$600 Million on the Way to Farmers: Federal and Provincial Governments Launch Agriinvest

OTTAWA, ONTARIO--(Marketwire - Dec. 20, 2007) - The Honourable Gerry Ritz, Minister of Agriculture and Agri-Food and Minister for the Canadian Wheat Board, today announced how the $600 million in federal kickstart funds will be delivered.

Federal, provincial and territorial governments have signed agreements to launch a new suite of business risk management programs for 2007. The new programs are moving forward under Growing Forward, the new policy framework for Canada's agriculture, agri-food and agri-based products industry and include:

- AgriInvest farmer accounts;

- AgriStability, an improved margin based program;

- AgriInsurance, which includes crop insurance and production insurance and is being expanded to include more commodities;

- AgriRecovery, a new disaster relief framework.

With agreements now in place to implement the new suite, $600 million in federal funds to kickstart new AgriInvest accounts is on the way to farmers.

"We have worked hard with provinces and industry to develop AgriInvest and I am pleased this program is now up and running with $600 million to kickstart new farmer accounts," said Minister Ritz. "This seals the deal on our commitment to replace CAIS with better programs."

With this announcement, the federal government is following through on a $1 billion commitment to improve farm financial programs. Close to $400 million has already been delivered to farmers through a direct payment to address high production costs.

With AgriInvest accounts, farmers make a deposit based on a percentage of allowable net sales of eligible commodities and receive a matching government contribution. Farmers have the choice to withdraw the money to cover small margin declines or for investments to mitigate risks or improve market income.

With today's announcement, Canada's government has completed the following commitments announced by Prime Minister Stephen Harper in March:

- AgriInvest is in place for 2007 and $600 million in federal funds to kickstart AgriInvest accounts is now being delivered.

- Initial kickstart deposits will be made to farmer accounts based on 2.63 per cent of a farmer's average Allowable Net Sales (ANS) from previous years. A final federal kickstart deposit may be made based on availability of funds.

- Farmers will not have to make a matching deposit to receive the money.

- The bulk of direct payments of $400 million to help address high production costs over the last four years have been delivered, and final payments are going to farmers now. To date, farmers have received $322 million.

- The Canadian Agricultural Income Stabilization (CAIS) program has been replaced with a new suite of business risk management programs which has been developed based on input from farmers.

Most farmers will automatically receive a letter with information on their share of the $600 million. For others, applications are available on the program web site or by calling 1-866-367-8506. (See attached backgrounder for details).

In Quebec, the program is delivered provincially. Farmers can contact La Financiere agricole du Quebec at 1-800-749-3646 for more information.


BACKGROUNDER

AgriInvest - What farmers need to know

AgriInvest is now in place for 2007 and a total of $600 million in federal funding will be delivered to farmers to kickstart their accounts.

How will AgriInvest work?

After filing their 2007 tax information in early 2008, farmers will receive a notice indicating how much they can deposit to their account. Farmers can deposit up to 1.5 percent of their Allowable Net Sales (ANS) into an AgriInvest account and receive a matching government contribution. For example, a farmer with $100,000 in ANS could deposit up to $1,500 and federal and provincial governments would make a matching contribution totaling $1,500.

Why participate in AgriInvest?

AgriInvest will replace the coverage for the top 15 per cent of margin decline covered previously by the Canadian Agricultural Income Stabilization (CAIS) program. The accounts will help farmers protect their farm income from small declines. Farmers will also have the flexibility to use the funds for risk mitigation and other investments. The program will be bankable, as farmers will be able to easily predict the government contribution to their account each year.

Who can participate?

Individuals, partnerships, co-operatives and corporations will be eligible participate. To be eligible, you must have reported farming income (or loss) to Canada Revenue Agency for tax purposes. Status Indians farming on reserves in Canada are eligible to participate in AgriInvest.

How can farmers apply?

Farmers will not have to provide additional information in order to participate in AgriInvest. For individual farmers, the application will be harmonized with the tax form in most provinces. In Quebec and for corporations, the application will be harmonized with the AgriStability application. Farmers simply need to indicate on the form that they intend to participate in AgriInvest.

How will ANS be calculated?

ANS are the net sales of commodities eligible under AgriInvest. Eligible commodities include most primary agricultural commodities except those covered under supply management (dairy, poultry and eggs) or specific commodities that have been excluded.



Allowable Net Sales Purchases
Sales equals of Eligible - of Eligible
Commodities Commodities

The ANS calculation allows farmers with mixed farms including supply managed commodities to make deposits for their non supply-managed sales.

Will there be a cap on government contributions?

For AgriInvest purposes, eligible participants will be limited to ANS of $1,500,000 per year. Based on this limit, the largest matching government contribution would be $22,500.

Will there be a limit on how much money can be held in the accounts?

For 2007, which is a transition year, account balance limits will not be in place. For 2008 and beyond, accounts will be limited to 25 per cent of a farmer's average ANS for the program year and the two preceding program years. If ANS was not calculated for one or more of these years, the limit will be calculated based on the average of years available.

How will AgriInvest funds be treated for tax purposes?

Money is deposited to two funds within a farmer's account. Farmer deposits are not tax deductible and are held in fund 1. Government contributions are held in fund 2 and would not be taxable until withdrawn and would be taxed as investment income.

How will farmers withdraw their funds?

Farmers will have the flexibility to withdraw funds either to address small margin declines or for investments to mitigate risk. Full details will be made available in early 2008. Governments will review whether withdrawal triggers should be in place for 2008 and subsequent contribution years.

Will accounts be held in financial institutions?

Governments are working with banks and credit unions to arrange for accounts to be held in financial institutions. In Quebec, La Financiere agricole du Quebec will hold these accounts.

When and how will farmers make their deposit for 2007?

Farmers will be notified of their maximum deposit amount after they have filed their 2007 tax information. Further details on the process for making a deposit will be available in early 2008.


BACKGROUNDER

AgriInvest Kickstart - What Farmers Need to Know

How will the AgriInvest Kickstart funds be delivered?

Farmers will receive a letter which tells them the amount of their kickstart benefit. In all provinces except Quebec, the $600 million is being delivered by the federal government.

Who is eligible?

To be eligible, farmers must have farmed in 2007 and must commit to participating in AgriInvest for the 2007 program year. Farmers do not have to make a deposit to be eligible for the kickstart funds.

Do I need to apply?

Eligible farmers who received a cheque under the $400 million cost of production payment this summer will automatically receive a letter and do not need to apply. For those who need to apply, forms are available on the program web site at www.agr.gc.ca/agriinvest or by calling 1-866-367-8506.

In Quebec, the program is delivered provincially. Farmers can contact La Financiere agricole du Quebec at 1-800-749-3646 for more information.

How will my benefit be calculated?

Deposits will be made to accounts based on 2.63 per cent of a farmer's average Allowable Net Sales (ANS) from previous years. An additional federal deposit may be made at a later date based on availability of funds.

ANS are sales of Eligible Commodities minus Purchases of Eligible Commodities in a year. Eligible commodities include most primary agricultural commodities except those covered under supply management (dairy, poultry, and eggs). Farmers who produce a mix of supply managed and other commodities are eligible to participate. The government contribution in these cases will be adjusted to reflect their share of the sales of non-supply managed commodities.

For most farmers, the share of kickstart funds will be based on average ANS from 2000 to 2004 inclusive. For those not farming in 2004 but farming in 2005 and 2006, the payment will be based on average ANS for the years they farmed. For those new to farming in 2007, the payment will be based on their ANS for 2007.

There is a cap on average ANS of $3 million, which means that a farmer's kickstart payment is capped at $78,900, based on the 2.63 per cent payment rate.

Can I withdraw the money?

Farmers will not have to make a matching deposit to receive the money. They have the option to either withdraw the funds or keep the funds on account. Until the AgriInvest program is fully implemented, there will be a limit on the number of withdrawals.

How can I find more information?

Check the AgriInvest web site at www.agr.gc.ca/agriinvest or call toll free
1-866-367-8506.

In Quebec, call La Financiere agricole du Quebec at 1-800-749-3646.