Canadian farmers with cash advances will save $61 million in interest costs over the next two years after Ottawa increased the interest-free portion of the Advance Payments Program.
Producers can borrow up to $1 million based on the expected value of their produce in a program year, with the first $100,000 interest free and the rest at prime or below, depending on the produce. and the administrator.
But as of June 20, the interest-free portion is $250,000 for this year and next.
“As a result, participating producers will save an average of $5,500 in interest costs over the next two years,” Agriculture and Agri-Food Canada said in a statement. “This change will represent total savings of up to $61 million over two years for approximately 11,000 growers.”
The move was welcomed by farm groups, including Alberta Wheat, which administers cash advances through its FarmCash division.
“Producer cash flow has been hit hard over the past year by widespread drought and now by rising fuel, seed and crop management costs,” said Alberta Wheat President, Greg Sears, in a statement.
“Canadian producers are proud to step up and sustain the domestic and global food supply. But we need enterprise risk management tools to be able to do what we do best. The cost savings brought about by this change will ensure that we are set for success. »
Farmers with cash advances should expect to hear from their account managers “in the coming days,” the June 23 statement 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 produce, with periods of up to 18 months to fully repay the advance for most commodities, and up to 24 months for cattle and bison. Cash advances are calculated on the basis of a maximum of 50% of the expected market value of eligible agricultural products that will be produced or stored.
“With the increased interest-free portion, eligible growers 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 program’s key administrators.
A list of cash advance administrators, along with their administration fees and rates on the interest-bearing portion of loans, can be viewed at Government of Canada website.