Risk Management in Agriculture in Canada

This report analyses the agricultural risk management system in Canada, applying a holistic approach that considers the interactions between all sources of risk, farmers‘ strategies and policies. The policy analysis is structured around three layers of risk that require a differentiated policy response: normal (frequent) risks that should be retained by the farmer, marketable intermediate risks that can be transferred through market tools, and catastrophic risk that requires government assistance. The main policy issue in this report is the definition of the boundaries of these different layers. In Canada the system is overcrowded with policies and unable to signal risk layers in which farmers should take their own responsibility of management. Policies include AgriInvest, AgriInsurance, AgriStability, AgriRecovery and ad hoc measures. The analysis of AgriStability provides insights about the economics of agricultural income stabilization policies.