Alberta farmers now have another service provider when it comes to selecting a cash advance.
Producers in the province can now choose from 11 organizations — five offering cash advances for grains and oilseeds — when seeking a low- or no-interest loan pledged against their crops, livestock, or other agricultural products.
But the Alberta Wheat Commission’s entry into the business of administering cash advances is being questioned by its main competitor.
Alberta Wheat’s board first considered becoming an administrator of the Advance Payments Program nearly three years ago during a strategic planning meeting. It pursued the opportunity for two reasons, according to general manager Tom Steve.
“Partly because we wanted to satisfy our own curiosity and partly because the government was encouraging us to look at becoming an administrator,” he said. “They believe there was benefit in having more administrators that can communicate the benefits of the program and provide an alternative to producers as to how they access it.”
Alberta Wheat’s program is available to all producers in the province, not just those looking for a specific commodity — an issue that has crept up in the past with honey, potatoes, and greenhouse vegetables.
“The reality is that some of the other administrators have offered it mainly to their members,” said Steve.
But Alberta Wheat’s loan program is largely identical to that of the Canadian Canola Growers Association, a main loan provider in the province.
The CEO of the canola growers’ association characterized the news as “a bit of a surprise, a bit of a disappointment, that AAFC (Agriculture and Agri-Food Canada) decided to go the opposite direction by adding a new administrator for no apparent reason.”
Federal officials had told his organization last year that they were not looking for more administrators — in fact, they talked of downsizing, said Rick White.
“AAFC said its view of the future was there would be less administrators of the program, not more,” said White. “There’s already 45 to 50 across Canada. It was our understanding that they were hoping for consolidation in the future, not be adding administrators.”
The cash advance program offers loans of $400,000, with the first $100,000 interest free and the remaining amount at a competitive rate.
“It’s the same cash advance, it’s nothing new,” said White. “In our view, it’s the same program; we’ve been doing it for 35 years. CCGA has the experience, the business process in place, the efficiencies built in, and various ways to apply and repay their advances.
“I don’t think there’s anything new that someone could offer farmers. To us, it appears to be duplication more than anything, which is unfortunate, because farmers pay for the service.”
But Alberta Wheat chair Kevin Bender said his organization is aiming to be different. He characterized other advance programs as cumbersome, and running around to collect signatures was a deterrent for some farmers.
“We’re hoping to have everything be done online a lot simpler — I think that may attract more people to the program,” said Bender. “We’re just trying to provide another way to our growers.”
The Sylvan Lake producer hasn’t used the cash advance program, but is now considering it.
The wheat commission, which shares the same staff with Alberta Barley and also manages the finances of the Barley Council of Canada, will charge a $50 administrative fee — the same as the Canadian Canola Growers Association. Both groups offer the prime rate on the $300,000 portion of the loan.
Even though it’s early days, Steve said 25 to 30 farmers are in Alberta Wheat’s online application queue, which gives him optimism that this initiative has a chance in an already crowded marketplace.
“Considering we’re in the middle of harvest we think that’s encouraging,” he said. “We just started the weekend over Labour Day; we’re getting lots of phone calls and inquiries. We’re very pleased at this time.”
The spring advance always generates more interest, which will provide a truer picture of the overall uptake, he added.
It’s not known if offering cash advances will generate a surplus, said Steve, but if it does, his organization will consult with the ag sector to determine how it will be used. The goal will be to reinvest any surplus back into Alberta agriculture to benefit all producers, he said.
The federal government picks up the tab for the interest costs on the first $100,000 of advances issued, as well as any losses incurred from loan defaults. These costs average approximately $23 million per year, but fluctuate depending on interest rate changes and the economic environment for agriculture. The federal government does not provide financial support to administrators of the Advance Payments Program.