An evaluation of the tripartite red meat stabilization program for Manitoba hog producers

Abstract

A number of provinces, including Manitoba, signed the National Tripartite Hog Stabilization Program (NTHSP) in 1986. However, the introduction of this program has raised several questions from both producers and governments. Producers are primarily concerned with impact of the program on their own operations while governments question the actuarial aspects of the NTHSP. The objectives of this study are twofold, 1. to examine the effects of the NTHSP on individuals producers. 2. to assess the financial characteristics of the stabilization fund using the current premium rate as well as under several alternative rates. In order to achieve the stated objectives a whole farm simulation model employing monte carlo techniques was utilized. The impact of the NTHSP on a case enterprise was evaluated with the aid of a series of probability distributions. The results show an improvement in the financial position of producers participating in the NTHSP. Specifically, the case farm experienced higher levels of cash flow and net worth under the program. Furthermore, the results indicate no obvious differences in either enterprise cash flow or level of stabilization payment due to the alteration of premium rates. However, with respect to the fund balance the current premium rate resulted in both higher probability and level of deficit than alternative higher premiums. Therefore, in conclusion, the findings of this study suggest that while producers benefit from participation in the NTHSP, there is a high probability that sufficient revenues will not be generated under the current premium rate to offset stabilization payments.