‘Biggest year’ seen for cash advance applications

With rail congestion, jammed elevators and a record-large crop dragging on farmers’ ability to deliver grain, a federal program to help farmers with near-term cash flow is seeing a particularly busy year.

Federal ag lender Farm Credit Canada is already urging farmers who haven’t done so to consider applying to the federal Advance Payments Program (APP) for a short-term loan until grain can be delivered.

FCC on Thursday said it aims to contact more than 16,000 customers that may be impacted by delays in grain delivery and will “explore options to address their individual needs” including the APP.

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Many farmers have already received cash advances through this program.

“This is the biggest year we’ve ever had,” said Rick White, general manager of the Canadian Canola Growers Association, an APP administrator.

“This is exactly what this program is for,” he said, “to help farmers cash flow themselves, so they don’t have to market for cash flow.”

The APP advances cash based on farmers’ grain inventory. Farmers can borrow up to $400,000, $100,000 of which is interest-free. Loan rates vary by crop: $5.85 per bushel of canola; $3.54 per bushel of wheat; other rates for more than 20 other commodities. When farmers deliver grain, 50 per cent of sale proceeds are automatically applied to the loan.

Advances received now must be repaid by Sept. 30. “The big question now is, are they going to be able to get enough grain delivered into the system to pay off the advance prior to the deadline?” White said.

Farmers missing the Sept. 30 deadline lose the interest-free component of the program — interest will be applied from the date they first received the advance.

There are some options for cash-strapped farmers concerned about their ability to meet the Sept. 30 deadline, White said.

First, farmers who cannot deliver grain and repay loans with sales can make cash repayments. However, they would have to pay interest if they repay the loans with cash not associated with a grain sale.

Farmers who make grain deliveries can choose to repay their cash advances at higher-than-usual rates. Rather than using 50 per cent of the sale to repay loans, White said, “they have the ability to apply the proceeds of the entire sale.” This would enable farmers to repay loans with fewer grain deliveries.

Farmers who can wait until April 1 for a cash advance can apply for the 2014-15 program, taking a loan based on next year’s plans rather than this year’s inventory.

“This gives them a full 18-month cycle to have the money,” White said.

While APP administrators can’t make exceptions for individual farmers in need, White said, “The federal government always has the ability, as the program deadline nears, to offer farmers a stay of default.”

While that would be an unusual step, White said, “if there’s a widespread problem out there” the CCGA could ask the federal government to take action.

“We won’t be able to make that case until we get well into the summer,” he said. “It’s way too early to be talking about that as something that might happen.”

— Leeann Minogue is editor of Grainews at Griffin, Sask.

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