Funds for New Accounts on the Way to Quebec Farmers Federal and Provincial Governments Launch Agriinvest

OTTAWA, ONTARIO--(Marketwire - Dec. 20, 2007) - The Honourable Christian Paradis, Secretary of State for Agriculture, and Laurent Lessard, Quebec Minister of Agriculture, Fisheries and Food, today announced how $600 million in federal funds to kickstart AgriInvest accounts 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 Mr. Paradis. "This seals the deal on our commitment to replace CAIS with better programs."

"AgriInvest is a positive initiative for all agricultural producers of Quebec as it allows for a flexible program through which producers may themselves manage risks. AgriInvest is based on self-management, recognizing the good judgment of producers and the fact that they are the best placed to make appropriate decisions in cases where their income fluctuates," stated Mr. Lessard.

With this announcement, the federal government is following through on a $1 billion commitment to improve farm financial programs. Close to $400 million has been delivered through a direct payment to address high production costs, with $44.5 million delivered to Quebec farmers.

With Agri-Invest accounts, farmers make a deposit based on a percentage of allowable net sales (ANS) and receive a matching government contribution. Farmers have the choice to withdraw the money to cover small margin declines or make investments to mitigate risks or improve market income.

With today's announcement, the Government of Canada 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, Canadian 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 from La Financiere agricole du Quebec containing information on their share of the $600 million. Other farmers can get application forms from the Web site of La Financiere, or by calling 1-800-749-3646 (see attached backgrounder for details).

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 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.