Though risk has always been a part of farming, for Canadian dairy producers the nature of that risk is changing. Rising input costs, weather volatility, trade policy impacts and increasing capital requirements are putting pressure on margins, even with a supply-managed system designed to provide stability.
These challenges were at the centre of a recent webinar hosted by the Canadian Agri-Food Policy Institute (CAPI), featuring experts from across the agriculture sector, including MNP’s Stuart Person.
The discussion explored whether Canada’s existing business risk management (BRM) programs remain fit for its purpose – and what needs to change to ensure they support farm viability when producers need it most.
While the webinar took a broad look at agriculture, many of the themes resonate strongly in the dairy sector. The conversation is especially timely for dairy producers who may have historically viewed risk management as less relevant in a supply-managed environment.
Stable revenue, rising costs
Unlike many other agricultural commodities, dairy producers operate within a regulated system where pricing is largely determined by supply management and component-based formulas. This structure provides a degree of predictability on the revenue side, but it also limits marketing flexibility.
Volatility is increasingly showing up in operating costs as feed remains the largest expense for dairy farms and the risks of securing reliable, high-quality feed grows.
Weather events such as drought can drastically reduce local supply, forcing producers to source feed from farther away at higher costs. Inflation has further compounded pressure on purchased feed, supplements, fuel and other essential inputs.
When revenues remain relatively flat while costs escalate, margins narrow quickly. For highly capital-intensive dairy operations, many of which carry substantial debt, this margin compression can strain cash flow and slow recovery long after a disruption has passed.
Clarifying the purpose of BRM programs
A central theme of the CAPI webinar was the need to refocus BRM programs on their original intent: supporting farm viability during disruptions, not eliminating normal business risk or guaranteeing profit.
Confusion around this intent is widespread. Surveys referenced during the webinar show producers often have differing expectations of what BRM programs should accomplish – ranging from minimizing losses, to supporting break-even outcomes, to ensuring profitability. In reality, BRM programs were designed as a backstop when risk exceeds what a farm business can reasonably manage on its own.
In dairy, this distinction is particularly important. Historically, many dairy producers have chosen not to participate in programs such as AgriStability, often because supply management reduced perceived income volatility and payouts seemed unlikely. That calculation may be changing.
As input costs rise and margins tighten, margin-based programs may begin to trigger more often, even without a decline in milk revenue. Re-examining program participation is becoming an important part of broader risk management planning.
Timing matters as much as coverage
Another key message from the webinar was that program effectiveness depends not only on design but also on timing. Many BRM programs remain largely reactive, with payments tied to year-end financial results and extensive administrative processes.
In practice, this can mean support arrives months or even years after the event that caused the financial stress. From an operational perspective, delayed support limits the usefulness of these programs.
Feed shortages, cost spikes or market disruptions often require immediate cash-flow solutions. When assistance arrives too late, producers may already have taken on additional debt or made difficult operational decisions to stay afloat.
Improving responsiveness – without expanding program mandates – was a recurring theme throughout the webinar. Earlier assessments, interim payments or simplified triggers could significantly improve outcomes, particularly during widespread or clearly observable events such as drought.
Proactive risk management in a changing environment
While policy reform takes time, dairy producers can take steps now to strengthen their risk management position. A proactive approach begins with identifying the greatest vulnerabilities within the operation – often feed supply, cost inflation and cash flow – and ensuring appropriate tools are in place before disruption occurs.
Insurance programs, forage coverage and BRM enrollment all play a role in this broader strategy. Producers already participating in programs are generally better positioned when extraordinary events occur. Missed enrollment deadlines or last-minute decisions can eliminate access to support precisely when it is needed most.
Proactive planning doesn’t eliminate risk, but it can improve resilience. When tools are aligned with the operation’s risk profile, producers are better equipped to minimize losses, stabilize cash flow and recover more quickly from adverse events.
Coordination and complexity: A growing challenge
The webinar also highlighted growing complexity within the risk management system, particularly where BRM programs intersect with other policy measures. For dairy producers, this includes trade-related compensation such as Dairy Direct Program payments from international trade agreements.
While these payments are intended to offset lost market share, they can create unintended effects within margin-based programs by inflating income calculations and potentially reducing BRM support. Better coordination between programs is essential to ensure policy tools complement rather that counteract one another.
Looking ahead
The next agricultural policy framework presents an opportunity to modernize Canada’s approach to business risk management. For dairy producers, the priority isn’t removing risk from farming but ensuring support structures respond when risk becomes unmanageable.
In the meantime, reviewing existing risk management strategies, understanding program intent and reassessing participation decisions are practical steps producers can take today. As risks evolve, so too must the tools used to manage them – both at the policy level and on the farm.
