What future for agricultural safety net programs?

The early 1990s held the promise of decoupled farm programs in Canada and the U.S.; however the potential benefits of decoupling have been eroded by ad hoc disaster programs. This paper assesses the benefits and difficulties of disaster programs relative to traditional farm programs, and proposes gross margin insurance as an approach to safety nets that captures the benefits of both. Gross margin insurance is applied to hogs in Ontario and Minnesota as case studies, with the cost and level of income protection compared. We show that based on simple estimates of actuarially fair premium costs, gross margin insurance compares favorably with programs that have been used to support hog farm incomes in both regions.