AJ Gill
At first glance, the AgriStability Form seems simple. There is a section for revenue and expenses, a section for acres and quantities produced, and a section for accrual adjustments and inventory reporting. It may seem like a small task to complete to participate in a beneficial risk management program, but the accuracy and details of that information reported can substantially influence the participant’s payments.
Here are some of the top issues observed that can influence the accuracy of your payment calculations:
Incorrect Classification of Allowable and Non-Allowable Items
The AgriStability program focuses on revenues and expenses that are specifically related to the farm’s current crop and its inputs. As such, it’s important to correctly classify the farm’s income and expenses.
Allowable income should include revenue for the farm’s crop sales but other items that need to be considered include:
- Allowable government assistance: Certain assistance should be reported with allowable income but not all government assistance should be included. It’s important to consult AgriStability’s Program Payment Lists to identify the correct classifications.
- Resale of any commodities purchased for resale: If your farm or packing plant purchases any crop to be resold, the revenues related to these commodities need to be isolated and reported separately as non-allowable income.
- Income from a crop share arrangement: If your farm participates in a crop share arrangement and pays the landlord either a portion of the crop or its proceeds, only your farm’s portion of the revenue should be reported. If you are a landlord, there are very specific rules about eligibility to participate in AgriStability and the administration should be advised of your arrangement prior to enrollment.
While the form highlights the most common allowable and non-allowable expenses, other items to consider are:
- Trees and vines purchased for planting: Not all tree and vine purchases are treated equally. For AgriStability, the purpose of the planting drives the treatment of its reporting. Spot replantings for dead and damaged trees or vines are allowable expenses but replanting a block of trees or vines may not be. Also, trees and vines purchased to expand the acreage of your operations are considered non-allowable as they are increasing the farm’s operations.
- Arm’s length salaries: This program code should be used to report not only payroll for unrelated individuals but also the cost of board and travel for those employees. If your farm employs temporary foreign workers, you may be missing out on additional expenses related to these employees.
Allowable expenses are very specific for AgriStability purposes and participants should be familiar with the most common ones. Coding of expenses for accounting and descriptions of those expenses becomes extremely important once enrolled to ensure that expenses are being reported correctly.
Incorrect Reporting of Productive Capacity
The productive capacity of a vineyard or orchard is based on its acres in production. While it may seem that disclosing the acres is as simple as inputting the total acres for the form, the factors outlined below may require additional information to be provided to AgriStability:
- Enrollment in production insurance: If the farm is enrolled in production insurance, you should be reviewing the planting history of your farm annually to ensure that it is correct, and that all insured acres are reflected. AgriStability receives these details directly from production insurance which are then used to calculate the farm’s structure change adjustment. If this information is incorrect, it could influence not only your production insurance coverage but your AgriStability payment as well.
- Uninsured acres: If your farm has any uninsured acres, these should be separately disclosed to AgriStability along with their planting history. As mentioned above, differences in productive capacity can impact payments as it drives the structure change adjustment.
A structure change adjustment is an adjustment that AgriStability makes to compare your prior years’ production margins with the margin of your farm’s current structure. The structure of a farm often changes year-to-year depending on the crops produced and the age of its trees and vines. This adjustment is completed to make prior year’s information more comparable to the current operation. With that said, if details on the age of the trees and vines, or composition of crops, is incorrect, it may produce an incorrect structural change adjustment influencing potential payments.
Missing or Incorrect Accrual Adjustments
Farmers have the benefit to elect to use cash or accrual reporting for taxes. AgriStability uses modified accrual reporting which means that even if you report on a cash basis, certain accrual adjustments are required to your application to accurately report income and expenses in the correct period. It’s important these are reported annually.
On the other hand, if your farm reports on an accrual basis, there should be no accrual adjustments reported on the application as these are already reflected in your reporting.
Final Comments
AgriStability is part of a suite of business risk management programs offered in British Columbia to support agricultural producers. While crop insurance might cover some losses; AgriStability protects against declines in net farming income due to market prices, production losses, and / or increased costs of production, like rising labour costs. As such, this unique program relies on the reporting of the applicant to calculate any declines.