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Agricultural policy frameworks such as Growing Forward are intended to enhance the productivity and competitiveness of the Canadian agricultural sector and to stabilize farm income. This paper examines the relationship between production efficiency and government program payments. First, we find evidence of heterogeneity in production efficiency across farms. Second, we find a negative correlation between production efficiency and the share and level of program payments. The result of this study underscores the importance of understanding the link between technical inefficiency and government payments. Les cadres stratégiques agricoles comme Cultivons l'avenir existent pour favoriser la productivité et la compétitivité du secteur agricole canadien et pour stabiliser les revenus des exploitations agricoles. Cet article examine la relation entre l'efficience de la production et les programmes gouvernementaux de paiements. En premier lieu, nous avons trouvé des preuves d'hétérogénéité dans l'efficience de la production dans toutes les exploitations agricoles. Ensuite, nous avons identifié une corrélation négative entre la production efficiente,et la part et niveau des programmes de paiements. Le résultat de cette étude met en relief l'importance de comprendre le lien entre les inefficiences techniques et les paiements gouvernementaux. [ABSTRACT FROM AUTHOR]

Risk balancing refers to the balancing of business risk (BR) and financial risk (FR) by firms through their investment and borrowing decisions. Assuming the concept holds, a decrease in income variability (BR) prompts the firm to incur greater debt levels thereby increasing FR. Reducing (BR), which continues to be the central objective of Canadian agricultural policy through programs such as Canadian Agricultural Income Stabilization Program (CAIS)/AgriStability, may lead farmers to take on more FR than they would take otherwise, which, in turn, increases the risk of equity loss. However, it is not known whether Canadian business risk management (BRM) programs offset BR as intended, and whether any potential reduction leads to increased FR (risk balancing) and possibly higher levels of overall risk for individual farm operations. This paper represents the first attempt to shed light on whether Canadian BRM programs fail to reduce farm risk as a result of farmers' risk balancing behavior using a longitudinal farm-level data set from Ontario. Results are mixed: (1) BRM payments reduce BR for beef farms but not for field crops farms (though the latter result may be due to the lack of data on Crop Insurance payments); (2) risk balancing holds particularly for the larger farms, and (3) BRM programs overall have no significant effect on the likelihood of increased debt use for either sector, on average; however, participation in CAIS/AgriStability increases the probability that farms take on more debt than they would take otherwise for both sectors. Further analysis is needed to determine whether BRM programs increase the probability of default for farms. [ABSTRACT FROM AUTHOR]

Canada has four major sources of information on the financial and production aspects of agriculture: the Census of Agriculture, the Farm Financial Survey, the Agricultural Taxation Data Program, and administrative data resulting from Business Risk Management programs. These data sets form the basis for the analysis of Canadian agricultural policy, which has shifted from a focus on farm family income enhancement, to commodity-specific supply stabilization, to enhancing the competitiveness of the sector and individual operations. The changing focus of agricultural policy together with the growing heterogeneity of the farm sector has significant implications for the forms of analysis conducted and the suitability of the data collected for analysis. No single data set supplies all the data necessary to determine the need for and effect of farm support programs. Census data provide descriptive measures of total production but lack detailed farm financial information. Such data is provided by tax data but information is not provided on assets/liabilities, inputs/outputs, and demographics. Proposals to consider the individuals behind a unit of production in the determination of support eligibility would drive an even larger gap between data demands and the current supply of publicly provided data. [ABSTRACT FROM AUTHOR]

Purpose – The purpose of this paper is to examine the factors affecting the relative variability in farm and off-farm income for Canadian farm operators. Design/methodology/approach – Variability of farm and off-farm income is analyzed using a dataset of 17,000 farm operators from 2001 to 2006. Relative ranking of the coefficients of variation (CV) for farm and off-farm income are compared across farm types and are regressed against factors conditioning the variations. Findings – Greater reliance on farm income results in lower (greater) relative variability in farm (off-farm) income. Larger commercial operations experience larger farm income volatility because they are less risk averse or they can manage more risk. Diversification and off-farm employment appear to be risk management strategies for commercial operations. Research limitations/implications – Government payments have a small, positive effect on farm and off-farm income variability, indicating this support leads farmers to take on more risky activities and/or reduce the use of self-insurance activities. Results could also be due to the lag between the time of the income reduction and the time in which the aid is received. Further research is necessary to decipher the effects of government support on farm decisions. Practical implications – The results on relative variation in the farm and off-farm income across farm type raises questions about whether government programs should target specific operations. Originality/value – While income variation remains a focus of public policy, factors affecting its variability are not well-understood. Studies have examined the level of farm income and the decision to participate in off-farm employment but none has examined the variance in both income sources. [ABSTRACT FROM AUTHOR]