A further temporary increase to the interest-free chunk of cash advances available to Canadian farmers, as telegraphed in March’s federal budget, has now gone live.
Agriculture Minister Marie-Claude Bibeau confirmed Wednesday that the interest-free limit under the Advance Payments Program (APP) for the 2023 program year is now $350,000, effective Monday (May 8).
The regulatory amendments allowing this increase are not retroactive, the government noted. The new limit will be applied to existing APP advances as of Monday, when the amendments came into force, and producers still must pay any interest that accrued on an existing advance before that date.
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Bibeau said Wednesday the decision comes as farmers “continue to face significant financial challenges including high input costs and rising interest rates.”
The APP gives eligible farmers access to up to $1 million, calculated based on up to 50 per cent of the “anticipated market value” of production, whether it’s in storage or still to be produced — with “preferential” interest rates on the portion above the interest-free limit.
The operating credit from a cash advance thus can help improve a farm’s cash flow or offer the flexibility to sell commodities into more favourable market conditions, the government said.
Following the budget announcement in March, at least one farm consultant suggested other farmers might consider investing interest-free APP cash to benefit from the current interest rate environment.
APP advances, on most eligible commodities, must be repaid in full over the following 18 months. On cattle and bison production, that repayment period is 24 months.
The single-year interest-free limit increase to $350,000 is on top of last June’s temporary increase to $250,000 for the 2022 and 2023 program years — up from the usual limit of $100,000.
That earlier increase is estimated to save farmers an average of $8,600 over the two years, the government said Wednesday. This week’s increase, meanwhile, is expected to translate to total savings of up to $12.4 million, or an additional $3,600 in interest costs per applicant on average.
The government estimated the total federal investment for these increases for 2022 and 2023 could run up to about $94.9 million.
APP cash advances are delivered in Canada through 30 industry-led associations. One such program administrator, the Canadian Canola Growers Association, said last month it was waiting for the updated interest-free limit to be made available and “will notify customers as soon as we are able to issue advances under these new parameters.”
The CCGA also noted last month that some of the APP advance rates for 2023 have risen or fallen while others remain flat. For example, it said, the 2023 advance rate per tonne for wheat is up 20 per cent, and for canola up nine per cent, over 2022.
The feds, in Wednesday’s release, said they also plan to consult further with the provinces and territories “to explore ways to extend help to smaller agricultural producers who demonstrate urgent financial need.” — Glacier FarmMedia Network
