Budget 2025: What It Means for Agriculture

Sector Impact Summary

Alberta's agriculture sector faces a difficult convergence of challenges in Budget 2025: U.S. tariffs threatening export markets, a depleted crop insurance fund after three severe droughts in four years, and a dramatic normalization of total spending following the extraordinary 2024-25 disaster year. Total Agriculture and Irrigation expense falls to $984 million in 2025-26, a decrease of $1,082 million from the 2024-25 forecast of $2,066 million. This drop is almost entirely due to the non-recurrence of $1,112 million in disaster assistance that funded crop insurance indemnity payments and other emergency support during the 2024 growing season.

Stripping away the disaster spending, the base operating budget shows a modest increase. Agriculture and Irrigation operating expense rises to $860 million, up $30 million (3.6%) from the prior year. Alberta Financial Services Corporation (AFSC) agriculture support and insurance programs are estimated at $626 million, up $25 million from the 2024-25 forecast. However, this masks a significant structural challenge: three severe droughts in four years (2021, 2023, and 2024) have depleted AFSC's crop insurance fund, requiring premium increases to restore the fund balance. The 2024 growing season alone triggered $968 million in crop insurance indemnity payments.

The budget's capital commitment to agriculture is anchored by irrigation investment. The capital plan allocates $250 million over three years, with $152 million directed to Agriculture Sector Strategy irrigation projects and $57 million for the Irrigation Rehabilitation Program. This investment in water security is critical given the recurrence of drought conditions and the sector's long-term productivity ambitions.

Key Budget Measures

Agriculture and Irrigation operating expense: $860 million. Up $30 million from the prior year, mainly from AFSC income support and insurance programs. Does not include the $1,112 million disaster assistance from 2024-25 that does not continue. (Source: Fiscal Plan 2025-28, Expense, p.87)

AFSC agriculture support and insurance programs: $626 million. Up $25 million from the 2024-25 forecast of $601 million. Higher premiums are needed to restore the crop insurance fund after unprecedented payouts. AgriStability payments increased $135 million in 2024-25 as commodity prices declined. (Source: Fiscal Plan 2025-28, Expense, p.87)

Agriculture Sector Strategy - Irrigation Projects: $152 million over three years ($55 million, $79 million, $18 million). Expands irrigated acreage in southern Alberta, supporting crop diversification and productivity. (Source: Capital Plan Details by Ministry 2025-28)

Irrigation Rehabilitation Program: $57 million over three years ($19 million annually). Maintains and upgrades existing irrigation infrastructure. (Source: Capital Plan Details by Ministry 2025-28)

Animal health programs: $9 million over three years for African Swine Fever mitigation and Foot and Mouth Disease Vaccine Bank initiative, cost-shared with the federal government. (Source: Fiscal Plan 2025-28, Expense, p.87)

Crop Diversification Centres: $3 million increase in 2025-26 (and $2 million in each of the following two years) for Western Crop Innovations and Crop Diversification Centres to address emerging plant health issues. (Source: Fiscal Plan 2025-28, Expense, p.87)

University of Calgary Veterinary Medicine: $9 million over three years to improve access to diagnostic services and lower costs for producers. (Source: Fiscal Plan 2025-28, Expense, p.87)

Funding Changes

Item	2024-25 Forecast	2025-26 Estimate	Change
Agriculture total expense	$2,066M	$984M	-$1,082M
Agriculture operating expense	$830M	$860M	+$30M
AFSC insurance and support	$601M	$626M	+$25M
Disaster assistance (non-recurring)	$1,112M	$0	-$1,112M
Crop Diversification Centres	N/A	+$3M	Increase

(Source: Fiscal Plan 2025-28, Expense, p.87)

Capital Investment

The Agriculture and Irrigation capital plan totals $250 million over three years ($99 million, $107 million, $44 million):

• Agriculture Sector Strategy - Irrigation Projects: $152 million ($55M, $79M, $18M) -- the centerpiece capital investment expanding irrigated farmland.
• Irrigation Rehabilitation Program: $57 million ($19M annually) -- maintaining existing irrigation infrastructure.
• Southern Alberta Irrigation Projects: $9 million (2025-26 only).
• Agricultural Societies Infrastructure Revitalization: $8 million ($3M annually).
• Crop Diversification Centre upgrades: $5 million (2025-26 only).
• Water Management Feasibility Study: $4 million ($2M, $2M).
• IT and general capital: $16 million ($7M, $5M, $4M).

(Source: Capital Plan Details by Ministry 2025-28)

Risks

U.S. tariffs disproportionately impacting agriculture. The sector is expected to bear disproportionate impacts from 15% U.S. tariffs. Export volumes for crops are expected to decline. Livestock exports, particularly cattle, may see sharper price declines due to limited alternative markets. Food products are among Alberta's top 10 manufacturing exports to the U.S.

Recurring drought and crop losses. Three severe droughts in four years have depleted AFSC's crop insurance fund and stressed producers financially. The 2024 growing season required $1.1 billion in disaster assistance, including $968 million in crop insurance indemnity payments. There is no guarantee against another drought year in 2025.

Higher insurance premiums. Significant withdrawals from AFSC's crop insurance fund require restoration through higher agriculture insurance premiums, increasing operating costs for producers already facing margin pressures from lower commodity prices and tariff uncertainty.

Declining commodity prices. Declining commodity prices put downward pressure on producer profit margins and reduce the value of crops being insured, creating a challenging revenue environment on top of tariff effects.

Opportunities

Major irrigation expansion. The $152 million for irrigation projects, plus $57 million for rehabilitation and $9 million for Southern Alberta projects, will expand irrigated acreage and improve water security. Irrigation is critical to crop diversification and yield stability in drought-prone southern Alberta.

Diversified export markets. Greater diversity of export markets could provide some cushion for major crop commodities like wheat. Strong cattle prices and robust U.S. demand may partially cushion livestock impacts despite tariffs.

Weaker Canadian dollar boosting competitiveness. The forecast weaker Canadian dollar (US69.6 cents) makes Alberta agricultural exports more competitive in non-U.S. markets and partially offsets the tariff impact on U.S.-bound shipments.

Agri-food value-added processing. The government continues to support value-added agriculture processors through grants, the Agri-Processing Investment Tax Credit, and export market cultivation, encouraging domestic processing that captures more value from raw agricultural commodities.

Animal health preparedness. The $9 million for African Swine Fever mitigation and Foot and Mouth Disease Vaccine Bank, plus $9 million for veterinary medicine, strengthen the sector's disease preparedness, protecting Alberta's export market access that depends on disease-free status.

What's Missing

The budget does not include a specific tariff mitigation program for agricultural producers facing the 15% U.S. tariff, despite acknowledging the sector will be disproportionately affected. There is no new drought resilience fund or emergency reserve beyond the existing insurance programs, which have been strained by three recent severe events. The budget lacks detail on how it will support export market diversification for agricultural products away from U.S. dependence. There is no specific mention of climate adaptation programs for agriculture despite the increasing frequency and severity of drought conditions.

Net Assessment

Agriculture faces one of the most challenging outlooks of any sector in Budget 2025, caught between U.S. tariff headwinds, a depleted crop insurance fund, and the absence of recurring disaster assistance. The $250 million capital plan focused on irrigation expansion is a genuine positive signal for long-term productivity, but the near-term outlook is dominated by trade uncertainty, rising insurance premiums, and the lingering financial effects of three droughts in four years.