Canadian farmers with cash advances will save $61 million in interest charges over the next two years after Ottawa boosted the interest-free portion of the Advance Payments Program.
Producers can borrow up to $1 million against the expected value of their commodities in a program year, with the first $100,000 interest-free and the rest at or below the prime rate, depending on the commodity and administrator.
But as of June 20, the interest-free portion is $250,000 for both this year and next.
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“As a result, participating producers will save on average $5,500 in interest costs over the next two years,” Agriculture and Agri-Food Canada said in a release. “This change will represent total savings of up to $61 million over two years for approximately 11,000 producers.”
The move was hailed by farm groups, including Alberta Wheat, which administers cash advances through its FarmCash division.
“Producers’ cash flow has been hit hard over the last year by the widespread drought conditions and now the rising costs of fuel, seed and in-crop management,” Alberta Wheat chair Greg Sears said in a release.
“Canadian producers are proud to step up and support the national and global food supply. But we need the business risk management tools in place to be able to do what we do best. The cost savings instilled by this change will ensure we are set up for success.”
Farmers with cash advances should expect to hear from their account managers “in the coming days,” the June 23 release said.
The program, which is delivered through 30 industry associations, distributed $2.4 billion in advances last year to 17,430 producers across the country.
Advances are repaid as farmers sell their production, with periods of up to 18 months to fully repay the advance for most commodities, and up to 24 months for cattle and bison. The cash advances are calculated based on up to 50 per cent of the anticipated market value of eligible agricultural products that will be produced or are in storage.
“Through the increase to the interest-free portion, eligible producers will have access to additional cash flow over the next two growing seasons,” the government said.
“With higher input costs, rising interest rates and continued pressure from weather impacts and supply chain challenges, many farmers will be keen to access the increased benefit soon,” said Dave Gallant, director of finance and operations for the Canadian Canola Growers Association, one of the larger administrators of the program.
A list of cash advance administrators, as well as their administration fees and rates on the interest-bearing portion of the loans, can be found at the Government of Canada website.
