms, providing
more than 100% of total family income in most cases. Families on larger farms, on the other
hand, are less reliant on off-farm income, but it continues to grow in importance over time as
well (Figure 9).
Data from the Census of Agriculture confirm the extent to which farm operators rely on
off-farm income and how this has changed over time. Forty-six percent of (both male and
female) farm operators reported some off-farm work in 1995. This compares with earlier cen-
suses, when a smaller percentage of “first-listed” operators worked off the farm: 28% in 1951,
31% in 1961 and 35% in 1971 reported some days of off farm work (Bollman 1979a).

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Figure 10. Off-farm income as a share of total family incomea for farm families, 1971–97
Source: Statistics Canada, Survey of Consumer Finances.
a Farm families are those husband–wife families (including unattached individuals) where one individ-
ual reports some (positive or nonzero) net income from farming after depreciation (CCA).
The tendency toward more off-farm work may be a function of several factors:
• increasing off-farm employment opportunities
• technological and productivity improvements on the farm and within the household that
resulted in the “freeing” of farm family labor to work off the farm (operators are working
more days off-the-farm than previously)
• an increase in relative wages of off-farm employment relative to returns to the farm
• better transportation (better roads, better vehicles) and a relatively lower cost of commut-
ing longer distances than previously
• a desire (or need) to diversify income sources as a means of managing risk
• an incentive for family members to work in off-farm jobs in order to qualify for social ben-
efits such as pension and health benefits.
Regardless of the reason, the increasing reliance on off-farm income of farm families has
resulted in greater diversification of income sources and less risk associated with variations
in farm income.
Farm Versus Nonfarm Household Wealth
While income comparisons are the traditional means of comparing farm families’ economic
well-being relative to that of nonfarm families, wealth comparisons are also an important
indicator. Wealth, as measured by net worth, is a longer-term indicator of a household’s eco-
nomic well-being, since it is less subject to the dramatic variations in income that can take
place from one year to the next. Based on recent data on wealth and net worth, most farm
families are doing better than nonfarm families in this regard.

CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
523
Figure 11. Median net wortha of farm and all Canadian farm households, 1999
Source: Statistics Canada, Survey of Financial Security, 1999, custom calculations.
a Median net worth measures the midpoint net worth below and above which there are the same number
of households. When medians are used, net worth does not equal assets minus liabilities.
Data on wealth or net worth for farm and nonfarm households are available from the
1999 Survey of Financial Security (SFS), which sampled all households in Canada and col-
lected data on business and personal assets and liabilities. Figure 11 present the results from
the SFS with comparisons between all Canadian households and farm households.
The survey sampled 290 farm households13 and 12,000 nonfarm households in 1999.
Farm households reported a median net worth of $363,200 while all households in the survey
reported $81,000. Net worth is higher for farm households than all Canadian households pri-
marily due to the importance of business equity for farm households. The majority of major
income earners in farm households are self-employed on sole proprietorship farms. Business
equity represented about 44% of total household net worth for farm households compared
with 18% for all households. Median business equity was $142,000 for the average farm
household compared to $10,000 for all households. It is often difficult for self-employed indi-
viduals to separate farm business assets from the personal assets of the household, especially
if personal assets, such as cars or residences are also used for business purposes.
The relatively high median net worth of farm households compared to all households
may have implications for future safety net policy. It is becoming increasingly difficult to jus-
tify the large amount of support that is being paid out to large commercial farm operators
when the average Canadian household, with substantially lower net worth, receives less sup-
port. On the other hand, the relatively high net worth of low-income farm households pre-
vents them from access to certain nonagricultural social safety net programs that might oth-

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Figure 12. Consumer attitudes toward various issues, 2000 and 2001
Source: Eckos, 2000, 2001.
erwise benefit them substantially. However, differences in net worth may reflect the differ-
ences in investment to income ratios and the rate at which wealth accumulates for farm house-
holds versus nonfarm households, as well as the relative age of farm operators versus the
average household head. In addition, farmers, more than any other group, count on the sale
of their assets upon retirement to provide them with retirement income. This probably influ-
ences capital accumulation and net worth levels on the farm as well.
Environmental and Food Safety Issues
Over the 1990s and perhaps culminating in the WTO talks in Seattle, Washington, in
December 2000, we have seen the rise of “consumer sovereignty”. Consumers speak loudly
and their voices are being heard on several fronts affecting the agriculture and agri-food sector.
For example, they are increasingly demanding clean water, a safe food supply, and non-
genetically modified crops. They want an environment that is clean and sustainable and water
that is free of contaminants and safe to drink. A recent survey of consumer attitudes towards
the priority of various issues shows that the environment and food safety rank high in terms
of priority for Canadian citizens, and are becoming more important over time (Figure 12).
Much of this interest stems from recent events in Europe and Canada. In May 2000, a
deadly strain of E. Coli bacteria was distributed by the water utility in a small town in
Ontario, Canada (Walkerton). Seven people died and 2,300 other people were infected. With
the source of the E. Coli believed to be from local livestock operations, the public concern
over agricultural production practices, particularly intensive livestock production, has been
significantly increased as a result. Water safety and environmental concerns in the post
Walkerton period will not be taken for granted.
In addition to Walkerton in Canada, foot and mouth disease and mad cow disease in
Europe have increased consumers’ awareness of food safety issues. Food safety issues stem-
ming from pesticide residues and genetically modified foods are also of major concern for

CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
525
consumers. Governments and farmers increasingly recognize that risk management must
extend beyond the traditional (financial) risk management tools associated with agricultural
safety nets to risk management tools for environmental and food safety risks. In other words,
there are increasingly market risks associated with assuring market access against border
closures due to food safety issues. Increasingly, HACCP (Hazard and Critical Control Path)
programs for farms, environmental farm plans, regulations governing intensive livestock oper-
ations and nutrient management regulations are being introduced by provincial governments
in Canada (e.g., Ontario, Alberta and Prince Edward Island). As a result, there is pressure to
extend agricultural support beyond the traditional safety net funding to provide income pro-
tection to producers against risks associated with these new consumer concerns for the envi-
ronment, water and food safety. These pressures will influence the future policy directions in
Canada and in other countries around the world.
SUMMARY
Agricultural safety net programs are in place to help producers manage the financial risk of
their farm businesses arising from variations in prices, production and income. However, new
pressures are evident arising from structural change in the agriculture sector, a recognition of
the diversity of farm operators and farm businesses and their policy needs, increasingly
demanding consumers and greater risks associated with the impact of farming on the envi-
ronment, water and food safety. The government is aware of its expanded role in the area of
risk management beyond that covered by traditional safety net funding and is venturing into
new areas governing food safety and the environment. This, at a time when structural change
is leading to a smaller, more concentrated sector that is increasingly diverse, with diverse pol-
icy needs, yet increasingly comparable to other sectors based on income and low income
gaps. All of these factors will continue to press for change in the future of safety net policies
in Canada.
APPENDIX
A Move Away from a “One-Size-Fits-All” Approach
Not all farms and farm families share the same goals, opportunities and challenges. Policies
aimed at improving the well-being of farmers should recognize the diversity that exists
among farm families. To address this problem, a farm typology was developed by Agriculture
and Agri-Food Canada similar in many respects to the typology developed by the Economic
Research Service (ERS). Factors such as age, business intentions, and sales class were used
to classify farm businesses and farming families into eight mutually exclusive groups. As
with the ERS typologies, the groups differ in their contributions to agricultural production,
product specialization, program participation and dependence on farm income.
One of the main differences between the Agriculture and Agri-Food Canada and the
ERS farm typology groupings is the order in which farms are selected. The Agriculture and
Agri-Food Canada typology selects retirement age operators first, rather than second. In addi-
tion, the small farms and large farms have different revenue cut-off points: $10,000 to
$99,999 for small farms in Canada and $1,000 to $249,999 in the United States.
There are eight groups identified in the Agriculture and Agri-Food Canada typology:
• retirement farms: farms managed by operators 60 years of age or older, receiving pension
income with no children involved in the day-to-day operation of the farm.

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• lifestyle farms: Farms managed by families with total household off-farm income of
$50,000 or more and where gross revenues from farming are between $10,000 and $49,999.
• low-income farms: farms managed by families with total household income less than
$20,000 and gross farm revenues of $10,000 to $99,999.
• business-focused farms: all other family farms sorted by size.
– small (total revenues of $10,000 to $49,999)
– medium (total revenues of $50,000 to $99,999)
– large (total revenues of $100,000 to $499,999)
– very large (total revenues of $500,000 and over)
• nonfamily farms. Hutterite colonies, communal operations and other nonfamily organiza-
tional arrangements such as a nonfamily cooperative and corporation.
NOTES
1For a more detailed discussion of the historical objectives of agricultural policy in Canada, the chang-
ing trade and macroeconomic environment, and the leading pressures for change in the agriculture and
agri-food sector see Ndayisenga et al, forthcoming.
2In the EU, agricultural support objectives relate to maintaining a rural lifestyle and rural economies and
other “multifunctionality” objectives.
3A farm is considered highly specialized when 90% or more of its agricultural sales are derived from
one commodity or commodity group.
4Direct program payments on the Farm Financial Survey include revenues from provincial stabilization
programs (e.g., ASRA, FIDP, ADIP, MRP), crop insurance net of premiums, AIDA, dairy subsidies and
certain input and fuel tax rebates, but exclude NISA withdrawals, which are collected separately).
5Farm typology definitions are included in the appendix.
6Farms are determined based on census definition, i.e., those operations producing agricultural products.
7Low-income cut-offs (LICOs) are published by Statistics Canada every year and averaged $22,000 for a
family of four in rural areas. It was this amount on which the low-income cut-off for the typology was based.
8Farm families include those economic families (husband-wife families with children related by blood
or adoption) whose “head” reported earning “some” (positive or nonzero) net farm self-employment
income, after depreciation. Data are from the Survey of Consumer Finances.
9Data used for this comparison are derived from Small Area Administration Data (for nonfarm fami-
lies) and Taxfiler (for farm families). The family is defined as husband-wife economic families and lone
parent families, excluding unattached individuals.
10There are several measures of low income. The most common measure is called the “low-income cut-
off” (LICO) calculated by Statistics Canada and based on the Family Expenditure Survey. The LICO is
based on the amount of money the average Canadian family spends on basic necessities such as food,
shelter and clothing. The cost of basic necessities is adjusted for family size and area of residence (such
as rural or urban large city). This share is then inflated by 20 percentage points and also adjusted for
inflation relative to the base year. In 1996, for example, the LICO for an average four-person family liv-
ing in rural Canada was $22,849 while the LICO for the same-sized family living in a large Canadian
city was $33,008. Other measures of low income are also available such as the low income measure
(LIM) developed for the OECD and the Market Basket Measure used by Human Resources
Development Canada. However, results indicate the same trends showing that the extent of low income
among farm families has improved relative to the general population over the 1970s, 1980s and 1990s.
LIMs are calculated as 50% of the average median income of a particular country. The OECD
makes use of this measure because it allows international comparisons among countries that do not have
sophisticated income data.

CANADIAN AGRICULTURAL SAFETY NET PROGRAMS AND PRESSURES FOR CHANGE
527
The Market Basket Measure has been developed by Human Resources Development Canada to
take account of the cost of daycare and other expenses important to lower-income families, and that not
captured as well as in the Family Expenditure Survey.
11In Darcovich, Gellner and Piracha (1977), farm families were defined as those economic families whose
head reported farming as their main occupation. Data were from the Survey of Consumer Finances.
12In Waithe, Zafiriou and Niekamp (2000), farm families were defined as those (economic) families
with the household “head” reporting some (positive and nonzero) net farm income. Data used were from
the Survey of Consumer Finances. The difference in definition of farm families can explain differences
in low income incidence over the two periods.
13Farm households are defined as those where the major income earner is classified as having an agri-
cultural occupation.
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