CFFO: AgriStability and Farm DiversityDecember 16, 2016 6:06am
By Bethanee Jensen
I often hear complaints that “AgriStability penalizes diversification.” But that is like saying good drivers, who don’t have accidents, are penalized because they don’t collect insurance.
AgriStability is insurance, not a hand-out. It saddens me that farmers have stooped to a welfare mindset with a sense of entitlement. Our governments need to be more financially responsible. If we mitigate our own risk, we are not only helping ourselves, but society as a whole.
Rather than saying “AgriStability penalizes diversification,” we could say that it “rewards poor decision making.” Financial advisors recommend a diversified financial portfolio to reduce risk.
It is just good money management. Why should farming be any different? We should be mitigating our own risk, rather than depending on a government hand-out.
We pay car insurance every year for decades and hope we never have occasion to collect. We pay insurance on our house every year and hope we never have a fire. Why should AgriStability be any different? We should be happy to pay into it every year and do what we can to mitigate our own risk and make a profit, so we never have to collect. AgriStability should only be there in case circumstances beyond our control cause us to need it. That being said, since diversified farmers have reduced risk, they should be rewarded with reduced premiums. Lower AgriStability premiums for lower risk farms would be an incentive for farms to diversify.
Monoculture means our fortunes rise and fall on one commodity. Diversification is a recipe for success. Not all commodities rise and fall together. If grain goes up, you can make good money. But if it goes down, and that is all you grow, you can lose your shirt. However, if you add livestock into the mix, although you don’t get the full benefit of the grain highs, when grain goes down, it makes cheaper feed for your animals and you make a profit on the animals. In the same way, a livestock farmer with crops can be happy not to have to buy grain when grain prices are high. He is not forced to sell animals at a loss because it is too expensive to feed them. Having both crops and animals mitigates farm income risk.
To those diversified farmers out there, you have my applause. You are on the right track. Don’t let anyone tell you that you are being penalized. Diversification is just plain smart risk management. The reason you don’t collect is not because you are being penalized, but because you made the right decisions and don’t need it. However if disaster should befall you, it would be there.