Canadian Agricultural Income
Stabilization (CAIS) Program
and
AgriStability
Technical Information Circulars
These Technical Information Circulars (TICs) are to provide more detailed
information related to AgriStability Program Guidelines to reflect the
application of the Program rules in Ontario. Where there is any conflict
between these TICs and the AgriStability Program Guidelines, the
Guidelines take precedence.
Updated November 18, 2016
Table of Contents
1 Production Margin......................................................................................................... 1
1.1
Allowable income ............................................................................................ 2
1.2
Allowable expenses ........................................................................................ 3
1.3
Agricultural custom work ................................................................................. 4
1.4
Non-arm’s length salaries or family labour ...................................................... 5
1.5
Source Documents and Method of Accounting for 2006 Program Year .......... 6
1.6
Source Documents and Method of Accounting for 2007 Program Year
Forward .................................................................................................................. 7
1.7
Market Revenue payments ............................................................................. 8
1.8
Crop/Livestock Share ...................................................................................... 9
1.9
Custom feeding ............................................................................................. 13
1.10 Futures market transactions .......................................................................... 14
1.11 Resale of Commodities and Processing ....................................................... 16
1.12 Standing crop purchases .............................................................................. 17
1.13 Livestock lease or rent payments .................................................................. 18
1.14 BSE payments .............................................................................................. 19
1.15 Other Insurance payments ............................................................................ 21
1.16 Horses ........................................................................................................... 22
1.17 Apple bin rental ............................................................................................. 23
1.18 Milk quota rental and Over quota levy ........................................................... 24
1.19 Farm transfer................................................................................................. 25
1.20 Formation of a partnership ............................................................................ 26
1.21 Farm partnership becomes a sole proprietor................................................. 27
1.22 Farm incorporations ...................................................................................... 28
1.23 Stub Periods.................................................................................................. 29
1.24 Tobacco Kiln Retrofit and Conversion ........................................................... 30
1.25 Plum Pox Virus .............................................................................................. 31
1.26 Countervail Duties ......................................................................................... 33
1.27 Planting of Perennial Crops........................................................................... 34
1.28 Transitional Industry Support Program (TISP) Payments ............................. 36
1.29 Farm Income Payment Program (FIPP) Payments ....................................... 37
1.30 Aquaculture ................................................................................................... 38
1.31 Changing Method of Accounting for Tax Purposes – 2003 to 2005 Program
years ..................................................................................................................... 39
1.32 Expenses Related to the Nutrient Management Act ...................................... 40
1.33 Inclusion of Reference Year Production Margin ............................................ 41
1.34 Purchase and Resale of Dairy Cattle ............................................................ 42
1.35 Beef Cattle Finishing Operations................................................................... 43
1.36 Grain and Oilseed Program Payment (GOPP) .............................................. 44
1.37 Farming Activities outside Canada ................................................................ 45
1.38 Special Beekeepers Fund (SBF) ................................................................... 46
1.39 Cost of Production Payment (COP) .............................................................. 47
1.40 Hybrid Method of Inventory Valuation ........................................................... 48
1.41 Market Inventory - Hybrid Method of Inventory Valuation ............................. 49
Non-market Inventory - Hybrid Method of Inventory Valuation ...................... 50
Accrual Tax Filers- Hybrid Method of Inventory Valuation ............................ 51
Reference Margin - Hybrid Method of Inventory Valuation ............................ 52
Ontario Juice Grape Transition Program ....................................................... 53
Orchard and Vineyard Transition Program .................................................... 54
Cull Breeding Swine Program ....................................................................... 55
Circovirus Inoculation Program ..................................................................... 56
Hog Farm Transition Program ....................................................................... 57
Canada-Ontario Forage and Livestock Transition Assistance Initiative
payments .............................................................................................................. 58
1.51 Canada-Ontario Apple and Tender Fruit Weather Risk Mitigation Strategy
Initiative payments ................................................................................................ 59
1.52 Beekeepers Financial Assistance Program ................................................... 60
1.53 Scientific Research and Experimental Development program payments ...... 61
2 Schedule 1 & 2 ........................................................................................................... 62
2.1
Completing Schedule 1 & 2 ........................................................................... 63
2.2
Crop in ground .............................................................................................. 64
2.3
Outstanding crop insurance payments .......................................................... 65
2.4
Recording crops by grade ............................................................................. 66
2.5
Liquidation/purchase of breeding stock ......................................................... 67
2.6
Pre-paid expenses ........................................................................................ 68
2.7
Ginseng ......................................................................................................... 69
2.8
Bad debt ........................................................................................................ 71
2.9
Basis contracts .............................................................................................. 72
2.10 Commodity loans from the Agricultural Commodity Corporation (ACC) ........ 73
2.11 Seed Corn Contracts ..................................................................................... 74
2.12 Feeder Finance Co-op Cattle ........................................................................ 75
2.13 Fair Market Values (FMVs) ........................................................................... 76
3 Schedule 3 .................................................................................................................. 77
3.1
Completing Schedule 3/ Income & Expense Adjustment Form ..................... 78
4 Schedule 4 .................................................................................................................. 79
4.1
Reference Period Accrual Adjustments ......................................................... 80
5 CAIS-AgriStability Application Form ........................................................................... 81
5.1
Farm Business Registration (FBR) number................................................... 82
5.2
Partnership application .................................................................................. 83
5.3
Farm partnerships ......................................................................................... 84
5.4
Farming activities in a corporation ................................................................. 85
5.5
Share of ownership in a corporation .............................................................. 86
5.6
Corporations farming as a partnership .......................................................... 87
5.7
Deceased participants ................................................................................... 88
5.8
Jointly held common shares .......................................................................... 90
5.9
Province of Main Farmstead ......................................................................... 91
5.10 Ownership for Program Purposes ................................................................. 92
6 Calculation of Program Benefits ................................................................................. 93
6.1
Reference margin .......................................................................................... 94
6.2
Negative Program year margin ..................................................................... 95
1.42
1.43
1.44
1.45
1.46
1.47
1.48
1.49
1.50
Negative production margins in the reference period .................................... 96
Negative reference margin ............................................................................ 97
Maximum Government Program Benefits ..................................................... 98
Related farming activities with different year ends ........................................ 99
Assignment of Program Benefits ................................................................. 100
Assignment in bankruptcy ........................................................................... 101
Administrative Cost Share (ACS) ................................................................ 102
Deemed Production Insurance Benefit ........................................................ 103
Supply Management Adjustment for Program Years 2003 to 2012 ............ 105
7 Structural Change ..................................................................................................... 108
7.1
Structural Change - Additive Method .......................................................... 109
7.2
Structural Change – Ratio Method .............................................................. 111
7.3
Benchmark-Per-Unit (BPU) Margins ........................................................... 112
7.4
Production Capacity .................................................................................... 113
7.5
Structural Change under Disaster Circumstances ...................................... 114
7.6
Mechanized Harvesting in Tobacco ............................................................ 115
7.7
Double Cropping ......................................................................................... 116
7.8
Tobacco Quota Allocation ........................................................................... 117
7.9
Ruminant Livestock Producers.................................................................... 119
7.10 Lost Production Contracts ........................................................................... 120
7.11 Potatoes ...................................................................................................... 121
7.12 Beginning Farmers and Structural Change ................................................. 122
7.13 Plum Pox Virus ............................................................................................ 123
7.14 Unique Farming Activities............................................................................ 124
7.15 Tobacco Transition Program ....................................................................... 125
7.16 Orchards and Vineyards Transition Program .............................................. 126
7.17 Cull Breeding Swine Program and Hog Farm Transition Program .............. 127
8 Whole Farm Combining ............................................................................................ 128
8.1
Whole Farm Approach ................................................................................ 129
8.2
Related Persons.......................................................................................... 130
8.3
Related Parties............................................................................................ 131
8.4
Operational Independence .......................................................................... 132
8.5
Whole Farm Combining Examples .............................................................. 133
8.6
Non-Fair Market Value Transactions ........................................................... 134
8.7
Margin Calculation for Whole Farm Combining ........................................... 135
9 Production Insurance Premium Adjustment .............................................................. 136
9.1
Premium Adjustment ................................................................................... 137
9.2
Calculation of the Premium Adjustment for 2003 to 2006 Program Years .. 138
9.3
Calculation of the Premium Adjustment for 2007 to 2012 Program Years .. 139
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
CAIS-AgriStability Program
TIC – 01
Technical Information Circular – 01
Production Margin
1
CAIS-AgriStability Program
TIC- 01.1
Technical Information Circular – 01
Production Margin
Allowable income
Allowable farm income for CAIS-AgriStability is all farming income reported to the
Canada Revenue Agency, EXCLUDING BUT NOT LIMITED to the following:
 Recapture of capital cost allowance
 Optional inventory adjustment
 Mandatory inventory adjustment
 Payments under the Crop Advance Payment program
 All rental income (e.g. land rental, barn rental, equipment rental/lease etc.)
 Crop Share income
 Custom work and trucking
 Non-agricultural income (includes consulting income, dividend income, employment
income including off farm income, royalty income, per diems, resource sales such as
sand/soil/gravel/water/oil/peat moss sales/leases, trapping income, standing timber,
wood sales, pet sales, gathering of earthworms or berries)
 Interest income
 NISA withdrawals (Although corporations must claim NISA withdrawals as farm
 income for income tax purposes, it is NOT allowable income for the CAISAgriStability.)
 Per diem payments (boards)
 Rebates for other non-allowable expenses
 Gains due to speculation on the futures market
 Property tax rebates
 Ontario Whole Farm Relief Program payments
 Ontario Farm Income Disaster Program payments
 Canadian Agricultural Income Stabilization Program benefits
 AgriStability benefits
 Risk Management Program
 Market Revenue payments
 Ontario Grain Stabilization Payments
 Canada-Ontario Grain & Oilseed Payments
 Canada-Ontario Edible Horticulture Payments
 Patronage Dividends
 Resale of commodities purchased
 Income related to the retrofit and/or conversion of tobacco kilns
2
CAIS-AgriStability Program
TIC- 01.2
Technical Information Circular - 01
Production Margin
Allowable expenses
Allowable expenses for CAIS-AgriStability are farming expenses directly related to
production of an allowable commodity as reported to the Canada Revenue Agency,
EXCLUDING BUT NOT LIMITED to the following:
 Machinery (repairs, licences, and insurance)
 Advertising and promotion costs
 Building and fence repairs
 Contract work (unless itemized to identify allowable expenses such as fuel or labour)
 Contract feeding of livestock (unless the contract specifically itemizes allowable and
non-allowable expenses such as labour, electricity or overhead)
 All insurance premiums other than Production Insurance
 Memberships/subscriptions
 Office expenses
 Legal and accounting fees
 Non Arms Length Salaries
 Motor vehicle expenses
 Small tools
 Soil testing
 Licences/permits
 Telephone
 Clearing, leveling and draining land
 Interest (operating and term)
 Property taxes
 Rent and/or lease payments for land, buildings, machinery, pasture
 Insurance program overpayment recapture
 Losses incurred due to speculation on the futures market
 Optional inventory adjustments
 Mandatory inventory adjustments
 Capital expenditures and capital cost allowance
 Allowance on allowable capital property
 Expenses for non-agricultural custom work and off-farm business income
 Life insurance premiums
 Expenses related to the retrofit and/or conversion of tobacco kilns
 Other expenses not directly related to production
 Well drilling
 Risk Management Program Premiums
 Canadian Agricultural Income Stabilization Program and AgriStability Fees
3
CAIS PROGRAM
TIC- 01.3
Technical Information Circular – 01
Production Margin
Agricultural custom work
All custom work/machine rental income and expenses are considered non-allowable
under CAIS, with the exception of expenses for trucking that is used to transport
allowable commodities to market or allowable inputs to the farm.
Income: Custom work and trucking income is excluded from the calculation of
production margin. In addition, an amount equal to 30% of reported custom work and
trucking income will be deducted from allowable expenses. Where the 30% ratio is
inappropriate for the operation, the program may use a different expense ratio, and
where required, request supporting documentation from the participant.
Expense: Custom/contract work expenses must be itemized in order to be considered
allowable. If contract work expense amounts for arm’s length labour or production input
costs are to be considered allowable, these amounts must be itemized separately on
supporting documentation such as the participant’s financial statements submitted with
their income tax return. Where there is a discrepancy in the method used to itemize
expenses in the program year and the reference period, the reference period expenses
shall be adjusted according to the method used in the program year.
4
CAIS-AgriStability Program
TIC- 01.4
Technical Information Circular – 01
Production Margin
Non-arm’s length salaries or family labour
Non-arm’s length salaries are a non-allowable expense.
Canada Revenue Agency defines non-arms length salaries or salaries for family labour
as income paid to the following relatives:
 children, grandchildren, great-grandchildren (natural and adopted), including in-laws
 mothers, fathers, grandparents, including in-laws
 brothers, sisters, including in-laws
 husbands, wives, including common law spouses
Salaries and/or management fees paid to shareholders or the person who controls the
corporation are also considered non-arm’s length salaries.
Payments in kind for labour often referred to as commodity share (e.g. % of farm
revenue), if expensed or netted out of farm income, are considered non-arms length
salaries. In this case, the commodity share will be added back to farm income. To
verify commodity shares, the participant may be required to submit further tax
statements including the recipient’s tax statements.
After-tax dividends are not considered non-arms length salaries.
5
CAIS-AgriStability Program
TIC- 01.5
Technical Information Circular – 01
Production Margin
Source Documents and Method of Accounting for 2006 Program Year
The following records are used to calculate a participant's reference margin:
CAIS records for any year in which the participant participated in CAIS.
NISA records for any year in which the participant participated in NISA.
 Participants who have filed NISA & tax using the cash method may have their
reference margin based on the cash method. These participants have the option for
2006 to make an accrual adjustment to this historical cash information using
Schedule 4
 Participants who have filed to NISA using the accrual method & tax using the cash
method will have their reference margin calculated on the accrual method. Income
tax records will be used for any year in which the participant did not participate in
NISA.
Income tax records for any year the participant did not participate in CAIS or NISA
 Participants who filed tax using the cash method may have their reference margin
based on the cash method. These participants have the option for 2006 to make an
accrual adjustment to this historical cash information using Schedule 4.
 Participants who have filed an accrual financial statement to Canada Revenue
Agency (CRA) and then converted to the cash method for tax will have their
reference margin calculated using the accrual method. These producers simply
need to submit a copy of the accrual statement provided to CRA to the CAIS
program for each of the reference years.
Participants must use the following method of accounting to calculate their 2006
program year margin:
 the cash method, if the participant files income tax using the cash method. In this
case, the program year margin will be adjusted for changes in inventory value using
the hybrid method, purchased inputs, accounts receivable and accounts payable; or
 the accrual method, if the participant files income tax using the accrual method.
The administrator can exercise its discretion to apply adjustments necessary to more
accurately reflect the farming activity of the participant.
6
CAIS-AgriStability Program
TIC- 01.6
Technical Information Circular – 01
Production Margin
Source Documents and Method of Accounting for 2007 Program Year Forward
The following records are used to calculate a participant's reference margin:
CAIS-AgriStability records for any year in which the participant participated in CAISAgriStability.
Income tax records for any year the participant did not participate in CAIS-AgriStability
 Participants who have filed an accrual financial statement to Canada Revenue
Agency (CRA) and then converted to the cash method for tax will have their
reference margin calculated using the accrual method. These producers simply
need to submit a copy of the accrual statement provided to CRA to the CAISAgriStability program for each of the reference years they did not participate in
CAIS-AgriStability.
Participants must use the following method of accounting to calculate their program
year margin:
 the cash method, if the participant files income tax using the cash method. In this
case, the program year margin will be adjusted for changes in inventory values using
the hybrid method, purchased inputs, accounts receivable and accounts payable; or
 the accrual method, if the participant files income tax using the accrual method, with
adjustments to the hybrid method for any non-marketable commodities held as
inventory.
The administrator can exercise its discretion to apply adjustments necessary to more
accurately reflect the farming activity of the participant.
7
CAIS-AgriStability Program
TIC- 01.7
Technical Information Circular – 01
Production Margin
Market Revenue payments
Market Revenue payments are non-allowable income and will not be added to the
program year margin or reference period margins.
8
CAIS-AgriStability Program
TIC- 01.8
Technical Information Circular – 01
Production Margin
Crop/Livestock Share
For income tax purposes, share cropping is normally considered land rent, and thus for
CAIS-AgriStability is a non-allowable income and/or expense. Landlord income, whether
cash, rent or payments-in-kind that is earned through a crop or livestock share or lease
arrangement, must be reported as rental income for income tax purposes. Therefore,
landlord income is non-allowable income.
The tenant must report the cash rent or payments-in-kind made to the landlord as a rent
expense.
The following examples illustrate the recording of crop share income and expense on
the T1163 when the landlord share is non-allowable:
Example 1 – Income Splitting
A producer grows 100 ac of corn on a neighbour’s farm. The share arrangement is a
60:40 split of the income. The producer harvests 100 bu/ac and sells it for $3/bu. (total
sales: 100 ac x 100 bu/ac x $3/bu = $30,000). The producer’s share is 60% or $18,000.
The neighbour’s share is $12,000.
Landlord (neighbour) – Recording sharecropping income
Landlord income, whether cash, rent or payments in kind, earned through a crop or
livestock share or lease arrangement, is to be reported as rental income (not farming
income), both for income tax and CAIS-AgriStability purposes – CAIS-AgriStability nonallowable. The landlord will report $12,000 as rental income (not farming income) for
income tax purposes – CAIS-AgriStability non-allowable
Tenant (farmer) – Recording sharecropping income and expenses
The tenant's income must include all the commodity sales from the sharecrop
agreement. It will include both the landlord’s and tenant’s share (gross income). The
tenant will also record land rent corresponding to the share of the income given to the
landlord.
Tenant (farmer) - T1163
The corn sale income of $30,000 is recorded as income on line 011 corn – CAISAgriStability allowable. The $12,000 given to the landlord is recorded as land rent on
line 9811 – CAIS-AgriStability non-allowable
Tenant (farmer) – Production Summary (schedule 1)
Record the total acres in the sharecrop agreement.
Tenant (farmer) – Schedule 2
9
Record the total acres and total yield for the crop in the production columns. If the crop
is sold before fiscal year-end include total yield in sales column. If the crop is sold after
fiscal year-end, include total production in ending inventory.
Do not record the amount of crop given to the landlord in the crop share column of
Schedule 2.
Example 2 – Production Splitting
A producer grows 100 ac of corn on a neighbour’s farm. The share arrangement is a
60:40 split of the crop (yield). The producer harvests 100 bu/ac for a total yield of
10,000 bushels. The producer keeps 6,000 bushels and gives the neighbour 4,000
bushels.
Landlord (neighbour) – Recording sharecropping income
Landlord income, whether cash, rent or payments in kind, earned through a crop or
livestock share or lease arrangement, is to be reported as rental income (not farming
income), both for income tax and CAIS-AgriStability purposes – CAIS-AgriStability nonallowable. When the landlord sells the 4,000 bushels, the income is recorded as rental
income (not farming income) for income tax purposes – CAIS-AgriStability nonallowable
Tenant (farmer) – Recording sharecropping income and expenses
The tenant's income must include all the commodity sales from the sharecrop
agreement. It will include both the landlord’s and tenant’s share (gross income). The
tenant will use the FMV for the month of harvest where the payment in kind (grain) was
transferred to the landlord, if the sales figure of the payment in kind is not known. The
tenant will also record land rent corresponding to the share of the production given to
the landlord.
Tenant (farmer) - T1163
The total corn sale income is recorded as income on line 011 Corn – CAIS-AgriStability
allowable. The 4,000 bushels given to the landlord is recorded as land rent on line 9811
– CAIS-AgriStability non-allowable
Tenant (farmer) – Production Summary (schedule 1)
Record the total acres in the sharecrop agreement.
Tenant (farmer) – Schedule 2
Record the total acres (100) and total yield (10,000 bu.) for the crop in the production
columns. Also record 4,000 bu. under crop share column.
10
CAIS-AgriStability Program
TIC- 01.8.1
Technical Information Circular – 01
Production Margin
Joint Venture
Where an arrangement constitutes a joint venture, such that the land owner’s share in
the allowable expenses reasonably approximates their share in the allowable related
income, those income and expenses may be considered allowable.
The following examples illustrate the recording of joint venture income and expense on
the T1163/Statement A when the land owner’s share is allowable:
Example 1 – Income Splitting
A producer grows 100 ac of corn on a neighbour’s farm. The arrangement is a 80:20
split of the income, based on a similar 80:20 split of allowable expenses, such as seed,
fertilizer and pesticides. The producer harvests 100 bu/ac and sells it for $3/bu. (total
sales: 100 ac x 100 bu/ac x $3/bu = $30,000). The producer’s share is 80% or $24,000.
The land owner’s share is $6,000.
Land owner (partner A) – Recording income and expense
The land owner will report $6,000 as corn income (line code 011) for income tax
purposes – CAIS-AgriStability allowable. The land owner will report will report their
share of the allowable expenses.
Land owner (partner A) – Production summary (schedule 1)
The land owner will record 20 acres on the production summary, based on their share of
the allowable expenses.
Land owner (partner A) – Schedule 2
The land owner will record production from 20 acres on schedule 2. The land owner will
also indicate sold crop on schedule 2.
Tenant (partner B) – Recording income and expenses
The tenant will report $24,000 as corn income (line code 011) for income tax purposes –
CAIS-AgriStability allowable. The tenant will report their share of the allowable
expenses.
Tenant (partner B) – Production Summary (schedule 1)
The tenant will record 80 acres on the production summary, based on their share of the
allowable expenses.
Tenant (partner B) – Schedule 2
The tenant will record production from 80 acres on schedule 2. The tenant will also
indicate sold crop of schedule 2.
11
Example 2 – Production Splitting
A producer grows 100 ac of corn on a neighbour’s farm. The arrangement is a 80:20
split of the crop (yield), based on a similar 80:20 split of allowable expenses, such as
seed, fertilizer and pesticides. The producer harvests100 bu/ac for a total yield of
10,000 bushels. The producer keeps 8,000 bushels and gives the neighbour 2,000
bushels.
Land owner (partner A) – Recording income and expense
The land owner will report corn income if the crop was sold by fiscal year-end. The
landlord will report their share of the allowable expenses.
Land owner (partner A) – Production summary (schedule 1)
The land owner will record 20 acres on the production summary, based on their share of
the allowable expenses.
Land owner (partner A) – Schedule 2
The land owner will record production from 20 acres on schedule 2. The land owner will
indicate sold crop on schedule 2 if the crop has been sold by fiscal year-end. The land
owner will indicate ending inventory on schedule 2 if the crop has not been sold by fiscal
year-end.
Tenant (partner B) – Recording income and expense
The tenant will report corn income if the crop was sold by fiscal year-end. The tenant
will report their share of the allowable expenses.
Tenant (partner B) – Production summary (schedule 1)
The tenant will record 80 acres on the production summary, based on their share of the
allowable expenses.
Tenant (partner B) – Schedule 2
The tenant will record production from 80 acres on schedule 2. The tenant will indicate
sold crop on schedule 2 if the crop has been sold by fiscal year-end. The tenant will
indicate ending inventory on schedule 2 if the crop has not been sold by fiscal year-end.
12
CAIS-AgriStability Program
TIC- 01.9
Technical Information Circular – 01
Production Margin
Custom feeding
Income: Custom feeding income is allowable if the participant grows or purchases the
feed used in the operation. The allowable income that a custom feeding operation would
report for CAIS-AgriStability is the value of the feed, purchased or grown and fed to the
livestock. The yardage portion of the fee charged by the custom feeding operation is
non-allowable.
In the event that a participant generates custom feeding income that is considered
allowable, but is unable to break out the feed portion of this income, the program will
assume that 5% of the total custom feeding income is yardage and the remainder is
feed. Where the 5% is inappropriate for the operation, Agricorp may use a different
percentage, and where required, request supporting documentation from the participant.
Expense: The balance of the cost incurred to have livestock custom fed is an allowable
expense.
The following examples illustrate the recording of custom feeding income and expense
on the CAIS-AgriStability T1163:
Farmer feeding the livestock (custom feeder):
The allowable income that the custom feeder reports for CAIS-AgriStability is the value
of the feed, purchased or grown and fed to the livestock. The yardage portion of the
custom feeding income is non-allowable. Record the value of the feed, fed to the
livestock using commodity code 046 – Prepared feed and protein supplement (income).
Record the yardage portion of the income using line code 9600 – Other (specify).
Farmer who owns the livestock (livestock owner):
Record the total amount charged by the custom feedlot operator to feed the livestock on
line 573 for AgriStability.
13
CAIS-AgriStability Program
TIC- 01.10
Technical Information Circular – 01
Production Margin
Futures market transactions
For income tax purposes, farms are required to report futures market transactions
whether hedging or speculation either as farm income and/or expense or as a capital
gain and/or loss. Either method may be used as long as the chosen method is used
consistently over time.
CAIS-AgriStability will allow normal hedging transactions to be included as allowable
income and allowable expenses. The CAIS-AgriStability will not accept the gains and/or
losses due to speculation.
A futures market hedge is defined as an equal but opposite position to the farmer’s
position in the cash market. The purpose of a hedge is to provide protection from price
declines if the producer is selling a commodity or from price increases if the producer is
buying a commodity.
For example, a corn producer with corn in storage may take a short futures position,
since he/she is long in the cash market, for a volume of corn no greater than what is in
storage. This short hedge would ensure a minimum price that the producer would
receive for his/her stored corn.
A feedlot operator planning to buy feeder cattle, may go long feeder cattle futures, since
he/she is short in the cash market. This long hedge would ensure a maximum price that
the operator would have to pay for purchased cattle.
The above, are two very basic examples of what is a futures market hedge. In practice,
hedging can be much more sophisticated and complex. However, one aspect of
hedging that is always present regardless of how complex the strategy, is that a hedge
is intended to offset the risk held in the cash market. If no cash market position is held,
there is no risk to offset. Futures market transactions that do not meet the definition of a
hedge are considered speculation for the purposes of CAIS-AgriStability.
14
All participants reporting futures market transactions may be required to complete the
following for any futures market gains and losses to be considered allowable income
and expenses, respectively:
Demonstrate through a written summary of their futures market strategy and brokerage
statements recording their futures transactions for the years in question that:
 All futures transactions are hedging, not speculation.
 All futures transactions were undertaken in commodities produced and/or consumed
on the farm. For example, a producer that does not grow wheat could not include
wheat futures transactions as allowable income and/or expense.
 All futures transactions represented a volume of product that could either be
reasonably produced and/or consumed on the farm. For example, a producer that
grows 500 acres of corn, but undertook futures transactions equivalent to 1,000
acres of corn, could not include those transactions in excess of what was produced
on the farm.
 Some of a participant’s futures transactions may be considered hedging while others
may be of a speculative nature. In this circumstance, the participant must provide a
detailed breakdown of the gains and/or losses associated with 1) all hedging
activities and 2) all speculative activities for any hedging gains/losses to be
considered allowable.
15
CAIS-AgriStability Program
TIC- 01.11
Technical Information Circular – 01
Production Margin
Resale of Commodities and Processing
The income and expense associated with the purchase and resale of a commodity
without any further processing are non-allowable. An example is a producer that
purchases grain and simply resells the grain without any processing.
Processing is defined as a changing of state. For example: milk to cheese,
strawberries to jam, beeswax to candles, beef to beef jerky, grain to flour.
The income and expense associated with the processing of purchased commodities not
produced on the participant’s operation are allowable if:
 The participant carries on a bona fide farming operation;
 Activities are related to the participant's other farming activities;
 Activities are undertaken on a small scale; and
 Income from these activities is incidental to the participant’s other farming income.
CAIS-AgriStability will consider the above in determining whether processing income
and expense should be considered allowable.
16
CAIS-AgriStability Program
TIC- 01.12
Technical Information Circular – 01
Production Margin
Standing crop purchases
The purchase of standing crops, such as hay is an allowable expense as long as the
payment is not classified as rent and the contract does not represent an entire growing
season. The key factor is that the producer is purchasing feed and does not have
extended use of the land.

A producer that buys hay from another farmer, simply cuts and bales the hay, and
does not have extended use of the land (e.g. the producer if needed could use for
pasture, apply fertilizer or manure, take 2nd or 3rd cuts) may include the purchase as
an allowable expense.

A producer that rents the land, takes off 1 or more cuts of hay and then pastures
cattle on the land is renting and this is a non-allowable expense.
17
CAIS-AgriStability Program
TIC - 01.13
Technical Information Circular – 01
Production Margin
Livestock lease or rent payments
Lease or rent payments for livestock are a non-allowable expense.
.
18
CAIS-AgriStability Program
TIC- 01.14
Technical Information Circular – 01
Production Margin
BSE payments
BSE Recovery payments are allowable income only in the program year. These
payments are non-allowable income in the reference years.
The BSE Phase 1 and 3a programs in Ontario were based on cattle sold for slaughter
within a specific period of time. The specific period of time for both programs was within
calendar 2003. However, due to timing of individual producer year ends and the
processing of payments, not all producers received funds from BSE Phase 1 and 3a
within their 2003 tax year.
BSE Phase 1 and 3a payments will be treated as allowable income for CAISAgriStability based on the date the cattle were slaughtered relative to the producer's tax
year end.
For example, a producer applied to BSE 1 and 3a for 1,000 cattle, all of which were
slaughtered within the producer's 2003 tax year. However, the producer received
payments for 800 of the cattle within their 2003 tax year and the other 200 cattle within
their 2004 tax year. In this example, the producer will have all of the BSE 1 & 3a
payments for the 1,000 cattle treated as allowable income in the 2003 program year
margin. .
BSE Phase 2 was based on the number of cattle declared at a point in time and as
such, will be added to the program year margin based on the date received.
The Canada-Ontario Fed Cattle Set Aside Program compensated bidders for the cost
of maintaining cattle on feed for a specific time period. Fed cattle set aside payments
will be added to the program year margin to the extent that the set aside period for each
lot of cattle occurred within the respective program year. For example, if a producer has
a December 31st year end, and on December 1, 2004 entered a contract to set aside
1,000 fed cattle for 120 days at $10 per day, 31 days of the 120 day set aside payment
would be treated as allowable income for 2004 and 89 days of the contract would be
treated as allowable income for 2005. If the entire set aside period fell within the
program year, then the entire set aside payment would be treated as allowable income
for that respective program year.
The Canada-Ontario Feeder Cattle Set Aside Program was based on a % the
number of calves that a producer declared at a point in time would be held until January
19
1, 2006. As such, these payments will be treated as allowable CAIS-AgriStability
income when received.
The Cull Animal Program was based on the number of eligible animals that a producer
declared at a point in time. As such, these payments will be treated as allowable CAISAgriStability income when received.
20
CAIS-AgriStability Program
TIC- 01.15
Technical Information Circular – 01
Production Margin
Other Insurance payments
For both income tax purposes and CAIS-AgriStability, insurance payments for items that
are considered allowable income and/or expense are allowable income. In cases where
insurance payments are for non-allowable income and/or expense items such as capital
items, this is non-allowable income.
Insurance payments received for damaged fruit trees, vines or other perennial crops are
allowable income if the participant has treated the replant costs as an operating
expense for tax purposes. If the participant has treated the replant costs as a capital
cost for income tax purposes, the insurance payments are non-allowable income.
21
CAIS-AgriStability Program
TIC- 01.16
Technical Information Circular – 01
Production Margin
Horses
The following horse related income is allowable income/expense for CAIS-AgriStability:
 Sale of horses produced by the participant
 Pregnant mare’s urine
 Sale of purchased horses that have been fed for meat purposes
The following horse related income is non-allowable income/expense for CAISAgriStability:
 Sale of purchased horses that have not been fed for meat purposes
 Prize money or purses from racing
 Training or boarding of horses
Example 1: A producer breeds and raises thoroughbred horses and sells them to be
used for the purpose of horse racing. The income from the sale of these animals and
the related expenses to produce these animals are allowable for CAIS-AgriStability.
Example 2: A producer breeds and raises thoroughbred horses and also enters the
animals in horse races. The income from the sale of these animals and the related
expenses to producer these animals are allowable for CAIS-AgriStability. The income
(purses) and expenses associated with the racing of these animals are non-allowable
for CAIS-AgriStability.
Example 3: A producer buys thoroughbred horses and uses them as race horses and
then sells the animals. The income (purses) and expenses associated with the
purchase, racing and resale of these animals are non-allowable for CAIS-AgriStability.
Example 4. A producer purchases horses feeds them for several months and sells
them for meat purposes. The income from the sale of these animals and the related
expenses to produce these animals are allowable for CAIS-AgriStability.
22
CAIS-AgriStability Program
TIC- 01.17
Technical Information Circular – 01
Production Margin
Apple bin rental
Apple bin rental payments are an allowable expense
If a farmer purchases apple bins it is included for income tax and CAIS-AgriStability as
containers and twine expense, which is an allowable expense for CAIS-AgriStability. In
order to treat this producer in the same manner if he/she decides to rent bins, bin rental
payments are an allowable expense for CAIS-AgriStability.
23
CAIS-AgriStability Program
TIC- 01.18
Technical Information Circular – 01
Production Margin
Milk quota rental and Over quota levy
According to Dairy Farmers of Ontario (DFO) Quota policy, milk quota can not be
rented.
Over quota levy is an allowable expense for CAIS-AgriStability.
24
CAIS-AgriStability Program
TIC- 01.19
Technical Information Circular - 01
Production Margin
Farm transfer
When ownership of a farm operation has been transferred to a related person or party,
the CAIS-AgriStability reference period margins will also be transferred.
Example 1: Farm transfer at the start of the program year
A sole proprietor completes the fiscal period ending December 31 prior to selling the
farm to his/her child who retains a December 31 year end
Reference Margin Calculation
Use actual historical tax or CAIS-AgriStability data from the previous owner
Program Year Margin Calculation
Use actual CAIS-AgriStability data from the current owner
Example 2: Farm transfer during the program year
A sole proprietor with a December 31 year end, retires and sells the farm to his/her child
on May 31 who retains a December 31 year end
Reference Margin Calculation
Use actual historical tax CAIS-AgriStability data from the previous owner
Program Year Margin Calculation
Combine the actual CAIS-AgriStability data from both previous and current owner
25
CAIS-AgriStability Program
TIC- 01.20
Technical Information Circular - 01
Production Margin
Formation of a partnership
When an ongoing farm operation(s) becomes a partnership, the CAIS-AgriStability
reference period margins from the previous farm operation(s) will be used.
Example; A son joins his father’s ongoing farm operation becoming a partner.
Reference Margin Calculation
Use actual historical tax or CAIS-AgriStability data for 100% of the farming operation
and apply the partnership share accordingly.
Program Year Margin Calculation
Use actual CAIS-AgriStability data for the partnership
26
CAIS-AgriStability Program
TIC- 01.21
Technical Information Circular - 01
Production Margin
Farm partnership becomes a sole proprietor
When an ongoing farm partnership becomes a sole proprietorship, the CAISAgriStability reference period margins for 100% of the partnership are transferred to the
sole proprietorship.
Example: A farther and son, farm as a partnership until eventually the son takes over
the operation, becoming a sole proprietor.
Reference Margin Calculation
Use actual historical tax or CAIS-AgriStability data from 100% of the farming operation.
Do not take participant’s previous share of the farm, but rather 100% of the allowable
income and expenses.
Program Year Margin Calculation
Use actual CAIS-AgriStability data from 100% of the farming operation.
27
CAIS-AgriStability Program
TIC- 01.22
Technical Information Circular - 01
Production Margin
Farm incorporations
When an ongoing farm operation(s) (whether a sole proprietorship or partnership)
incorporates, the CAIS-AgriStability reference period margins from the previous farm
operation(s) will be used
Example 1: Farm incorporates during the program year
A sole proprietor completes 7 months of the fiscal period ending December 31, prior to
incorporating. The corporate year end remains as December 31
Reference Margin Calculation
Use actual historical tax or CAIS-AgriStability data from the previous business structure
Program Year Margin Calculation
Combine the actual CAIS-AgriStability data from both sole proprietorship and the
corporation
Example 2: Farm incorporates at the start of the program year
A sole proprietor completes the fiscal period of January 1, 2012 to December 31, 2012
prior to incorporating. The corporate year end remains as December 31
Reference Margin Calculation
Use actual historical tax or CAIS-AgriStability data from the previous business structure
Program Year Margin Calculation
Use actual CAIS-AgriStability data
28
CAIS-AgriStability Program
TIC- 01.23
Technical Information Circular - 01
Production Margin
Stub Periods
If one of a participant’s tax years represents less than 12 months (a stub period), the
income statement for the stub period will be combined with information from preceding
statements until a minimum period of 12 months is available. The combined income and
expenses will be prorated to reflect a 12 month period. Separate income statements for
all combined periods must be reported.
In cases where a farming operation has a tax year other than 12 months, and within that
tax year at least one production cycle is completed, the program may consider the tax
year as the full fiscal period in calculating the program year margin and apply a
structure change adjustment to reference year margins to reflect the stub period.
29
CAIS-AgriStability Program
TIC- 01.24
Technical Information Circular - 01
Production Margin
Tobacco Kiln Retrofit and Conversion
Income and expenses associated with the retrofitting and conversion of tobacco kilns
are non-allowable for CAIS-AgriStability
30
CAIS-AgriStability Program
TIC- 01.25
Technical Information Circular - 01
Production Margin
Plum Pox Virus
Commercial tender fruit producers may be eligible for two types of Plum Pox Virus
(PPV) payments, one from the Canadian Food Inspection Agency (CFIA) and the
Canada-Ontario PPV Financial Assistance which is administered by Agricorp. Both
payments will be considered allowable income in the program year only and not when
calculating the reference margin.
CFIA Payments
CFIA payments to producers affected by PPV provides compensation for costs
associated with tree removal/destruction and replanting. These payments will be
considered allowable income in the program year only and not when calculating the
reference margin.
Canada-Ontario PPV Financial Assistance Payment
The Canada-Ontario PPV Financial Assistance provides payments to compensate for
lost income from trees removed as a result of CFIA disposal orders. These asset loss
payments will be adjusted in the program year to take into consideration the fact that the
payment represents more than just the program year loss but rather the productive life
of the trees.
31
For CAIS-AgriStability purposes, payments received under the Canada-Ontario PPV
Financial Assistance program will be allocated to a program year based on the number
of productive years for which the producer received compensation. The following list
provides the number of years used in the allocation formula by commodity type:
Peach – 4 years
Nectarine – 4 years
European Plums – 6 years
Japanese Plum – 8 years
Apricots – 8 years
Peach (one year fallow) – 5 years
Nectarine (one year fallow) – 5 years
European Plums (one year fallow) - 7 years
Japanese Plum (one year fallow) – 9 years
Apricots (fallow) – 9 years
For example, a producer has 20 acres of peaches. In 2002 PPV is discovered on the
farm. The producer removes 5 acres of peaches after harvest. He receives $40,000 in
PPV payments.
The $40,000 is divided into 4 equal parts. In each of the program years from 2003 to
2007, $10,000 will be added to allowable income. Once a program year becomes a
reference year, the $10,000 is non-allowable income.
The entire $40,000 would show in income as non-allowable for CAIS-AgriStability in the
year(s) it was recorded for tax purposes. The $10,000 is added to the program year
margin at the final calculation stage (similar to BSE payments).
32
CAIS-AgriStability Program
TIC- 01.26
Technical Information Circular - 01
Production Margin
Countervail Duties
Countervail duties charged to individual participants when exporting agricultural
commodities to the United States or other countries are an allowable expense.
Participants should report countervail duties as an allowable expense, rather than report
the net price received for the exported commodity. The countervail duty must be
reported in Canadian dollars
Some participants may eventually receive compensation for these countervail duties.
Any compensation received by a participant that in a previous program year had
included countervail duties as an allowable expense, will be included as allowable
income in the program year received.
33
CAIS-AgriStability Program
TIC- 01.27
Technical Information Circular - 01
Production Margin
Planting of Perennial Crops
The information in this TIC primarily refers to perennial crops such as tree fruits, grapes,
berries and asparagus. There may be other crops that fit this category as well.
Perennial crops are planted in one year, come into production a few years later and
remain productive for many years.
When planting a perennial crop, in most instances the purchase of the trees (or vines,
canes, bushes, crowns etc.) should be recorded as a capital expenditure. The trees are
a capital asset that will produce over a number of years. If the tree purchase is a capital
expenditure, it is a non-allowable expense for CAIS-AgriStability.
When planting a perennial crop in some instances the purchase of the trees (or vines,
canes, bushes, crowns etc.) can be recorded as an operating expense. If the tree
purchase is an operating expense, it is an allowable expense for CAIS-AgriStability.
CRA indicates that if you are an apple producer replacing damaged or dead trees,
record apple tree purchases using the code for apples. If you are buying trees to
expand an orchard, this amount would be a capital expenditure and would not be
entered as a commodity purchase.
CAIS-AgriStability will generally consider replacement of damaged perennial crops an
allowable expense, while the planting of new perennial crops for expansion or initial
establishment as a non-allowable expense.
34
Example 1: A producer has 30 acres of pear trees in production and plants 5 more
acres of pear trees in the program year. The cost of purchasing the trees should be
recorded as a capital expenditure, as the producer is expanding the operation.
Therefore it is a non-allowable expense. On Schedule 1 record 30 acres of pears as
bearing and then 5 acres as non-bearing.
Example 2: A producer has 30 acres of grapes in production. There is a very cold
winter and 5 acres of grapes are killed. The producer replants the 5 acres. The cost of
purchasing the vines can be recorded as an operating expense, as the producer is
replacing winterkilled vines. Therefore it is an allowable expense for CAIS-AgriStability.
On Schedule 1 record 25 acres of pears as bearing and then 5 acres as non-bearing.
Example 3: A producer has 10 acres of apples. Every year a few dead or diseased
trees are replaced. The cost of purchasing the trees can be recorded as an operating
expense, as the producer is replacing dead or diseased trees. Therefore it is an
allowable expense for CAIS-AgriStability. On Schedule 1 record 10 acres of apples as
bearing.
35
CAIS-AgriStability Program
TIC- 01.28
Technical Information Circular - 01
Production Margin
Transitional Industry Support Program (TISP) Payments
The Transitional Industry Support Program (TISP) was announced by Agriculture and
Agri-Food Canada in March 2004. The TISP was offered in two payments, the Direct
Payment and the General Payment. TISP is allowable income in the program year and
non-allowable income in the reference years. TISP Payments will be treated as
allowable income based on the date of announcement which was March 2004. All 2004
years ending from January to March 31, will have the TISP payments treated as
allowable income for the 2005 program year, and all 2004 years ending from April 1 to
December 31, will have the TISP payments treated as allowable income for the 2004
program year.
36
CAIS-AgriStability Program
TIC- 01.29
Technical Information Circular - 01
Production Margin
Farm Income Payment Program (FIPP) Payments
The Farm Income Payment Program (FIPP) was announced by Agriculture and Agrifood Canada in March 2005. The FIPP was offered in two payments, the Direct
Payment and the General Payment. FIPP is allowable income in the program year and
non-allowable income in the reference years. FIPP Payments will be treated as
allowable income based on the date of announcement which was March 2005. All 2005
years ending from January to March 31, will have the FIPP payments treated as
allowable income for the 2006 program year, and all 2005 years ending from April 1 to
December 31, will have the FIPP payments treated as allowable income for the 2005
program year.
37
CAIS-AgriStability Program
TIC- 01.30
Technical Information Circular - 01
Production Margin
Aquaculture
In Ontario, aquaculture is considered allowable income and for CAIS-AgriStability.
Ontario will provide 100% of the government program benefits for CAIS-AgriStability
participants that have any amount of aquaculture income or expense in reference or
program year. As such, OMAFRA will be covering both the provincial and federal share
of program benefits for these participants.
38
CAIS-AgriStability Program
TIC- 01.31
Technical Information Circular - 01
Production Margin
Changing Method of Accounting for Tax Purposes – 2003 to 2005 Program years
Participants must use the following method of accounting to calculate their 2003, 2004
or 2005 program year margin:
 The cash method, if the participant files income tax using the cash method. In this
case, the program year margin will be adjusted for changes in inventory quantities,
purchased inputs, accounts receivable and accounts payable; or
 The accrual method, if the participant files income tax using the accrual method.
Participants that change from the cash to accrual method will have their program year
margin calculated using the accrual method as filed to CRA. If the participant did not
receive acceptance from CRA to make the change from the cash to accrual method
based on sound business reasons, the program may require the participant to calculate
their program year margin using the cash method as described above.
Participants that change from the accrual to cash method will have their program year
margin calculated using the cash method as described above.
39
CAIS-AgriStability Program
TIC- 01.32
Technical Information Circular - 01
Production Margin
Expenses Related to the Nutrient Management Act
Some of the expenses related to compliance with the Nutrient Management Act are
allowable expenses for CAIS-AgriStability, to the extent that the participant properly
categorizes these expenses for income tax purposes.
Some of the allowable expenses include hired labour, fuel and chemical purchases.
Since most of the expenses related to compliance with the Nutrient Management Act
are capital expenditures, the participant must be able to breakdown the expenses into
CAIS-AgriStability allowable and non-allowable items. For example, if the participant
installs a new manure system, much of the costs are capital expenditures which are
non-allowable for income tax and CAIS-AgriStability purposes. However, the labour,
fuel and electricity component of this cost can be treated as an allowable expense for
CAIS-AgriStability.
40
CAIS-AgriStability Program
TIC- 01.33
Technical Information Circular - 01
Production Margin
Inclusion of Reference Year Production Margin
To be eligible for program benefits a participant must have, in the program year:
 Carried on the business of farming in Canada;
 Conducted a minimum of six consecutive months of farming activity;
 Completed a production cycle;
 Reported farming income (or loss) for income tax purposes to the CRA, unless
exempt under the federal Indian Act;
In some instances, a participant may be farming but not be eligible for program benefits
for a given program year because they do not meet the minimum six months and/or
production cycle criteria.
Even though a participant is not eligible for program benefits for a given program year,
the respective production margin may be included as a reference year when calculating
the reference margin.
The inclusion of a reference year is based on the following:
 Did the participant report farm income/expense for that tax year?
 Did the participant report allowable CAIS-AgriStability income/expenses for that tax
year?
 Was a normal production cycle for the farm type in question completed during that
tax year?
If the answer is yes to all of the above, then the year should be included as a reference
year. If the answer is no to one or more of the above, then the program will determine
whether or not the year should be included.
41
CAIS-AgriStability Program
TIC- 01.34
Technical Information Circular - 01
Production Margin
Purchase and Resale of Dairy Cattle
The purchase and resale of commodities without any further processing is considered
non-allowable (see TIC.1.10)
TIC 1.10 does not apply to participants that purchase dairy cattle for resale provided
that the majority of the participant’s operation cannot be characterized as:

Simply an agent or broker for the sale of livestock
− An agent or broker is someone that acts as an intermediary between a cattle buyer
and seller, usually charging a fee or commission for their service. An agent or
broker does not actually purchase or take ownership of the cattle, rather they simply
bring the cattle buyer and seller together.

An auction yard where the cattle are simply brought for shipment
− This does not include producers that in addition to other farming activity, purchase
dairy heifers from several other producers and then co-ordinate, and manage the
shipment of these heifers either domestically or internationally.
42
CAIS-AgriStability Program
TIC- 01.35
Technical Information Circular - 01
Production Margin
Beef Cattle Finishing Operations
The purchase and resale of commodities without any further processing is considered
non-allowable (see TIC.1.10)
TIC 1.10 does not apply to participants that are beef finishing operations provided there
has been an appreciable contribution made to the growth and maturity of the cattle (see
Appendix 1 - IT156R Feedlot Operators of the Income tax Act).
For a beef cattle finishing operation, for there to have been an appreciable contribution
to the growth and maturity of the livestock, the cattle must have been on feed for at
least 60 days or an average gain of at least 90 kilograms.
Operations are not considered to have made a contribution to the growth and maturity
of the beef cattle, and the corresponding income and expenses are therefore nonallowable, if the majority of the participant’s operation can be characterized as:
Acting as an agent or broker for the sale of beef cattle;
Buying beef cattle for short-term resale; or
Assembling and preparing beef cattle for shipment.
43
CAIS-AgriStability Program
TIC- 01.36
Technical Information Circular - 01
Production Margin
Grain and Oilseed Program Payment (GOPP)
The Grain and Oilseed Program Payment (GOPP) was announced by Agriculture and
Agri-Food Canada in February 2006. The GOPP is allowable income in the program
year and non-allowable income in the reference years. GOPP will be treated as
allowable income based on the date of announcement which was February 2006. All
participants with a tax year ending in January, will have the GOPP treated as allowable
income for the 2007 program year, and all participants with a tax year ending from
February 1 to December 31, will have the GOPP treated as allowable income for the
2006 program year.
44
CAIS-AgriStability Program
TIC- 01.37
Technical Information Circular - 01
Production Margin
Farming Activities outside Canada
Income and expenses generated from farming activities outside Canada are nonallowable.
Income from commodities taken to a finished or marketable state within Canada, and
subsequently sold outside Canada is allowable. For example, a producer ships
finished hogs to the United States (US) for sale. This producer would include the
income generated from the sale of these hogs; converted to Canadian dollars, as
allowable income for CAIS-AgriStability
When a commodity is produced in Canada and then shipped outside of Canada for
further production, the income and expense generated once the commodity has left
Canada is non-allowable.
 For example, a producer ships weaner pigs to the US for finishing and sale. Any
income or expense generated from the further production or finishing of these hogs
is non-allowable. In this case, the producer would include the fair market value of
the weaner pigs as they left Canada as allowable income for CAIS-AgriStability.
When a commodity is produced in Canada and then shipped outside of Canada for
further production, the income and expense generated once the commodity has left
Canada is non-allowable. However, it is possible that the commodity may return to
Canada for further production or sale. In this case, the income and expense generated
once the commodity reenters Canada is allowable for CAIS-AgriStability.
 For example, a producer ships weaner pigs to the US for finishing. Any income or
expense generated from the further production or finishing of these hogs within the
US is non-allowable. In this case, the producer would include the fair market value
of the weaner pigs as they left Canada as allowable income for CAIS-AgriStability. If
the pigs reenter Canada at a later date, the producer would include the fair market
value of the pigs as they enter Canada as allowable expense/purchase for CAISAgriStability, and as allowable income once sold.
45
CAIS-AgriStability Program
TIC- 01.38
Technical Information Circular - 01
Production Margin
Special Beekeepers Fund (SBF)
The Special Beekeepers Fund (SBF) is allowable income in the program year and nonallowable income in the reference years. The SBF will be treated as allowable income
for the 2007 program year for participants with an April 1 or later year end. The SBF will
be treated as allowable income for the 2008 program year for participants with a March
31 or earlier year end. This ensures that the SBF payment is included in the program
year in which any expenses related to bee hive losses would have been incurred.
46
CAIS-AgriStability Program
TIC- 01.39
Technical Information Circular - 01
Production Margin
Cost of Production Payment (COP)
The federal Cost of Production Payment (COP) is allowable income in the program year
and non-allowable income in the reference years. The COP will be treated as allowable
income based on the date of announcement which was May 1, 2007. All participants
with a tax year ending on or after May 1 will have the COP treated as allowable income
for the 2007 program year, and all participants with a tax year before May 1 will have
the COP treated as allowable income for the 2008 program year.
47
CAIS-AgriStability Program
TIC- 01.40
Technical Information Circular - 01
Production Margin
Hybrid Method of Inventory Valuation
Starting with the 2006 program year, all participants will adjust the program year using
the hybrid method of inventory valuation. The hybrid method of inventory valuation
refers to the method of valuing market versus non-market inventories.
Market Inventory
Market inventory will be valued based on a price at the beginning of the year and a price
at the end of the year. Examples of commodities considered market inventory include all
crops, market livestock, beef/dairy heifers (open and bred), and gilts. Market inventory
adjustments will be made by calculating the difference between the year-end inventory
quantity multiplied by the year-end price; and the year-beginning inventory quantity
multiplied by the year-beginning price.
Non-Market Inventory
Non-market inventory will be valued based on the price at the end of the fiscal year
only. Examples of commodities considered non-market inventory include beef and dairy
cows, bulls, sows, boars, ewes, rams, does, bucks, all culled breeding stock, and laying
poultry. Non-market inventory adjustments will be made by calculating the difference
between the year- end inventory quantity multiplied by the year-end price; and the yearbeginning inventory quantity multiplied by the year-end price
48
CAIS-AgriStability Program
TIC- 01.41
Technical Information Circular - 01
Production Margin
Market Inventory - Hybrid Method of Inventory Valuation
For the purposes of the hybrid method of inventory valuation market inventory includes
but is not limited to the following: all crops, dairy calves, steers and heifers (bred and
open), beef calves, steers and heifers (bred and open), weaner, feeder and market
hogs and gilts (bred and open), and feeder lambs.
49
CAIS-AgriStability Program
TIC- 01.42
Technical Information Circular - 01
Production Margin
Non-market Inventory - Hybrid Method of Inventory Valuation
For the purposes of the hybrid method of inventory valuation non-market inventory
includes but is not limited to the following: dairy cows (including culls) and bulls, beef
cows (including culls) and bulls, sows (including culls) and boars, ewes (including culls)
and rams, does (including culls) and bucks and laying poultry.
Any animal that could be considered part of the above list, even if it is solely intended
for sale, is considered non-market inventory for the purposes of the hybrid method of
inventory valuation.
50
CAIS-AgriStability Program
TIC- 01.43
Technical Information Circular - 01
Production Margin
Accrual Tax Filers- Hybrid Method of Inventory Valuation
For participants who report income tax on the accrual basis, the hybrid method of
inventory valuation will be applied to all non-market inventory quantities. These
participants will be required to provide the beginning and ending quantities of nonmarket inventory as well as the beginning and ending prices used to value that
inventory for income tax purposes. The program will then revalue this non-market
inventory using the hybrid method of inventory valuation.
51
CAIS-AgriStability Program
TIC- 01.44
Technical Information Circular - 01
Production Margin
Reference Margin - Hybrid Method of Inventory Valuation
For 2006, participants who reported reference year margins on the cash basis and who
wish to make adjustments for changes in inventory, accounts payable and receivable,
and purchased inputs, may do so by submitting a Schedule 4.
Beginning with the 2007 program year, reference years that were reported on a cash
basis will be adjusted for changes in inventories using the hybrid method of inventory
valuation and also will be adjusted for changes in accounts payable and receivable, and
purchased inputs.
Beginning with the 2007 program year, reference years that were reported on an
accrual basis will be adjusted for changes in inventories using the hybrid inventory
adjustment. This adjustment shall not be applied to reference years prior to 2006.
52
CAIS-AgriStability Program
TIC- 01.45
Technical Information Circular - 01
Production Margin
Ontario Juice Grape Transition Program
The Ontario Juice Grape Transition Program (OJGTP) provides payment per acre
towards vineyard stock removal and disposal costs. To receive the OJGTP growers
must have removed all vineyard stock, including vines, roots, posts, and wires by
November 30, 2007.
The OJGTP is allowable income in the program year and non-allowable income in the
reference years. The OJGTP will be treated as allowable income in the program year in
which the final date for removal of November 30, 2007 occurs. For example, a
participant with a March 31st year end will include the OJGTP as allowable income in
the 2008 program year.
53
CAIS-AgriStability Program
TIC- 01.46
Technical Information Circular - 01
Production Margin
Orchard and Vineyard Transition Program
Payments for the removal portion of The Orchard and Vineyard Transition Program
(OVTP) are allowable income in the program year and non-allowable income in the
reference years. These payments will be treated as allowable income in the program
year corresponding to the date of orchard/vineyard removal.
54
CAIS-AgriStability Program
TIC- 01.47
Technical Information Circular - 01
Production Margin
Cull Breeding Swine Program
The Cull Breeding Swine Program (CBSP) is allowable income in the program year and
non-allowable income in the reference years. The CBSP will be treated as allowable
income in the program year in which the payment is received.
55
CAIS-AgriStability Program
TIC- 01.48
Technical Information Circular - 01
Production Margin
Circovirus Inoculation Program
The Circovirus Inoculation Program (CIP) is allowable income in the program year and
non-allowable income in the reference years. The CIP will be treated as allowable
income in the program year in which the payment is received.
56
CAIS-AgriStability Program
TIC- 01.49
Technical Information Circular - 01
Production Margin
Hog Farm Transition Program
The Hog Farm Transition Program is non-allowable income in the program year and
non-allowable income in the reference years.
57
CAIS-AgriStability Program
TIC- 01.50
Technical Information Circular – 01
Production Margin
Canada-Ontario Forage and Livestock Transition Assistance Initiative payments
Canada-Ontario Forage and Livestock Transition Assistance Initiative payments are
considered allowable income in the program year only. Payments under the initiative
shall not be considered as allowable income for the calculation of a reference margin.
58
CAIS-AgriStability Program
TIC- 01.51
Technical Information Circular – 01
Production Margin
Canada-Ontario Apple and Tender Fruit Weather Risk Mitigation Strategy Initiative
payments
Canada-Ontario Apple and Tender Fruit Weather Risk Mitigation Strategy Initiative
payments are not considered allowable income in the program year. Payments under
the initiative also shall not be considered as allowable income for the calculation of a
reference margin.
59
CAIS-AgriStability Program
TIC- 01.52
Technical Information Circular - 01
Production Margin
Beekeepers Financial Assistance Program
Beekeepers Financial Assistance Program payments are considered allowable income
in the calculation of production margin in the program year in which the expenses
related to bee hive losses occurred. However, payments under the initiative shall not be
considered as allowable income for the calculation of a reference margin.
60
CAIS-AgriStability Program
TIC- 01.53
Technical Information Circular - 01
Production Margin
Scientific Research and Experimental Development program payments
Some or all of Scientific Research and Experimental Development (SRED) program
payments either in the form of a grant or a tax credit are allowable income in the
program and reference years for AgriStability
The portion that is allowable is based on the percent of the total expenses covered by
the SRED payment that could be attributed to allowable AgriStability expenses, and
should be reported on line 9574 – Resales, rebates, GST/HST for allowable income.
The portion that is non-allowable should be reported on line 9600 – Other (specify).
The SRED payment will be treated as allowable income in the program and reference
years based on when the payment was received.
SRED applications are not treated as an accounts receivable on Schedule 2.
61
CAIS-AgriStability Program
TIC- 02
Technical Information Circular – 02
Schedule 1 & 2
62
CAIS-AgriStability Program
TIC- 02.1
Technical Information Circular – 02
Schedule 1 & 2
Completing Schedule 1 & 2
For deadline purposes, a completed Schedule 1 consists of the following:
 Financial year end
 Accounting method
 Number of production units
For deadline purposes, a completed Schedule 2 consists of the following:
 Opening and ending inventory;
 Opening and ending purchased inputs;
 Opening and ending accounts receivable; and
 Opening and ending accounts payable.
63
CAIS-AgriStability Program
TIC- 02.2
Technical Information Circular – 02
Schedule 1 & 2
Crop in ground
Include crop in ground at the end of the program year in the Purchased Input Record of
Schedule 2.
If the crop in ground is not mature at the end of the program year (e.g. a calendar year
end with winter wheat planted), use the cost of the inputs used to plant the crop as the
value of this inventory.
If the crop in ground is mature at the end of the program year (e.g. corn left in the field
to dry), an estimate of the crop yield (e.g. bu/acre or tonne/acre) and grade must be
provided. If Agricorp production insurance records for the participant’s crop in question
are available, these will be used. This information will be used to estimate the volume
and value of the mature crop still in the field at the end of the program year.
64
CAIS-AgriStability Program
TIC- 02.3
Technical Information Circular – 02
Schedule 1 & 2
Outstanding crop insurance payments
2012 Crop Year Example
If a farmer’s 2012 crop was insured under crop insurance and he/she received a crop
insurance payment for this crop during the 2013 tax year, an ending 2012 accounts
receivable for this amount must be included on Schedule 2. This treats the farmer the
same as someone that received a 2012 crop insurance payment during the 2012 tax
year and had to include this as allowable income.
65
CAIS-AgriStability Program
TIC- 02.4
Technical Information Circular – 02
Schedule 1 & 2
Recording crops by grade
In completing Schedule 2, please use the Fair Market Value List as a guide for the
classes of crops and livestock inventory.
Please note that the Fair Market Value List includes various grades for corn and
soybeans. Include each grade of crop as a separate line in the Homegrown Crop
Record. For example, if you had Grade 2-4 corn in inventory at the start of the year and
all the corn in inventory at the end of the year was sample grade, include two lines for
corn in the homegrown crop record. The first line would record the amount of Grade 2-4
corn in inventory at the start of the year and zero Grade 2-4 corn in inventory at the end
of the year. The second line would record zero sample grade corn in inventory at the
start of the year, and the amount of sample grade corn in inventory at the end of the
year.
Due to large variation across the province, CAIS-AgriStability will not be providing a
discount for Grade 5 and sample grade corn or soybeans from the Grade 2-4 price.
Rather, by submitting invoices with your application, CAIS-AgriStability will use the
discount that you actually received or paid for Grade 5 or sample grade corn or
soybeans. This discount will then be applied to the Grade 2-4 corn or soybean price
corresponding to the last month of your year-end.
66
CAIS-AgriStability Program
TIC- 02.5
Technical Information Circular – 02
Schedule 1 & 2
Liquidation/purchase of breeding stock
If the participant has liquidated/purchased breeding stock, the actual price received/paid
per animal may be used to value either beginning or ending inventory quantities, which
is applicable. This price will be determined either by obtaining sales/purchase
documents from the participant or comparing the dollar sales/purchase amount to the
number of animals sold/purchased.
67
CAIS-AgriStability Program
TIC- 02.6
Technical Information Circular – 02
Schedule 1 & 2
Pre-paid expenses
Beginning and ending inventory quantities should ONLY include inventory (purchased
inputs, crops and livestock) that has been paid for and expensed. On Schedule 2
include prepaid expenses as inventory but note that it is prepaid.
68
CAIS-AgriStability Program
TIC- 02.7
Technical Information Circular – 02
Schedule 1 & 2
Ginseng
Schedule 1
Schedule 1 will consist of 3 ginseng acreage numbers for each year.
Total Ginseng Acres Growing
Record the total acres of ginseng in the ground at the beginning of each fiscal period.
For a calendar year fiscal period, this would include last fall's new planting plus all root
in the ground.
Total Ginseng Acres Planted
Record the total acres of ginseng planted in each fiscal period.
Total Ginseng Acres Harvested
Record the total acres of ginseng harvested in each fiscal period.
Schedule 2
Ginseng producers can complete a Schedule 2 - Purchase Input Record for their
ginseng crop. The purpose of the Purchased Input Record (PIR) is to match production
expenses with income in the program year. For ginseng, the production expenses
would be carried forward to match the income at harvest. Completing the Purchased
Input Record will be of benefit to many ginseng producers, especially producers who
have varied their planting acres in previous or the program year.
When completing a Purchased Input Record, the dollar values must represent the
actual expenses incurred by the participant. These expenses must be allowable
expenses for the CAIS-AgriStability program and be part of the production margin for a
given reference or program year.
69
Purchase Input Record
Record each planting year on a separate line.
Opening Inventory: Total of CAIS-AgriStability allowable expense incurred to grow the
crop to the beginning of the program year.
Purchases: All allowable expenses incurred to grow the crop in the program year.
Resold and Used: Total of opening inventory plus purchases for harvested ginseng.
Will be zero for unharvested ginseng.
Ending Inventory: Total of opening inventory plus purchases for unharvested ginseng.
Will be zero for harvested ginseng.
70
CAIS-AgriStability Program
TIC- 02.8
Technical Information Circular – 02
Schedule 1 & 2
Bad debt
Amounts owing are included in accounts receivable if outstanding at fiscal year-end. If
a receivable is deemed uncollectible, it is removed from closing accounts receivable on
a cash basis in the year it was deemed uncollectible.
For the amounts owing to be deemed uncollectible under CAIS-Agristability, there must
be documented evidence of:
•
Receivership;
•
Bankruptcy; or
•
Court action.
In addition, the participant will be required to certify in writing that they will re-submit
their CAIS-AgriStability application for the year in question if a settlement is received
through the court proceedings.
71
CAIS-AgriStability Program
TIC- 02.9
Technical Information Circular – 02
Schedule 1 & 2
Basis contracts
An inventory adjustment for a basis contract is only required if the basis contract has not
been liquidated by the end of the farm’s tax year.
For example, a farmer enters into a basis contract in July of 2012 for delivery in
November of 2012. If the contract is liquidated in November of 2012, no inventory
adjustment is required. If the contract was rolled to March 2013, and the farm’s year
end is December 31st 2012, an inventory adjustment is required.
If an inventory adjustment is required use the following steps:
1. Record the initial payment made to the farmer when entering the basis contract as
income in the year received.
2. Include on Schedule 2 as an Accounts Receivable, an amount equal to the
difference between the CAIS-AgriStability fair market value for the crop in question
and the initial payment received, times the volume contracted.
 If the basis contract was not liquidated by the start of the Program year (e.g. was not
liquidated by the end of 2012), then the adjustment is an Opening 2013 Accounts
Receivable
 If the basis contract was not liquidated by the end of the Program year (e.g. was not
liquidated by the end of 2012), then the adjustment is an Ending 2012 Accounts
Receivable
72
CAIS-AgriStability Program
TIC - 02.10
Technical Information Circular – 02
Schedule 1 & 2
Commodity loans from the Agricultural Commodity Corporation (ACC)
ACC commodity loans provide operating funds for crop inputs and livestock. ACC
commodity loans are repaid through commodity sales.
In obtaining an ACC commodity loan, a producer has two options:
1. Expense the input cost and obtain ACC commodity loan later
 Producer will purchase inputs and expense these on financial statement
 The ACC commodity loan would then be obtained later to finance the input
purchase.
 Since the input cost has been expensed, for the purposes of preparing financial
statements and completing Schedule 2, the ACC commodity loan would not be
considered an accounts payable.
2. Purchase the Input on credit and instruct ACC to forward all or part of the commodity
loan to the input supplier
 When obtaining an ACC commodity loan, the producer can choose to have all or
part of the commodity loan forwarded to an input supplier, who the farmer owes the
cost of purchased inputs.
 If the farmer owes the supplier for purchased inputs, then the inputs will not have
been expensed on a financial statement. In this case, the amount forwarded by the
ACC to the input supplier, that has not been repaid to the ACC by the end of the
farm’s tax year, would be considered an accounts payable when completing
Schedule 2.
73
CAIS-AgriStability Program
TIC- 02.11
Technical Information Circular – 02
Schedule 1 & 2
Seed Corn Contracts
All seed contracts in Ontario operate under the premise that the seed corn company
owns the parent seed used to produce the crop as well as all parts of those plants
produced from the parent seed supplied by the company. At no time does the grower
have right or title to the crop. The contract is designed as a service contract and a
grower is paid for his services in relationship to his productivity.
Since a seed corn grower does not own any part of the hybrid seed corn at anytime
during the production cycle, there is no opening or ending seed corn inventory to be
recorded on Schedule 2. The number of acres and yield of seed corn grown should be
recorded on Schedule 2. All production grown during the program year should be
recorded as sold.
Most seed corn producers will not have received payment for all of the seed corn grown
until after their tax year-end. This remaining amount must be recorded as an account
receivable. Use the actual dollar amount if the price is known. Use an estimated
amount if it not yet priced.
74
CAIS-AgriStability Program
TIC- 02.12
Technical Information Circular – 02
Schedule 1 & 2
Feeder Finance Co-op Cattle
Under the Ontario Feeder Cattle Co-op Program:
The producer/member must obtain a purchase order from the Co-op before they buy the
cattle in the name of the co-op
When obtaining a purchase order, the producer must deposit using their own funds, 5%
of the purchase amount into an assurance account
The producer must sign a feeder agreement and promissory note to cover the value of
the purchase cattle
The Co-op retains title to the cattle, makes payment for the producer’s cattle and the
cattle are sold and bought in the name of the Co-op
The cattle must be sold and the loan repaid within 365 days of the purchase
All proceeds of the sale of cattle first go towards repayment to the Co-op and the
remaining proceeds will be provided to the producer
If the proceeds from the sale of the producer’s cattle do not cover the purchase value,
the shortfall is first taken from the assurance account
Feeder finance cattle should be recorded on Schedule 2, because the cattle are
registered to the producer under the name of the Co-op. These cattle should be
recorded in a similar manner to other cattle, based on weight range at year end.
The purchase of the cattle should not be expensed on the cash basis until the cattle are
sold and the Co-op repaid. However, because the cattle are recorded as inventory on
Schedule 2, the purchase value of the cattle should be recorded on Schedule 2 as an
accounts payable if still outstanding to the Co-op at year end.
When the cattle are sold, the producer should report, the full allowable income and
purchase from these cattle, rather than the net amount received from the Co-op.
75
CAIS-AgriStability Program
TIC- 02.13
Technical Information Circular – 02
Schedule 1 & 2
Fair Market Values (FMVs)
The Administration uses fair market values (FMV) to value changes in inventory for crop
and livestock production. FMVs are established for each month and are used to value
inventory for any day within that month. For example, the ending inventory value for an
individual with a tax year end of March 31 will use the March FMV.
A set of industry-standard FMV’s are published for high volume, openly traded
commodities. When available, these values are used to process a file as long as the
values are reasonable for the specific farming operation.
A program participant producing commodities without a published FMV (or who wishes
to use an FMV with a different value than the published FMV) must provide a receipt for
sales or purchases that occurred within 30 days of their year-end. Purchased input
inventory (e.g. seed, purchased feed, fertilizer), will be valued using the actual purchase
cost of that inventory.
For commodities with a published FMV, the applicant must explain and substantiate
why the published FMV is not reasonable for their operation (e.g., the FMV category
does not reflect the nature of their inventory, marketing channel or production method),
and that they are operating in an open market. They must also provide arms-length
documentation.
The Administration will make best efforts to ensure that the FMVs used to value opening
and closing inventory within an operation are from the same data source (for example,
that a published FMV is not used for the opening while a personal FMV is used for the
closing.)
76
CAIS-AgriStability Program
TIC – 03
Technical Information Circular – 03
Schedule 3
77
CAIS-AgriStability Program
TIC - 03.1
Technical Information Circular – 03
Schedule 3
Completing Schedule 3/ Income & Expense Adjustment Form
Schedule 3/Income & Expense Adjustment Form is a reconciliation worksheet that can
be used when the participant requests changes to the source document information
available to the CAIS-AgriStability. The program will accept adjustments to historically
filed NISA and/or Income Tax information for benefit purposes. For benefit purposes,
changes to historically filed NISA and/or Income Tax information will be accepted as
long as there is no change in total farm income or expenses in any given year. This
means that changes will be accepted that move income or expense items from one
T1163 code to another. The total increase and decrease in income and expense items
must balance in any year to be accepted.
78
CAIS-AgriStability Program
TIC – 04
Technical Information Circular – 04
Schedule 4
79
CAIS-AgriStability Program
TIC - 04.1
Technical Information Circular - 04
Schedule 4
Reference Period Accrual Adjustments
This TIC is applicable to the 2003, 2004, 2005 and 2006 program years.
Participants that have filed tax on the cash basis will by default have their reference
margin based on the cash method. These participants can make a one time choice to
make an accrual adjustment to this historical cash information. Once a participant has
chosen to make an accrual adjustment to their reference margin, the reference margin
for all future CAIS-AgriStability program years will include an accrual adjustment.
Schedule 4 requires opening and ending; quantities of crop and livestock inventory,
dollar amounts of purchased input inventory, accounts receivable and accounts
payable. Schedule 4 adjusts each reference year for changes in inventory quantities,
purchased inputs, accounts receivable and accounts payable.
If a participant submits a Schedule 4 for; and has not had their program benefits in a
previous program year determined using Schedule 4, the program will not apply
Schedule 4 if its application reduces the benefits for that program year.
80
CAIS-AgriStability Program
TIC - 05
Technical Information Circular – 05
CAIS-AgriStability Application Form
81
CAIS-AgriStability Program
TIC - 05.1
Technical Information Circular – 05
CAIS-AgriStability Application Form
Farm Business Registration (FBR) number
A Farm Business Registration (FBR) number is not required to be an eligible CAISAgriStability participant.
82
CAIS-AgriStability Program
TIC - 05.2
Technical Information Circular – 05
CAIS-AgriStability Application Form
Partnership application
Farm partnerships cannot make a single joint CAIS-AgriStability application.
83
CAIS-AgriStability Program
TIC - 05.3
Technical Information Circular – 05
CAIS-AgriStability Application Form
Farm partnerships
If a participant’s partner decides not to apply, it will not affect their CAIS-AgriStability
eligibility. However, the CAIS-AgriStability reserves the right to combine the farm
statements of individuals and/or partners if there are concerns with the application such
as transactions between businesses at other than fair market value.
84
CAIS-AgriStability Program
TIC - 05.4
Technical Information Circular – 05
CAIS-AgriStability Application Form
Farming activities in a corporation
A participant’s program benefits can only be affected by activities within a farming
corporation(s) if the program considers the operations a “whole farm” as outlined in TIC
– 08.1.
85
CAIS-AgriStability Program
TIC - 05.5
Technical Information Circular – 05
CAIS-AgriStability Application Form
Share of ownership in a corporation
Share of ownership in a corporation is determined by the percent of common shares
held. In addition, the CAIS-AgriStability application requires the % of voting shares
associated with the common shares held by a shareholder. Where the % of voting
shares held by a shareholder is less than the common shares held, CAIS-AgriStability
may instead use voting shares to determine the participant’s share of ownership in the
corporation.
86
CAIS-AgriStability Program
TIC - 05.6
Technical Information Circular – 05
CAIS-AgriStability Application Form
Corporations farming as a partnership
If two or more corporations are involved in a partnership, they would apply to the CAISAgriStability in the same manner used to report farm income to the Canada Revenue
Agency (CRA)
A corporation that is involved in a partnership will typically report its share of the
partnership on a consolidated financial statement for the two businesses, which is
submitted to the CRA and CAIS-AgriStability. The information submitted to CRA and
CAIS-AgriStability will be used to determine eligibility for the CAIS-AgriStability.
In some cases, the year end for which the corporation is filing farm tax differs from the
year end of the partnership. For example, the corporation may file farm tax with an April
30, 2013 year end. Included in the corporation’s April 30, 2013 financial statements is
its share of the partnership for the year ending December 31st 2012. In such cases,
CAIS-AgriStability uses the financial statements submitted to CRA by the corporation.
No adjustments are made because the corporation’s year end differs from the
partnership’s year end.
87
CAIS-AgriStability Program
TIC - 05.7
Technical Information Circular – 05
CAIS-AgriStability Application Form
Deceased participants
CAIS-AgriStability eligibility may be met through a combination of activities performed
by the deceased participant and their estate. If coverage was selected by the deceased
participant prior to their death, this level will be assumed by the estate.
The executor/executrix must notify the program of the participant’s death and submit a
letter to the program outlining:
Application Details:
 who the executor/executrix is
 when the participant passed away
 number and type of tax filing for the program year (more details below)
 if the estate is still operating or has it has been closed/probated
 if the estate is closed/probated, who the beneficiaries are (who has taken over the
farming operation)
Banking Details:
 new name
 example - new name needed for the CAIS-AgriStability account (i.e. “John Smith” to
“estate of John Smith” or “John Smith” to “Mary Smith”)
 new SIN, BN, PIN, Address
88
If the program has questions or concerns with regards to the estate after receiving a
letter from the executor/executrix, we may request more information, including but not
limited to:
 a copy of the death certificate
 a copy of the will
 letter of probate
 if there was no will, a Letter of Program, naming the executor/executrix of the estate
In the case of deceased participants, the filing of more than one income tax return may
be involved. The program year margin for deceased participants will be based on their
final tax return (start of program year to the date of death), plus any return filed from the
date of death to the end of the Program Year. Any inventory, deferred income or
accounts receivable, and accounts payable existing at the date of death (or at the end
of the fiscal period if more than one return is filed) shall be accrued to the final return.
If, in addition to the final return, an optional return for the year of death for a deceased
participant is filed (such as a return of rights and things), this information must be
submitted to the program. Where the death of a participant results in less than 12
months of income and expenses being reported in the Program Year, the Program Year
will be treated as a stub period.
In the case of a beneficiary whose farming operation consists of all or most of the
deceased participant’s farming operation will be considered as continuing to operate the
same farming operation as the deceased. If there is more than one beneficiary, a
common business arrangement must be created to carry on the same farming operation
as the deceased participant in order to retain the reference history.
89
CAIS-AgriStability Program
TIC - 05.8
Technical Information Circular – 05
CAIS-AgriStability Application Form
Jointly held common shares
Where common shares are jointly held, such that each individual is named on the share
certificate, the joint shareholders are treated as a single shareholder when determining
CAIS-AgriStability eligibility.
90
CAIS-AgriStability Program
TIC - 05.9
Technical Information Circular – 05
CAIS-AgriStability Application Form
Province of Main Farmstead
Province where all or the majority of the gross farming income was earned over the
reference period subject to any adjustments. In the event of a structural change
adjustment, the province of main farmstead will be determined based on the program
year.
91
CAIS-AgriStability Program
TIC - 05.10
Technical Information Circular – 05
CAIS-AgriStability Application Form
Ownership for Program Purposes
The AgriStability guidelines define a production cycle to include one or more of the
following activities:
• the growing and harvesting of a crop;
• the process of rearing livestock;
• the purchase and/or sale of livestock within a Program Year in the case of
feeding or finishing enterprises.
AgriStability is designed to cover production risk and directly supports producers who
contribute to the growing/raising of, and incur the production and marketing risk for,
their commodities produced.
While the producer who bears the production risk will normally be the legal owner of
the commodity, this is not the case in all situations. When this occurs, the producer
who bears the production risk should receive the support as opposed to the legal
owner of the commodity.
Ownership for AgriStability Program purposes means the right of possession of a
commodity and their associated risks and must be demonstrated by Participants
upon request in order to be eligible for AgriStability coverage.
AgriStability considers legal ownership, price risk and production risk in determining
eligibility for program purposes.
92
CAIS-AgriStability Program
TIC – 06
Technical Information Circular – 06
Calculation of Program Benefits
93
CAIS-AgriStability Program
TIC - 06.1
Technical Information Circular – 06
Calculation of Program Benefits
Reference margin
Calculation of the reference margin is based on an olympic average. This method
calculates a production margin for each of the five years preceding the program year,
drops the highest and lowest valued production margins and averages the three
remaining production margins.
For participants without production margins for all of the five reference years preceding
the program year, the calculation of the reference margin is the average production
margin of the three years immediately preceding the program year.
For participants without their own production margin for any of the three years
immediately preceding the program year, the program creates margins for the missing
years based on the appropriate Benchmark-Per-Unit margin for the commodity
produced. The program does not create production margins for any reference year in
which the producer reported, or should have reported, farming income to CRA.
Negative production margins in the reference period will remain negative when
calculating the reference margin.
94
CAIS-AgriStability Program
TIC - 06.2
Technical Information Circular - 06
Calculation of Program Benefits
Negative Program year margin
If a participant has a negative program year margin, they will be eligible for government
program benefits for that negative margin providing that the participant has (in the
program year):
 Incurred a negative margin resulting from a peril beyond the participant’s control;
 Had a production margin that is greater than zero in at least two of the three years
used to calculate the reference margin; and
 Followed sound management practices.
* Up to and including the 2012 Program Year, participants who did not participate in a
Production Insurance program at the minimum level will have their negative margin
benefit reduced by sixty per cent of the Deemed Production Insurance Benefit (see TIC
6.10) as calculated by the program. Beginning with the 2013 Program Year participants
who did not participate in a Production Insurance program at the minimum level will
have their negative margin benefit reduced by seventy per cent of the Deemed
Production Insurance Benefit (see TIC 6.10) as calculated by the program.
Up to and including the 2012 Program Year, government benefits will be paid at 60% of
the negative margin, less 60% of any amounts resulting from deemed production
insurance benefits. Beginning with the 2013 Program Year, benefits will be paid at 70%
of the negative margin, less 70% of any amounts resulting from deemed production
insurance benefits.
95
CAIS-AgriStability Program
TIC - 06.3
Technical Information Circular – 06
Calculation of Program Benefits
Negative production margins in the reference period
If there is a negative production margin in one or more of the reference years, this
negative number is used in the calculation to determine the participant’s reference
margin.
96
CAIS-AgriStability Program
TIC - 06.4
Technical Information Circular – 06
Calculation of Program Benefits
Negative reference margin
For the 2003 and 2004 program years, participants with a negative reference margin
are not eligible for program benefits.
Starting with the 2005 program year, participant’s that have a production margin that is
greater than zero in at least two of the three years used to calculate the reference
margin are eligible for program benefits.
97
CAIS-AgriStability Program
TIC - 06.5
Technical Information Circular - 06
Calculation of Program Benefits
Maximum Government Program Benefits
The maximum total government program benefits that can be provided to a participant
is the lesser of $3 million or 70% of the program year margin decline compared to the
reference margin. For this purpose, any negative portion of the program year margin will
be included in the calculation of the difference between the reference margin and the
program year margin.
98
CAIS-AgriStability Program
TIC - 06.6
Technical Information Circular – 06
Calculation of Program Benefits
Related farming activities with different year ends
When determining the program benefits of related farming activities, CAIS-AgriStability
combines the respective tax years of the farms in question, regardless of year end.
For example, a participant runs two corporations, one with a December 31st year end
and the other with a March 31st year end. CAIS-AgriStability would calculate the
program year margin by combining the records for the year ending December 31st 2012
for the one corporation, with the records for the year ending March 31st 2012 for the
second corporation.
99
CAIS-AgriStability Program
TIC - 06.7
Technical Information Circular - 06
Calculation of Program Benefits
Assignment of Program Benefits
CAIS-AgriStability government program benefits cannot be assigned, deferred, or
otherwise encumbered.
 CAIS-AgriStability is joint cost shared between the federal and provincial
governments.
 The Federal Programs Act prohibits the federal 60% share of CAIS-AgriStability
program benefits from being assigned.
 The provincial 40% share of CAIS-AgriStability program benefits will not be assigned
because of the administrative complexity required to do so.
100
CAIS-AgriStability Program
TIC - 06.8
Technical Information Circular - 06
Calculation of Program Benefits
Assignment in bankruptcy
Where a CAIS-AgriStability participant that has yet to receive a program benefits for a
program year has entered bankruptcy proceedings, any benefits provided after the
assignment in bankruptcy will be made payable to the trustee in bankruptcy of the
farmer. To do so, the CAIS-AgriStability will require proof of the assignment in
bankruptcy and appointment of the trustee.
101
CAIS-AgriStability Program
TIC - 06.9
Technical Information Circular - 06
Calculation of Program Benefits
Administrative Cost Share (ACS)
The ACS is $55 per participant per year. If the participant has not already paid the ACS
for a program year, it will be deducted from any program benefits received by the
participant. If the participant does not trigger program benefits, the ACS will accumulate
and be deducted from future CAIS-AgriStability program benefits.
102
CAIS-AgriStability Program
TIC - 06.10
Technical Information Circular - 06
Calculation of Program Benefits
Deemed Production Insurance Benefit
Crop losses that could have been covered by production insurance will not be eligible
for benefits as part of the negative margin coverage under CAIS-AgriStability.
CAIS-AgriStability participants that have a negative program year margin and did not
participate in production insurance for some or all of their crop production will have be
reviewed to determine if an adjustment for a deemed production insurance benefit
(deemed benefit) is required.
The following crops will have a deemed benefit calculated: corn, soybeans, winter
wheat, white beans, coloured beans, spring grain, canola, peanuts, popping corn,
sunflowers, red spring wheat, green & wax beans, green peas, sweet corn, sugar beets,
tomatoes, hemp, lima beans, red beets, butternut squash, carrots, apples, grapes,
peaches, pears, sour cherries, flue-cured tobacco, burly tobacco, black tobacco.
It is not possible to deem benefits in every situation. As an example, some fresh market
horticulture crops require infield inspection to assess crop damage and due to the timing
of the CAIS-AgriStability application it is impossible to accurately assess infield losses.
Another example is pilot/new crop plans or existing plans that are under going design
changes. These plans are temporarily exempted from deeming with the expectation
that they will be included in future crop years.
The following are among those crops that will not have a deemed benefit calculated:
potatoes, seed onions, rutabagas, set onions, spanish onions, strawberries, sweet
cherries, peppers, asparagus, plums, fresh market carrots, honey, forage rainfall plan,
mustard, unseeded acreage, reseeding benefit, forage celery, fresh market tomatoes,
broccoli, lettuce, cabbage, parsnips, cauliflower and fresh market sweet corn.
Calculating the Deemed Benefit
For purposes of calculating the deemed benefit, a participant that has not purchased
any coverage from production insurance will have coverage, premium, loss and benefit
for each insurable commodity deemed at the minimum coverage level offered for each
plan. The program will calculate the deemed benefit based on information provided on
the CAIS-AgriStability inventory forms, following the standard rules used to set
coverage, premium and loss within production insurance programs as they existed at
the time that coverage would have been obtained. If a CAIS-AgriStability participant has
no production insurance history, their coverage, premium and losses (if any) will be
103
determined as for a new entry into the production insurance program. This may require
the use of regional or provincial average information rather than the usual individual
underwriting process. If a CAIS-AgriStability participant has a production insurance
history, then those records will be used to establish coverage, premium and loss based
on the standards used in the province. If the historical information does not reflect
current management practices and potential productive capacity, Agricorp may adjust
the coverage and premium.
Notes:
 If crop production can be insured under an “acreage value option”, and revenue for
this crop is reported to CAIS-AgriStability at less than the coverage provided under the
production insurance program, the “insured acreage value” will be used to calculate the
deemed benefit.
 The highest available price option under the production insurance program will be
used to calculate the deemed benefit. If a variable or floating price option is available
under a production insurance program, the most common price option that the farm
population elects for production insurance will be used to calculate the deemed benefit.
 For production insurance participants, any assessed uninsured causes of loss will be
counted in calculating the deemed benefit, in order to include indemnities refused to a
production insurance client because of poor management or ‘non-insured causes’ of
production loss.
 Deemed benefits will be calculated for participants who were excluded from
participating in Production Insurance for reasons of fraudulence, misrepresentation,
non-payment of premiums or failure to comply with other Production Insurance
participation requirements.
104
CAIS-AgriStability Program
TIC - 06.11
Technical Information Circular - 06
Calculation of Program Benefits
Supply Management Adjustment for Program Years 2003 to 2012
Under CAIS-AgriStability, if a producer’s program year margin decline is less than or
equal to 30 percent, the government benefits are adjusted to stabilize income only from
commodities that are not supply-managed.
If a producer’s program year margin decline exceeds 30 per cent, falling into Tier 3,
no adjustment is required and the full benefits are provided.
Supply Management Adjustment
In the case of a margin decline that does not fall into Tier 3, the government benefits are
adjusted by removing the portion related to supply-managed commodities. This is done
by:
 Calculating total allowable farm income for the years used in the reference margin,
using production information in the program year to make this determination.
 Calculating total allowable farm income from supply managed commodities for the
years used in the reference margin, using production information in the program
year to make this determination.
 Determining the percentage of allowable farm income from supply managed
 commodities for the years used in the reference margin
 Reducing the calculated government benefits by this percentage
Example 1:
In this example, the producer has a reference margin of $250,000 based on an Olympic
average of the 2004, 2005 and 2007 years. The producer‘s program year margin drops
by $50,000 or 20 per cent from the reference margin, so the margin decline remains in
Tier 2. This means the benefits are adjusted to remove supply-managed income. The
average of the producer’s total allowable income for 2004, 2005 and 2007 is $250,000,
while the average of the supply managed income in those years is $125,000.
Allowable Income from Supply Managed Commodities = 125,000 / 250,000 = 50%.
The government benefits will be reduced by this percentage.
Example 2:
In this example, the same producer experiences a more significant loss. The producer's
program year margin drops by $125,000 or 50 per cent from the reference margin, so
the margin decline falls into Tier 3. In this case, no adjustment is made for supply
managed income.
105
CAIS-AgriStability Program
TIC- 06.12
Technical Information Circular – 06
Calculation of Program Benefits
Growing Forward 2 AgriStability amendments
Starting with the 2013 program year, the AgriStability program has changes as agreed
to under the Growing Forward 2 Multilateral Framework. The changes include




Decrease of the payment trigger to 70%
Harmonization of the compensation rates to 70%, even in the negative tier
A limit to reference margins equal to eligible expenses. A Participant’s
Reference Margin with respect to a Program Year shall not exceed the average
allowable expenses of the three years used to calculate the Reference Margin for
the Program Year.
The AgriStability fee shall reflect the trigger decrease and the harmonization of
compensation rates but reference margin limit will not be applied when
calculating the Contribution Reference Margin. When calculating Interim
Payments or Targeted Advance Payments, the administrator may elect not to
apply the reference margin limit.
106
CAIS-AgriStability Program
TIC - 06.13
Technical Information Circular - 06
Calculation of Program Benefits
Reference Margin Limit
Starting with the 2013 program year, participant’s Reference Margins shall not exceed
the average allowable expenses of the three years used to calculate the Reference
Margin for the Program Year.
Where a Structural Change adjustment was applied for a reference year, the
Administrator will also apply a Structural Change adjustment to the allowable expenses
for that reference year. In cases where no Structural Change adjustment was applied
under clause 4.7 of the AgriStability Guidelines, the Administrator may apply a
Structural Change adjustment to the allowable expenses if, in the opinion of the
Administrator, there has been a Structural Change which can be expected to result in a
significant change in allowable expenses.
Where there has been a change in productive units, the Administrator shall structurally
adjust the allowable expenses using the same method that was applied under clause
4.7. However, in cases where, in the opinion of the Administrator, the method that was
applied under 4.7 is not appropriate for structurally adjusting the allowable expenses,
the Administrator may apply a different method.
The default method for structurally adjusting expenses shall be performed as follows for
each of the three reference years used to calculate the Reference Margin:
1. For each reference year, the number of productive units (for each commodity or for
commodity groups established by the Administrator) in that year will be multiplied by the
expense portion of the BPU in that reference year for that commodity or commodity
group. A benchmark level of expenses for each reference year will be established in this
manner.
2. For each reference year, the number of productive units (for each commodity or
commodity group) in the Current Program Year will be multiplied by the expense portion
of the BPU in that reference year for that commodity or commodity group. A benchmark
level of expenses for each reference year will be established in this manner.
3. The benchmark expense level calculated in (2) will be divided by the benchmark
expense level calculated in (1).
4. The ratio calculated in (3) will be multiplied by the actual level of expenses for that
reference year
107
CAIS-AgriStability Program
TIC – 07
Technical Information Circular – 07
Structural Change
108
CAIS-AgriStability Program
TIC - 07.1
Technical Information Circular – 07
Structural Change
Structural Change - Additive Method
The Additive Method for Structural Change was the only method used for structural
change calculations between 2003 and 2007. From 2008 onwards, the Ratio Method is
the default method used for calculating structural change, although the Additive Method
may be used where the administrator deems appropriate.
Structural change is a change in ownership, business structure, size of operation,
farming practices, type of farming activity, method of accounting, moving from one
province to another, or any other practice that a participant might undertake that may
alter production margins. If the program determines that there has been a significant
change in a farming operation’s productive capacity as a result of a structural change,
adjustments will be made to the reference year margins to reflect the change.
The structural change adjustment will be performed as follows:
 For each year in the reference period, the difference between the number of
productive units (for each commodity or commodity group) in the Program Year
and the number of units in the Reference Year will be calculated.
 The difference in productive units for each commodity will be converted to a dollar
amount by multiplying the difference in units by the benchmark per unit margin in
that reference year for that commodity or commodity group.
 This dollar amount will be added (subtracted) to the unadjusted production margin for
that reference year.
Structural Change adjustments will be applied where the average unadjusted reference
margin and the average adjusted reference margin differs by more than 10% and
$5,000.
Note: Where the standard structural change adjustment cannot be calculated, or if in the
opinion of the program, the standard structural change adjustment does not accurately
reflect the structural change of the farming operation, alternate methods of calculating
structural changes may be applied by the program.
The program will apply any structural change adjustments to the production margin of
each reference year prior to calculating the reference margin but after any whole farm
adjustments.
The following table illustrates an example of the structural change calculation for a
farrow to finish hog operation.
109
1998
Sow Numbers
1999
2000
2001
2002
100
100
100
100
100
Difference in Units compared
to Program Year
1)
100
100
100
100
100
Farrow-Finish per Sow BPU
2)
$61
$275
$992
$1,209
$502
3) = 1) *
2)
$6,100
$27,500
$99,200
$120,900
$50,200
4)
$80,000
$95,000
$120,000
$110,000
$80,000
= 3) +
4)
$86,100
$122,500
$219,200
$230,900
$130,200
%
Change
34%
Margin change (based on
BPU)
Actual Margin
Adjusted Margin
Actual Olympic Average
$95,000
Adjusted Olympic Average
$157,300
Average to be used
$157,300
110
$
Change
$62,300
Program
Year
200
$472
CAIS-AgriStability Program
TIC - 07.1.1
Technical Information Circular – 07
Structural Change
Structural Change – Ratio Method
The ratio method of structural change has been the default method since the 2008
AgriStability program year.
Where there has been a change in productive units, the Administration shall perform the
structural change adjustment using the ratio method unless, in the opinion of the
Administration, another method would more accurately reflect the structural change.
The ratio method assumes that the previous performance of the farming operation is an
accurate predictor of the performance of the farming operation with respect to the
change in productive units or commodities. There are cases in which the Administration
may consider that this assumption is not realistic, and another method is more
appropriate. The parties to the agreement established common procedures for the
Administration to identify these cases.
When using the ratio method, the structural change shall be performed as follows:
1. For each year in the reference period, the number of productive units (for each
commodity or for commodity groups established by the Administration) in that
year will be multiplied by the BPU in that reference year for that commodity or
commodity group. A benchmark production margin for each reference year will
be established in this manner.
2. For each year in the reference period, the number of productive units (for each
commodity or commodity group) in the current Program Year will be multiplied by
the BPU in that reference year for that commodity or commodity group. A
benchmark production margin for each reference year will be established in this
manner.
3. The benchmark production margin calculated in (2) will be divided by the
benchmark production margin calculated in (1).
4. The ratio calculated in (3) will be multiplied by the actual production margin for that
reference year.
111
CAIS-AgriStability Program
TIC - 07.2
Technical Information Circular – 07
Structural Change
Benchmark-Per-Unit (BPU) Margins
The benchmark per unit (BPU) margins used by CAIS-AgriStability for structural change
and beginning farmer calculations try to represent the production margin that a
participant could expect to generate from a single production unit of a given commodity.
For example the grain corn BPU provides an expected production margin that could be
generated from growing an acre of corn in Ontario.
The BPUs are calculated from commodity specific economic data for the province of
Ontario. BPUs are not calculated specific to a region or county. However, most of the
information used to calculate the BPUs is based on weighted average information for
the entire province. As such, the data takes into account the relative importance that a
major producing region may play in terms of affecting provincial prices, yields or costs.
The program has used two methods to calculate BPUs for the CAIS-AgriStability
program. First where available, the program has used the budget approach. In
developing budgets, the expertise of commodity specialists is utilized to establish a
“budget” of revenues and costs involved in producing a specific commodity based on
normal or typical farm practices. The budget is established for a specific year and then
adjusted over time for changes in market prices, yields, and specific CAIS-AgriStability
expenses to develop the BPU for that year.
In the case of commodities where sufficient budget information is not available such as
grapes, the program has used what has been termed the sample approach. Using the
NISA/CAIS-AgriStability database, the average production margin per dollar of
commodity sales is determined for a sample of farms that generate a large percent of
their total farm sales from the specific commodity being evaluated. This is then used to
determine a provincial average production margin per unit of production.
112
CAIS-AgriStability Program
TIC - 07.3
Technical Information Circular – 07
Structural Change
Production Capacity
While the definition of productive capacity is specific to each commodity, the following
provides a summary for major commodity types produced in Ontario.
Acreage
Productive acres include those already producing a crop, or intended for seeding a crop
which would be productive in its first year. A crop which cannot normally be harvested in
its first year, or in the program year, will not be deemed as contributing to the productive
capacity of the farm.
Breeding Stock
The productive capacity of a breeding operation will be determined by the number of
breeding females which have birthed. Breeding animals which have been purchased,
but have not birthed will not be deemed as contributing to the productive capacity of the
farm.
Feeder Operations
The productive capacity of purchased livestock operations (feeder operations) will be
determined by the number of sales in the fiscal year. Feeder animals which have not
been sold will not be deemed as contributing to the productive capacity of the farm.
The productive capacity of custom feedlot operations will be based on the number of
animal fed during the fiscal year.
113
CAIS-AgriStability Program
TIC - 07.4
Technical Information Circular – 07
Structural Change
Structural Change under Disaster Circumstances
The structural change adjustment may be waived if, in the opinion of the program, a
structural change was a result of disaster circumstances. These situations will be dealt
with on a case-by-case basis to ensure that all relevant factors affecting production in
the program year are considered.
Structural change may be waived if productive capacity cannot be restored, or until such
time that it is reasonable to restore productive capacity. When assessing structural
changes resulting from disaster circumstances, the following principles will be applied
by the CAIS-AgriStability Program;
 Disaster circumstances include only those occurring for reasons outside of a
producer’s control. Common examples are flooded land and depopulation of
livestock due to disease. Disaster circumstances do not include circumstances
arising from a participant’s health or business decisions.
 Where compensation is received by the producer for lost productive capacity, it will
be considered allowable income under the program to the extent it is received in
lieu of normal farm income or as an allowed program payment.
 Where the nature of the disaster is such that the producer’s productive capacity can
be restored, the structural change will be waived for such time as is reasonable for
restoration to take place.
 Where the nature of the disaster is such that the producer’s productive capacity
cannot be restored, or restoration would be economically unfeasible, the structural
change will be waived for such time as is reasonable for the producer to develop
alternative capacity. Generally speaking, a reasonable time period would not
exceed one year.
114
CAIS-AgriStability Program
TIC - 07.5
Technical Information Circular – 07
Structural Change
Mechanized Harvesting in Tobacco
Hired labour for harvesting, has traditionally been a major expense for tobacco growers
in Ontario. Hired labour is an allowable CAIS-AgriStability expense. Over the last
number of years, many tobacco growers have substituted manual harvesting for
mechanized harvesting. While some of the costs associated with mechanized
harvesting such as fuel are an allowable CAIS-AgriStability expense many such as
purchase cost, repairs and depreciation are non-allowable. As such, a tobacco grower
that switches to mechanized harvesting will experience reduced allowable expenses, as
their hired labour declines.
CAIS-AgriStability considers the switch to mechanized tobacco harvesting a structural
change. This structural change will be addressed by reducing the grower’s hired labour
expenses in the reference years to reflect the level of mechanized harvesting during the
program year.
To make this expense adjustment, the grower will be asked to provide CAISAgriStability with the following:
 Number of labourers utilized per kiln prior to mechanization
 Number of labourers utilized per kiln after mechanization
 Average rate of pay per labourer per kiln
 Number of kilns used per acre of tobacco grown
This information will be used to determine an estimate of the reduced labour costs per
acre of tobacco grown as a result of mechanized harvesting. This per acre savings will
be used to reduce the hired labour expenses of each reference year accordingly. For
example, if the per acre savings are $600, and in 1998 there were 40 acres of tobacco
grown, labour expenses in 1998 will be reduced by $24,000.
115
CAIS-AgriStability Program
TIC - 07.6
Technical Information Circular – 07
Structural Change
Double Cropping
To the extent that double cropping is not considered a normal production practice and
accounted for in the calculation of the respective commodity’s Benchmark-Per-Unit
(BPU) margin, double cropping will be considered a structural change.
An example of double cropping is a participant that grows and harvests winter wheat,
and then plants and harvests soybeans on the same acreage. Unless this is an annual
practice for the participant, this is considered a structural change. If the participant grew
100 acres of winter wheat and then 100 acres of soybeans, their production summary
would include both crops at 100 acres.
116
CAIS-AgriStability Program
TIC - 07.7
Technical Information Circular – 07
Structural Change
Tobacco Quota Allocation
Flue-cured tobacco growers must own tobacco quota to sell their tobacco. All fluecured tobacco produced in Ontario is sold through the marketing board auction barn.
When a grower buys quota they are purchasing the right to sell “X” number of pounds of
tobacco each year, for as long as they own the quota.
Most tobacco produced in Ontario is consumed in Canada. Tobacco consumption and
therefore the need to produce cigarette tobacco in Ontario has been declining for a
number of years. To account for this the decline, the marketing board sets the “percent
allocation” of quota a grower (quota owner) can market in a given year.
Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
% Quota Allocation
44.57
42.68
45.78
46.73
44.34
38.37
36.24
33.51
29.17
27.23
31.08
20.42
15.10
In 1998, a producer could market .4673 lbs of tobacco for every lb of tobacco quota they
owned. In 2003, a producer could market .2917 lbs of tobacco for every lb of tobacco
quota they owned.
From 1997 to 2002, quota allocation was reduced 26.8%
From 1998 to 2003, quota allocation was reduced 37.5%
117
CAIS-AgriStability program will not apply structural change (downsize) to tobacco
growers when the adjustment would strictly be due to the reduction in the percentage of
tobacco quota allocation. The participant must meet the following criteria:
 reduction in tobacco acres is similar to the reduction in tobacco quota allocation
Starting with the program year corresponding to the 2006 tobacco crop year, CAISAgriStability will not apply a downward structural change adjustment to growers that
cease tobacco production. A downward structural change adjustment will not be
applied for the first crop year or corresponding program year for which there is no
tobacco production, after which time CAIS-AgriStability will apply a downward structural
change adjustment if triggered
Structural change calculations are basis on tobacco acres, not quota holding. In
general, the program will not know the tobacco quota holding of the participant. The
decision to not apply structural change is based on other information provided in the
CAIS-AgriStability application.
118
CAIS-AgriStability Program
TIC - 07.8
Technical Information Circular – 07
Structural Change
Ruminant Livestock Producers
For the 2003, 2004 and 2005 program years, CAIS-AgriStability will not apply structural
change (downsizing) to ruminant livestock producers that have reduced the size/scale
of their farm as a result of the BSE border closures. For the 2006 program year, CAISAgriStability will not apply structural change to:
 Ruminant livestock producers whose 2006 tax year includes July 2005
 Producers that market and/or export dairy cattle and were still affected by the BSE
border closures that year.
Since the border closures for dairy cattle was lifted in calendar 2006, structural change
will be applied as triggered to producers that market and/or export dairy cattle starting
with the 2007 program year.
119
CAIS-AgriStability Program
TIC - 07.9
Technical Information Circular – 07
Structural Change
Lost Production Contracts
Participants that for reasons beyond their control lose a production contract with a
processor or other operation may not have structural change (downsizing) applied for
one program year.
For example, in February 2008 a tomato grower loses his/her contract with the local
processor. Due to timing that grower cannot grow tomatoes that year, but instead is
forced to grow other crops such as soybeans. For that program year, the Administrator
will not apply structural change (downsizing); if triggered, to this participant.
For example, in June 2008, a tomato grower is told that his/her contract with a local
processor will not be honored. The grower cannot find a buyer for the tomatoes and
subsequently destroys the product. For that program year, the
Administrator will not apply structural change (downsizing); if triggered, to this
participant.
120
CAIS-AgriStability Program
TIC - 07.10
Technical Information Circular – 07
Structural Change
Potatoes
During 2003, the Ontario Potato Board developed a plan to help maintain Ontario potato
prices in the face of an excess supply of potatoes across North America and reduced
demand due to consumer concerns regarding the consumption of carbohydrates. The
Potato Board’s plan involved a recommendation to all Ontario potato growers to reduce
their 2004 potato acreage, in an attempt to reduce supply to meet current demand. As
a result, many Ontario potato growers significantly reduced their potato acreage. The
Ontario Potato Board intends to make similar recommendations to growers for the 2005
crop year.
Normally under CAIS-AgriStability, a reduction in potato acreage that was the result of a
producer’s individual marketing decisions would be considered a structural change.
Structural change includes a change in ownership, business structure, size of operation,
farming practices, type of farming activity, method of accounting, or any other practice
that may alter a participant's production margin in the reference years and/or program
year.
CAIS-AgriStability is not intended to provide assistance to producers who have had a
margin decline because of a structural change. However, a structural change
adjustment may be waived if, in the opinion of the program, the structural change was
the result of an event beyond a participant's control.
For the 2004 and 2005 program year, Ontario will not consider a reduction in potato
acreage due to the recommendation of the Ontario Potato Board as a structural change
under CAIS-AgriStability. Ontario feels that individual producers that followed the
advice and direction of the Ontario Potato Board, and reduced potato acreage should
not experience reduced coverage under CAIS-AgriStability because of this
management decision.
Structural change may be applied if it is determined the producer reduced potato
acreage as part of a plan to retire or switch permanently to a less profitable commodity.
121
CAIS-AgriStability Program
TIC - 07.11
Technical Information Circular – 07
Structural Change
Beginning Farmers and Structural Change
A beginning farmer is a participant without their own production margin for any of the
three years immediately preceding the program year. In this case, the program creates
margins for the missing years based on the appropriate Benchmark-Per-Unit margin for
the commodity produced and the production units for the program year.
In same cases, the beginning farmer has production in one or two of the reference
years. If the production units for these reference years differ from the program year, a
structural change may be applied as per TIC – 07.1.
122
CAIS-AgriStability Program
TIC - 07.12
Technical Information Circular – 07
Structural Change
Plum Pox Virus
Structural change will not be applied to participants who have reduced production
(bearing acres) because of the Plum Pox Virus.
123
CAIS-AgriStability Program
TIC - 07.13
Technical Information Circular – 07
Structural Change
Unique Farming Activities
Where a participant demonstrates unique farming activities such as unique production
or marketing practices he/she may use their own Benchmark-Per-Unit (BPU) margin
rather than the BPUs referred to in TIC-07.2. Examples of unique farming activity would
include product differentiation, and value added. Unique farm activity would not include
a participant that simply has a higher production margin than other similar operations.
124
CAIS-AgriStability Program
TIC - 07.14
Technical Information Circular – 07
Structural Change
Tobacco Transition Program
The Tobacco Transition Program is non-allowable income in the program and reference
years.
Participants that participate in the Tobacco Transition Program will have structural
change applied.
125
CAIS-AgriStability Program
TIC - 07.15
Technical Information Circular – 07
Structural Change
Orchards and Vineyards Transition Program
The Orchards and Vineyards Transition Program is allowable income in the program
and non-allowable income in the reference years.
For example;
•
Participants that participate in the Orchards and Vineyards Transition Program
and were not affected by the Cangro and/or Schweppes plant closure will have
structural change applied.
•
Participants that participate in the Orchards and Vineyards Transition Program
and were affected by the Cangro and/or Schweppes plant closure will not have
structural change applied until such time as they can reasonably switch to a new
commodity.
126
CAIS-AgriStability Program
TIC - 07.16
Technical Information Circular – 07
Structural Change
Cull Breeding Swine Program and Hog Farm Transition Program
Participants that participate in the Cull Breeding Swine Program and /or the Hog Farm
Transition Program will have structural change applied.
127
CAIS-AgriStability Program
TIC – 08
Technical Information Circular – 08
Whole Farm Combining
128
CAIS-AgriStability Program
TIC - 08.1
Technical Information Circular – 08
Whole Farm Combining
Whole Farm Approach
CAIS-AgriStability is a “whole farm” program. This means that the program will consider
all relevant farming history and sources of farm income when calculating a participant’s
program margins. The whole farm approach ensures that CAIS-AgriStability benefits are
directed to producers who have experienced an actual income decline.
The CAIS-AgriStability whole farm approach can have an impact both on how a
participant’s reference margin and program year margin are calculated. With respect to
the reference margin, participants who have joined or left operations may have all or a
portion of that operation’s reference margin information used in calculating any CAISAgriStability benefits. With respect to the program year margin, operations may be
combined to reflect a participant’s whole farm.
The operations of producers that are related parties (see TIC – 08.2) may be
considered to be a single whole farm for the purposes of benefits under the CAISAgriStability program. Where applicable, the combining of such operations is necessary
under CAIS-AgriStability to ensure that only actual income declines, and not financial
accounting procedures or an operation’s taxable status, trigger a program payment.
Participants may be combined with producers who are not participating in the program.
129
CAIS-AgriStability Program
TIC - 08.2
Technical Information Circular – 08
Whole Farm Combining
Related Persons
Related Persons are individuals connected by blood relationship, marriage, commonlaw partnership, or adoption.
130
CAIS-AgriStability Program
TIC - 08.3
Technical Information Circular – 08
Whole Farm Combining
Related Parties
The following are considered related parties:
1. A corporation and
 An individual, group of related persons, or entity that controls the corporation;
 An individual, group of related persons, or entity of a related group that controls the
corporation;
 Any individual considered a related person to the individual, group of persons or
entity that controls the corporation.
2. Two or more corporations if:
 They are controlled by the same individual, group of persons, or entity;
 An individual or any member of a group of persons or entity that controls one
corporation is a related person to the individual or any member of a group of
persons or entity that controls the other corporation.
131
CAIS-AgriStability Program
TIC - 08.4
Technical Information Circular – 08
Whole Farm Combining
Operational Independence
In determining when operations of related parties are part of the same whole farm, the
program may evaluate each operation's respective degree of legal, financial and
operational independence. The evaluation includes but is not limited to the following
criteria:
Financial independence:
 Separate bank accounts
 Separate bookkeeping and accounting
 Separate tax filings
 Separate accounts with vendors
 Separate accounts with customers
 Lack of indebtedness with a related person or party and its shareholders
 Absence of loans to a related person or party.
Operational independence:
 Different people providing daily management
 Separate decision makers
 No individuals in common as directors or shareholders
 All transactions with related persons or parties are at Fair Market Value.
The following are operations that will not be considered independent of one another:
 Operations whose transactions are not clearly assignable. This would include
operations that do not maintain separate books, have commonly held inventory or
inputs, or cannot show independent operational viability.
 Operations that are engaged in risk-splitting. This would include operations that
farmed as a single operation at any time in the program year or reference period
and subsequently split into two or more operations, except where it can be
demonstrated that a permanent division of controlling interest has also taken place.
132
CAIS-AgriStability Program
TIC - 08.5
Technical Information Circular – 08
Whole Farm Combining
Whole Farm Combining Examples
Example 1: Inventory not assignable
A husband and wife both have individual cash crop farming operations and report
separately to CRA. However, they share inventory storage facilities and do not
differentiate stored production. As a result, crop inventories and sales cannot be
properly assigned, and they would be combined for benefit purposes under CAISAgriStability.
Example 2: Dividing an operation
In order to better manage on-farm risk, a participant with an individual operation
producing hogs and wheat decided to split his proprietorship into an individual operation
and a corporation in the program year. The individual operation maintained the grain
business while the hog business was moved to the newly formed corporation. For
program purposes, these operations share a reference history and will be considered a
single whole farm. They would be combined for benefit purposes under CAISAgriStability.
Example 3: Transaction not at fair market value
A father and son are both involved in farming operations. The father owns a large herd
of feeder cattle and produces feed for these animals. The son also owns cattle but does
not produce any feed. The father provides feed for the son’s cattle at no cost and
maintains the animals on his land. Because the feed transactions between the father’s
and son’s operations are not at fair market value and cannot be quantified, the two
operations would be combined for CAIS-AgriStability benefit purposes.
133
CAIS-AgriStability Program
TIC - 08.6
Technical Information Circular – 08
Whole Farm Combining
Non-Fair Market Value Transactions
Transactions between all participants must be at fair market value to be considered
allowable for inclusion in the calculation of a production margin. Transactions above or
below fair market value may be excluded, in whole or in part, from the margin
calculations. Where these transactions cannot be clearly defined, the program may
combine the income and expenses of the operations involved in these transactions.
The administrator can exercise its discretion to apply adjustments necessary to more
accurately reflect the farming activity of the participant.
134
CAIS-AgriStability Program
TIC - 08.7
Technical Information Circular – 08
Whole Farm Combining
Margin Calculation for Whole Farm Combining
The margin and benefits calculation for combined participants are performed as follows:
1. For each reference year, the allowable income and expenses of all operations are
combined to arrive at a production margin for that year.
2. Based on the combined production margin for each reference year, a reference
margin for the combined operation is calculated.
3. For the program year, the allowable income and expenses (including all adjustments
for inventories, payables, and receivables) for all operations is combined to arrive at
a combined program year margin.
4. Each participant is allocated a percentage of the combined reference and program
year margin based on his or her share of the combined operation's benchmark
margin.
5. The benchmark margin for the combined operation is calculated by multiplying the
combined operation's production units in the program year by the BPU of each
production unit over the previous five reference years.
6. Each participant's program benefits are calculated based on his/her share of the
combined reference and program year margin.
135
CAIS-AgriStability Program
TIC – 09
Technical Information Circular – 09
Production Insurance Premium Adjustment
136
CAIS-AgriStability Program
TIC - 09.1
Technical Information Circular – 09
Production Insurance Premium Adjustment
Premium Adjustment
Production insurance payments and premiums are allowable income and expense, in
both the program and reference years, respectively for CAIS-AgriStability.
Participation in both CAIS-AgriStability and Production Insurance is not mandatory.
The premium adjustment provides an additional benefit when a participant’s CAISAgriStability program benefits (not including negative margin coverage) are reduced
because of production insurance benefits relating to the program year.
137
CAIS-AgriStability Program
TIC - 09.2
Technical Information Circular – 09
Production Insurance Premium Adjustment
Calculation of the Premium Adjustment for 2003 to 2006 Program Years
The premium adjustment is calculated as follows:
1. The participant must have received a production insurance (PI) claim relating to the
program year
2. The participant’s CAIS program benefits (not including negative margin coverage)
are calculated.
 The participant does not have to have received CAIS program benefits to be eligible
for the premium adjustment
3. CAIS program benefits (not including negative margin coverage) are then calculated
with PI claims and premiums in the program and reference years as non-allowable.
4. If the CAIS program benefits are lower in step 2 than in step 3, the difference in
program benefits is calculated.
5. The difference calculated in step 4 is compared to the participant’s PI premiums
relating to the program year.
6. If the difference exceeds the premium, the premium adjustment equals the PI
premium relating to the program year.
7. If the difference is less than the premium, the premium adjustment is the difference
calculated in Step 4.
The premium adjustment is non-allowable income in the program year and reference
years.
138
CAIS-AgriStability Program
TIC - 09.3
Technical Information Circular – 09
Production Insurance Premium Adjustment
Calculation of the Premium Adjustment for 2007 to 2012 Program Years
The premium adjustment for the 2007-2012 program years is calculated as follows:
1. The participant must have received a production insurance (PI) claim relating to the
program year
2. The participant’s AgriStability benefits are calculated. The participant does not have
to have received AgriStability benefits to be eligible for the premium adjustment
3. AgriStability benefits are then calculated with PI claims and premiums in the
program and reference years as non-allowable.
4. Calculate the net PI benefits relating to the program year (PI claim less PI premium
for that year)
5. If the result from step 3 exceeds the sum of step 2 and 4, the premium adjustment
equals the difference up to the about of the PI premium relating to the program year.
The premium adjustment is non-allowable income in the program year and allowable in
the reference years.
139