MAXIMIZING YOUR CAIS BENEFITS

Originally published on September 17, 2004

 

How lucky will you be when it comes to receiving a 2003 CAIS benefit? As Anne Tyler, the US novelist wrote ďPeople always call it luck when youíve acted more sensibly than they have.Ē Even if you have already mailed in your 2003 CAIS Supplementary form or have instructed your accountant to do it for you, it is not too late to use these tips for maximizing your CAIS benefits:

1. Be sure that you are crop specific

CAIS does not publish a price for every grade of commodity. If you have an increase in your inventory for CAIS purposes then you will want to ensure that this increase is not over-valued. For example, a farmer carrying sample grade canola will want to use a sample price rather than the published CAIS #2 canola price to maximize their CAIS benefit. Similarly, a farmer who puts up greenfeed oats would want to ensure that he provides a silage price for his ending inventory rather than using the CAIS price for seed oats.

2. Be sure that you are livestock specific

CAIS does not publish a cull animal price. For this reason any cull cows which are listed with breeding cows will be valued at the December 31, 2003 CAIS price of $700 per animal. Using CanFax prices for a D3 slaughter cow at the same date, a 1,200 pound cow is worth only $96. This difference of $604 per head would increase your CAIS benefit by reducing the value of your ending inventory. The same situation applies to cull bulls.

For this reason, all cow-calf producers should ensure that their cull animals are categorized correctly on their application.

3. Be sure that your 1998 salary expense is classified correctly on your 2003 CAIS Options Notice

Your 1998 production margin may have been reduced by a misclassified salary expense. If any amount of your 1998 salaries were paid to your spouse or children then they should be categorized as non-allowable expenses. By removing this expense your reference margin will increase, which may increase your CAIS benefit.

4. Be sure to consider MAAO

The Modified Accrual Accounting Option (MAAO) allows participants to adjust each year of their individual reference margin for net changes in inventories, deferred income, prepaids and accounts payable. Producers should not rule out MAAO based on their experience with CFIP: itís a case of same name but different results.

This option may considerably increase your reference margin resulting in a larger CAIS benefit, particularly for cow-calf producers with increasing herds. Since these forms were released late, producers have up to ninety (90) days after the date indicated on the CAIS Calculation of Program Benefits to submit a completed MAAO. You can expect to receive your calculation of benefits from CAIS once your application has been processed.

5. Consider applying for a 2004 CAIS interim withdrawal

In efforts to manage a restricted cash flow due to BSE and crop failures, producers and feedlot operators should be applying for a 2004 interim CAIS
 

 

withdrawal. CAIS has been very quick to process these applications and they are fairly simple to complete.

6. Consider the effects of a structure change on your unadjusted margin

Benchmark per unit (BPU) figures are used by CAIS for the purpose of calculating the adjustment to the applicantís actual reference margin when there has been an increase or decrease in the productive capacity of your farm or ranch. For this reason it is important for increases in productive capacity to be correctly reported on Part 5B of your application.

Cow-calf producers must report the number of cows birthed while feedlot operators must report the number of head sold. When you report an increase in your productive capacity, CAIS will increase your reference margin and, in the process, increase your CAIS benefit.

7. Clearly quantify and communicate any barter transactions among family operations

CAIS may combine the operations of related producers if they are not financially, legally and operationally independent. They will also combine operations into a single whole farm if they are engaged in significant transactions that are not at fair market value.

For the son, who has just starting farming, a whole-farm combination with his dad may wipe out his chance for a CAIS benefit. CAIS may make the whole farm combination on the basis that the son used his dadís equipment to seed his crop. In reality, the son paid for the use of his dadís equipment by bartering the unpaid machine rental against his own unpaid farm wages. By communicating this fact to CAIS, a combination of applications may be avoided.

Parents may sell calves in their childís name to finance their childrenís post-secondary education. These calves are simply a payment of farm wages that, depending on how they are reported to CAIS, would increase the parentís reference margin and their resulting CAIS benefit.

8. Follow-up and review your CAIS Calculation of Program Benefits

You have ninety days upon receipt of your CAIS Calculation of Program Benefits to request adjustments. Remember that CAIS is processing six years of financial data, they are categorizing allowable and non-allowable items, they are attaching price extensions to your reported inventories, they are making accrual adjustments, they are evaluating your productive capacity and, if there is a change, they are applying their structure change calculations. Ensure that you are receiving your full CAIS entitlement by closely reviewing the benefit calculations that are provided to you, and by filing any error adjustments within the ninety days.

The deadline for filing your CAIS Supplementary form is November 30, 2004. For those who have already filed their CAIS application, it may not be too late to make adjustments. You can call CAIS prior to November 30, 2004 to have any changes made. The agriculture industry is dependent upon many factors beyond the producerís control. Luck plays a big part in the success of a farmer. Winning isnít only about being dealt the right cards Ė you must know how to play them right.
 

Allyn Tastad, certified general accountant, is a partner in the accounting firm of Hounjet Tastad Harpham in Saskatoon at 306-653-5100, e-mail at allyn@hth-accountants.ca or website www.hth-accountants.ca. He is also involved in the family farm near Loreburn, Saskatchewan.