by SUSAN MANN
Ontario Agriculture Minister Carol Mitchell implemented a regulatory change this week that enables farmers to continue using deferred payments for their grain crops for the time being.
And that means its “business as usual,” she says in a telephone interview.
Agriculture Ministry spokesperson Sarah Petrevan says a deferred payment agreement has to be voluntary between all parties, must be put in writing, and it clearly has to define when the grain dealer or elevator operator will pay the producer. In addition, the dealer or elevator operator can’t extend payment to a farmer beyond July 1, 2012.
The need for the agreements to be voluntary is “protecting the farmer’s choice to enter into a deferred payment agreement,” she says.
On November 29 Agricorp issued a notice saying it would be cracking down and enforcing the ‘no deferred payment’ rule in the Grains Act. But Barry Senft, Grain Farmers of Ontario CEO, says farmers have been using the practice of deferred payments for more than 20 years.
Dave Buttenham, CEO of the Ontario Agri-Business Association, says the ministry recently determined that deferred payments weren’t permitted after completing a legal review of Grains Act regulations.
Buttenham says Agricorp’s move to crack down on the practice “in the mid stream of harvest was nothing short of a nightmare.”
Grain elevator operators, dealers and farmers were confused and frustrated both by Agricorp’s notice to implement the ‘no deferred payment’ rule and the timing of the announcement. Senft says they were getting 25 calls a day from concerned farmers, while Buttenham says the agri-business association was also getting lots of calls from dealers and elevator operators.
Both groups asked the agriculture minister and Agricorp to clearly outline how they planned to implement the change.
Buttenham says they are pleased with Mitchell’s decision to continue allowing deferred payments for now. The bigger question is “how do we deal with this moving forward?”
He says dealers and elevator operators view deferred payments as a producer issue. “If the producers say this is something that they need our primary role is to ensure elevator and dealer interests are covered.”
Senft says they don’t know how many farmers use deferred payment arrangements. But many producers use the tool to manage tax, especially in years like this one when there are both good crops and good prices. “This year would have been a year when it might have been used even more so than in an average year.”
Senft explains “it’s a tool that’s used to level off income from one year to a next.”
Both Grain Farmers and the agri-business association are breathing a sign of relief that they don’t have to scramble and cancel current deferred payment arrangements by the end of this year.
Grain Farmers and the agri-business association will be meeting with Agricorp and the provincial agriculture ministry early next year to determine how deferred payment arrangements can be incorporated into the Act along with what type and size of fund is needed to pay farmers in the event of elevator bankruptcies.
Senft says the minister’s regulatory change gives the industry time to thoroughly review the practice of deferred payments and come up with a long-term solution.
“It seems that since this has come into question we’re finding this is a well-used practice,” he explains, noting Grain Farmers would look favourably on having it continue.
If an elevator went bankrupt it would be up to the Grain Financial Protection program board to decide if a farmer with a deferred payment arrangement would be covered and they’d decide that on a case-by-case basis, Senft says.
In the longer term, a decision must be made to determine if deferred payment arrangements will be excluded or included in the Grain Financial Protection Fund.
Senft explains that currently the Grains Act stipulates payment to farmers must be made within 10 trading days after the grain is delivered, while sales from storage must be made by 2 p.m. of the next trading day after the day of sale. For basis or delayed price contracts, 75 per cent of the current market price must be paid by 2 p.m. of the next trading day after the day of sale with the balance being payable when the producer prices the grain to close out the contract. BF
Comments
Devil in the details! Depends on how Revenue Canada treats this type of contract. Will the established price contract be income for the next tax period or the current tax period? Has Rev. Can. changed their policy or are they in the process of changing policy?
You can check out the Canada Revenue Agency's Interpretaion Bulletin IT-184R - Deferred Cash Purchase Tickets Issued for Grain at http://www.cra-arc.gc.ca/E/pub/tp/it184r/it184r-e.html
This bulletin was last modified in 2002, and says in paragraph 11 - Voluntary Payment Deferrals:
- "Where grain is produced and the requirements of subsection 76(4) do not apply, such as where grain is produced in a non-designated area (that is an area outside the "designated area" described at 10(e) above) a farmer may sell grain in one fiscal period and receive payment in the following fiscal period. Where this occurs and neither of subsections 76(1) nor 76(2) is applicable (see IT-77), the farmer, who has elected to compute income in accordance with the "cash method", is to report the amount of the sale in the fiscal period in which the amount is received, even though this amount could have been received in the preceding period had the farmer chosen to request it. Subsection 28(1) would not apply in the fiscal period in which the grain was sold as no payment was received in that period."
It would therefore appear CRA's position hasn't changed since 2002, and unless and/or until the cash method of computing taxable farm income is abolished, deferred payments should continue to be afforded the same treatment for tax purposes as they have been.
BTW, unless CRA has updated IT-184 since 2:30 PM on December 18, 2010, this should be their most up-to-date position on the matter.
Stephen Thompson, Clinton Ont.
What is the designated area and where is the non-designated area that is described in the Act? Is south western Ontario in the designated area where the tax rules apply?
The "designated areas" are shown in paragraph 10 of IT-184R to be basically those areas served by the Canadian Wheat Board (CWB)- southern Ontario is not a designated area. It would appear the difference between designated areas, and non-designated areas, has to do with the somewhat peculiar way the CWB conducts its business by giving farmers a "cash purchase ticket" which appears to be a financial instrument in its own right.
In addition, paragraph 11 of IT-184R would seem to make it abundantly clear that - "..... where grain is produced in a non-designated area, a farmer may sell grain in one fiscal period and receive payment in the following fiscal period."
This has basically been the position taken by the Canada Revenue Agency since IT-184R was first issued on October 18, 1978 - so there's absolutely nothing new, tax wise for farmers to worry about at all.
The real problem was that CRA's 32-year-old interpretation of the Income Tax Act clearly supports one position, while Agricorp's recently-updated interpretation of the Grain Act, led Agricorp to adopt a completely-different position. Ag Minister Mitchell appears to believe Provincial legislation should be consistent with the long-standing provisions available to farmers under the Income Tax Act, and has acted accordingly.
Stephen Thompson, Clinton ON
(e) "Designate Area" means that area comprised by the provinces of Manitoba, Saskatchewan and Alberta, and those parts of the Province of British Columbia known as the Peace River District and the Creston-Wynndel areas, and such other parts of the Province of British Columbia and such parts of the Province of Ontario lying in the Western Division as the Board may from time to time designate.
Sounds like parts of Ontario are in a designated areas and parts are in non-designated areas.
Does that not deem payment deferrals in some parts of Ontario as tax evasion but legal in other parts of Ontario?
Seeking advice from an expert accountant is the way to go.
Agreed.
It would appear the whole payment deferral issue was a well orchestrated plan. Now farmers must put it in writing that they choose to delay payments for tax purposes. That is tax evasion with the farmers' SIGNATURE on the EVIDENCE.
Ontario has a huge deficit. The grain crops are bigger this year and prices are better also. McGuinty needs his tax income. Farmers will be cashing in 2 years in one. Not accepting payments might not translate into real tax deferrals for farmers, just payment deferral.
If farmers think the recent announcement is good news, they had better seek expert advice from qualified accountants first.
Canada Revenue Agency Interpretation Bulletin - "IT-184R" makes it abundantly clear that for farmers filing income tax on the cash basis, selling grain in one fiscal year, and getting paid in the next, is perfectly legitimate.
However, let's say a farmer sold grain in mid-December of one year, got paid right away, but didn't cash the cheque until early January of the next year, that would be a different matter because the farmer is required to report the sale as income when the cheque was received, not when it was deposited.
And really, making sure that both parties record the transaction in the same time period is only fair because the person writing the cheque is going to claim it as an expense the day he wrote the cheque, not when the person receiving the cheque finally decides to cash it.
Stephen Thompson, Clinton ON
Kudos to OABA, the GFO and Minister Mitchell on moving quickly to resolve this issue. It seemed rather hard to comprehend how Agricorp felt it was benefiting farmers by threatening to create a massive tax problem for them. Surely it could have been possible for Agricorp to have resolved this with a dialogue between the relevant parties instead of coming out with threatening language that created chaos.
To look at the issue in a "balanced" perspective, grain farmers need the ability to be able to do to the taxman, on occasion,
Comment modified by editors
Yes Kudos to OABA,GFO and Minister Mitchell. Now if the Minister could just get rid of Agri Corp we would be in really good shape. I'm glad I only have to deal with Agri corp for registration number I tried crop insurance a few times what a cluster that is.
Kudos? The government said it is ok to defer payments. The government did not say it will continue to allow the deferral of taxable income.
Deferring payments and deferring taxes are 2 different things.
I think the farmers should be looking to financial experts about this latest government stunt.
This story and all others in the farm press showing economic problems for farmers is symptoms of the big root cause problem for farmers that has been going on for 4 decade with no success other than Supply Management
THERE IS NO SOLUTION OTHER THAN COMPLAIN
Farmers had better realize there is no solution to their symtoms without fixing the MAIN ROOT PRIMARY PROBLEMS FIRST, EVERY BODY IS AFRAID TO SPEAK BLUNTLY WITH DEMANDING CANADIAN ACTION OF LAWFUL MEANS.
Farmers trying to solve all these problems with little documented success over the last 30 years is the same as taking a pill to fix your heart when you really need heart valve replacement by surgery.
Any other segment type of commerical business would most definitely have these root extreme problems solved finished done and dusted in 30 years!
IF farmers dont start to understand the following and other big ticket problems, our problems will never be solved as shown in the last 30 years.
Our farm system is so riddled with conflicts, complicity our Canadian system of government represented by MPP's and MP's cannot deliver economic results to Canadian farmers compared to USA system delivered by congressmen and senators, IF NOT WHY? Mps must obey party line and are dependent on their party leaders to sign their re-election writ to run, US congressmen have no such obligation
this isn't the first time agricultural legislation went one way, and the Income Tax Act went another. For example, the Income Tax Act has always requried farmers filing tax on the accrual system to use the P1/P2 method to value ALL inventory, including breeding stock because P1/P2 most accurately reflects reality - yet when AIDA and OWFRP were first introduced, OMAFRA and Ag Canada refused to use P1/P2 because they claimed P2/P2 most accurately reflected reality.
OMAAFRA and Ag Canada were, of course, dead-outright wrong on their understanding of both basic accounting principles as well as how the Canada Revenue Agency (CRA) requires the utilization of these principles to most accurately reflect "reality".
Even now, over ten years later, agricultural legislation and the Income Tax Act are still going two different directions - CRA still requires farmers filing on an accrual basis to value breeding stock using P1/P2, yet AgriStability forces them to use P2/P2.
Instead of blaming politicians for neglecting us, we're the problem because ever since AIDA was introduced, and even now, farmers and farm groups have been completely silent about the basic accounting flaws in our farm assistance programs.
Stephen Thompson, Clinton ON
So there could be a project for the CEO of the grain farmers of Ontario to take some of the money that farmers give it, They are always talking about research. Research and solve this problem!
But that wont work because farm leaders as Wayne Easter said are afraid to speak bluntly for fear of being locked out of meetings with the ministers.
Farm sector needs a 2010 December year end agriculture barometer farm saftey net(etc.) legislation progress balance sheet needs to be made each year end as a accural BENCHMARK to figure the value to reward of farmleaders and government for farm economic program progress for each 12 month period
The way it stands now there is no basis to judge true ducumented success or failure . We need proactive change. Why could this not be a start of change
In 20 years this could influence ducumented history and a basis for induction in the agricultural hall of fame or shame
It appears the only two courses of action are to complain or make a legal challenge. The ag community has certainly done all the required complaining and more than other sectors that have gained their goals. Environmental and Gay rights come to mind.
The outstanding measure of performance for service rendered is still operational audits that have never been done thoroughly for OFPMC and OMAFRA.
Why are we afraid to audit a public service trust? (OMAFRA & OFPMC)
We have no problem auditing police services health care and education to justify better performance or more funding. Why is agriculture such a sacred cow oblivious to public trust scrutiny?
Comment modified by editors
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It is now December 2010 where are the results
News Release
April 22, 2010
For Immediate Release
Farmers deliver message to Parliament Hill
OTTAWA – Dozens of farmers from the counties surrounding Parliament Hill spent Thursday meeting with politicians – MPs, Senators, and their staff – discussing current problems facing agriculture and solutions being proposed.
There were about 40 such meetings as members of county federations of agriculture sat with the politicians to review the issues threatening the farming sector. Bette Jean Crews, President of the Ontario Federation of Agriculture (OFA), said it was a successful event that gave farmers an opportunity to put necessary details into the hands of the politicians and bureaucrats.
It was the fifth such event bringing farmers and politicians face to face to discuss solutions to the issues threatening agriculture – adequate risk management programming to provide a more secure future for farmers and their families and a more secure food supply for Canadians.
“We need to have the Business Risk Management Program funded through a national AgriFlexibility program,” she said. “We also need changes to AgriStability making it retroactive to 2008 so farmers can weather the perfect storm brought on by crises upon crises in recent years.”
The development of a National Food Strategy was also at the top of the list of topics the farmers took to the politicians. Crews said she had a good meeting with Pierre Lemieux, MP for Glengarry, Prescott and Russell, and Parliamentary Secretary to Hon. Gerry Ritz, Minister of Agriculture and Agri-Food Canada.
Crews stressed the urgency of adequate Risk Management Programs in place to bring greater stability to the industry for farmers.
The meetings with the politicians and their staff delivered a clear message that farmers are the ones designing the programs they are requesting – farm leaders are elected by farmers to talk to government on behalf of the industry, Crews said.
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For immediate Release
February 8, 2010
IT’S DÉJÀ VU ALL OVER AGAIN AT THE AG FPT MEETINGS:
Improvements to Federal Business Risk Management programming discussed again
Toronto – Ontario and Quebec Grain Farmers from Windsor, Ontario to Rimouski, Quebec appear to be suffering from a bad case of déjà vu when it comes to the federal government’s Business Risk Management strategic review. For the fourth straight FPT meeting, the ministers discussed the federal government’s BRM strategic review and agreed that improvements need to be made. “We appreciate the recognition by the Ministers that there are shortcomings with federal agricultural programming, however, we are concerned that we are being stalled and delayed,” said Leo Guilbeault, Ontario chair for the Ontario-Quebec Grain Farmers Coalition.
Due to the shortcomings of the Federal government’s agriculture programming, provincial governments have had to respond with programs to stabilize farm income during tough times, known as business risk management. In the case of Ontario, the provincial government worked with Grains and Oilseeds farmers to develop the Risk Management Program (RMP) to fill this programming vacuum. RMP is a proactive, self-directed and producer designed program. Similar to an insurance program, farmers pay into the program to provide bankability and predictability to a sector that suffered through negative margins in the early 2000s. “In order to be eligible for RMP, farmers are also required to purchase production insurance to protect against weather and disease; this is a proactive and forward thinking program,” added Mr Guilbeault.
“We have a federal solution and it is called AgriFlex,” said William Van Tassel, President of the Coalition and Quebec grain farmer. “We believed we had a breakthrough during the 2008 election when the Conservatives and the Liberals promised an AgriFlex fund in their platforms - to partner with the provinces to deliver needed programming but as it turns out, we were duped, as the AgriFlex fund announced in the Economic Action Plan 2009 specifically excluded the business risk management component,” added Mr Van Tassel.
The version of AgriFlex announced in the Economic Action Plan lacked the flexibility to fund provincial business risk management programs. The federal government has instead told farmers and the provinces that “Ottawa knows best”.
Farming has had its challenges. The viability of the sector has come under attack from excessive international subsidies; unfair trading practices; volatile world prices and currencies; and rising fuel, fertilizer and labour costs. And there always is the unpredictable: poor weather, disease or crop failure. No commodity group has been immune to one or many of these factors at one point or another. Some have suffered through prolonged hard times. Some farmers in one part of the country suffer more than farmers of the same commodity in other parts due to weather, market access or unfair agricultural subsidies. “Agriflex with the Business Risk Management component addresses these regional challenges,” concludes Mr Guilbeault.
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QUOTES ON AGRIFLEX and FEDERAL AGRICULTURAL PROGRAMMING
July 29, 2009
STAKEHOLDERS
Bette Jean Crews, President of the Ontario Federation of Agriculture, March 9
Simcoe Reformer
During the (last) federal election campaign, Prime Minister Stephen Harper announced a $500 million program to be paid out over four years called the Agricultural Flexibility Program. That was less than the Canadian Federation of Agriculture envisioned when it put forth the idea of AgriFlex as a program to fund business risk management and other programs. Now the recent federal budget has changed the Agricultural Flexibility Program to $500 million over five years with no business risk management component. For Ontario farmers, it means about $20 million per year, none of which would be used to fund the Grain and Oilseed Risk Management Program or similar programs being designed by other commodities.
William Van Tassel, Ontario-Quebec Grain Farmers’ Coalition, February 3, 2009
Ontario Farmer
"By excluding business risk management from this proposal, the government is breaking its election promise. They are making it difficult for the provinces to maintain existing programs, and impossible for them to start new ones,"
Bob Bjornerud, Saskatchewan Agriculture Minister, February 26, 2009
Saskatchewan government Press Release announcing livestock ad-hoc aid
"In the absence of a national solution, we had to take action to help our producers," Bjornerud said. "We will continue to work with our federal counterparts toward a national solution. In the meantime, we urge the federal government to come to the table and top-up this program with their 60 per cent share, or provide some other form of meaningful support."
Bob Bjornerud, Saskatchewan Agriculture Minister, February 26, 2009
News Talk 650
"We've all heard (Federal Agriculture Minister Gerry) Ritz say that the programs are working and I guess we've agreed to disagree on that. I don't believe the programs are working adequately and I don't think there's a producer in this province that would say they're working adequately."
Laurent Pellerin CFA’s first vice-president January 2009
CFA Press Release
“While an agricultural stability program is good news, the details announced are not in keeping with what the farm community has been calling for… Regional needs span both sides of the programming envelope, and this Budget 2009 proposal is not targeting a large portion of the need—need that could be addressed through regional BRM programming.”
Don McCabe Vice-President Ontario Federation of Agriculture, January 2009
OFA Press Release
Farmers were hopeful the Agriflex program, as earlier promised, would be part of this budget. That didn’t happen, McCabe notes – the definition was changed. OFA and the Canadian Federation of Agriculture (CFA) will continue to pursue this initiative.
Jack Hextal, President of the Saskatchewan Cattlemen's Association, January 2009
Saskatoon Home Page
The President of the Saskatchewan Cattlemen's Association is disappointed there wasn't any new money for cow-calf producers. Jack Hextall says the business risk management programs need to be fixed.
Greg Marshall, President of the Agricultural Producers Association of Saskatchewan (APAS), February 2009
Moosejaw.ca
Greg Marshall, revised the D grade that Saskatchewan Premier Brad Wall gave the 2009 Federal Budget to an ‘E’… “The D grade by our Premier was for ‘deficit’, ‘delay’ and ‘disappointing’,” said Marshall. “When we examine the budget’s impact on farm families and their communities, we would give the budget an ‘E’ for ‘Empty’ promises, failed ‘Expectations’ and most of all ‘E’ for ‘Exit’
BARRY WILSON, March 7, 2009
Western Producer
Gerry Ritz’s curious fib about ‘agri-flex’
Why did the federal ag minister adopt the farm lobby’s terminology, give them something they didn’t want and then say he was meeting their demands?
Better Farming March 2009
The Corn Producers also plans to continue lobbying “for the correct program that we need,” says president Dale Mountjoy. The program announced by the federal government is “nothing like what we asked for.”
The Association’s safety net committee chair Jeff Davis says they feel the Ontario Risk Management program “would work under the Agri Flex portfolio.”
The Christian Farmers Federation of Ontario was also looking for Agri Flexibility to give “federal support for made-in-Ontario solutions,” says policy adviser Nathan Stevens, adding they’d be on side with wanting to push for changes in what’s being proposed.
QUOTES FROM POLITICIANS
Provincial and Territorial Agricultural Ministers meeting, July 10, 2009
Press Release following meeting
Ministers discussed the business risk management (BRM) strategic review, which is being undertaken to assess current objectives and programs. Ministers directed officials to identify: potential objectives and principles for future BRM programs; the roles and responsibilities of industry and governments in managing risk; and the range of possible program design options. Ministers expect to review and decide on these matters in early 2010. Ministers also directed that an industry engagement strategy be developed for their consideration as soon as possible.
Provincial and Territorial Agricultural Ministers meeting, February 9, 2009
Press Release following meeting
Ministers noted the importance of making progress on the review of the existing demand-driven suite of business risk management (BRM) programs. The review is important to ensure that BRM programming is responsive to Canadian farmers in helping them to manage risks.
Gerry Ritz, Agriculture Minister, March 4, 2009
Agriculture Canada Press Release
Farmers told us they need an agricultural flexibility program and this Government is investing $500 million in that initiative through our Economic Action Plan," said Minister Ritz. "Farmers gave us the vision for the agricultural flexibility program. Now we are working with farmers on the nuts and bolts to make sure the agricultural flexibility program works for the farm gate."
Gerry Ritz, Agriculture Minister, March 4, 2009
Agriculture Canada Press Release
"When it comes to agriculture policy, farmers are the most qualified experts out there," said Minister Ritz. "We are making sure their ideas are the foundation of initiatives such as the agricultural flexibility program."
Larry Miller, MP for Bruce Grey Owen-Sound, May 14, 2009
Owen Sound Times
There is no doubt that things are not perfect when it comes to the federal/provincial programming; but that is why the Minister has been very clear that he plans to continually review programming and work with the provinces and stakeholders to ensure we continue to improve all the programs… This takes time and hard work and for the most part when I talk to farmers they say our government is headed in the right direction. But make no mistake we are not there yet.
Alex Atamanenko, NDP Agriculture Critic, September 16, 2009
House of Commons Agriculture Committee
That the Committee recommend that the government include business risk management as an eligible component of the Agriculture Flexibility (Agri-Flex) program.
Wayne Easter, Liberal Agriculture Critic, April 23, 2009
Owen Sound Times
During the 2008 election campaign, Stephen Harper committed $500 million over four years to create an "Agricultural Flexibility" program to help farmers build flexible programs to meet their local needs… But once re-elected, the Harper government announced a program with less dollars and put rules around it so it could not be used for flexible programs such as the Ontario risk management program.
Wayne Easter, Liberal Agriculture Critic, August 2009
Yorkton News Review
This government (Conservative) in 2008 promised flexible dollars for AgriFlex and then reneged on that promise. In 2007 they promised a new program called AgriInvest but two years later it still isn't up and running. Also in 2007, they promised a $100 million per year cost of production program but then cancelled it before it was implemented.
MICHAEL IGNATIEFF, March 10, 2009
Ontario Farmer
Canada is the breadbasket of the world, and it is our farmers that have kept us that way… As many farmers have told me, "Farmers feed cities."…We will fight to make sure programs are flexible and are not "one size fits all."
BQ Agriculture Critic André Bellavance, February 10, 2009
House of Commons Agriculture Committee Transcripts
(The government) decided not to include income support measures in (the budget). And yet that's precisely what was requested by Quebec producers, who moreover felt that your budget displayed a disturbing insensitivity to the agricultural community. Those were the words of Christian Lacasse, president of Quebec's Union des producteurs agricoles. (The government) even appropriated the term “agri-flexibility” corresponding to the program put in place by the Canada Federation of Agriculture and encouraged by the Fédération des producteurs de cultures commerciales du Québec and the Grain Farmers of Ontario… by excluding income support measures, it is no longer the AgriFlex program at all, as sought by agricultural producers.
1966 Ottawa farmers march 20000 FARMERS
Comment deleted by editors:
In 1965 the farmers voted down, overwhelming, a single farm organization.
There was over 200,000 Ontario farmers then.
Ontario now support Chinese farmers more than they support the remaining 30,000 domestic farmers.
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