Choose the right protection
How much protection is enough? That is something that each producer will have to decide based on his or her reference margin.
For a reference margin of $100,000, the minimum deposit required is $14,000
for 70% coverage. The cost share for the farmer is 20% or 14% of the reference
margin. So if the producer’s margin declined to zero, the producer would
receive payments to bring him back to 70% of the reference margin. The cost
to the producer would be a refundable deposit equivalent to 14% of the reference
margin.
Protection Levels
using $100,000 reference margin as an example
SHARING THE COST
The reference margin is divided into three sections or tiers. Each tier represents
a specific range of the reference margin that has its own producer/government
cost share requirements. These tiers are used to determine the producer deposit
required for each level of protection. The tiers are also used to calculate
the payment triggered when a margin decline occurs. Here’s how it works:
Tier 3
At 0-70% range of the reference margin this is the minimum amount of protection
available. This is a 20:80 cost share between the producer and governments so
the producer must deposit a dollar amount equivalent to 20% of his reference
margin that falls within this tier to be protected.
Tier 2
This tier represents the range of the reference margin greater than 70% up to
85% with a cost share of 30:70 between producers and governments. So if a producer
has secured protection in Tier 1 and wants to take advantage of additional protection,
additional funds equivalent to 30% of the reference margin that falls within
this tier will have to be deposited.
Tier 1
This is the range of the reference margin greater than 85% up to 100%. The cost
is shared 50:50 between producers and governments. As with the other two tiers,
there needs to be a dollar amount equivalent to 50% of the reference margin
that falls within this tier.
For example…
As the following charts show, this producer faced challenges in 2003. He has
a reference margin of $100,000 and has selected a maximum protection level against
full margin decline and deposited $22,000.
Program Year Margin
Margin Decline
Government funds leveraged by account balance of $22,000
The producer selected a maximum protection level against full margin decline
and deposited $22,000. Upon withdrawing $19,000 from the original deposit, the
producer was able to receive a maximum of $46,000 from the margin decline for
a total payment of $65,000.
RESOURCE
CAIS Program Calculator
An online calculator is available to give producers a sense of how the CAIS
program can provide protection when their income drops by estimating their production
margins and corresponding program benefits.
www.agr.gc.ca/caisprogram/
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