Amid rising input costs and other challenges, the federal government is offering interest rate relief for Canadian farmers.
In an announcement Thursday, Ottawa said the interest-free portion of the Advance Payments Program will increase to $250,000 from the current $100,000 for the 2022 and 2023 program years. The change means participating producers will save on average $5,500 in interest costs over the next two years, with a total collective savings of up to $61 million, according to a federal release.
The Advanced Payments Program – which provided $2.39 billion in advances to 17,430 producers across Canada in 2021 - is designed to help producers manage their working capital by providing cash advances of up to $1 million against the expected value of their commodities. With the increase in the interest-free portion announced today, eligible producers will have access to additional cash flow over the next two growing seasons.
The Advance Payments Program cash advances are calculated based on up to 50% of the anticipated market value of the eligible agricultural products that will be produced or are in storage.
“The change to the program will make the purchase of important inputs such as fuel, fertilizer and seed more affordable for producers,” the release said. “This will ensure they can maintain production until they are able to sell their products in the fall or winter. The interest savings and access to cash flow are both critical in helping Canadian producers continue to contribute to global food security.”
The new limit is not retroactive, so will only be applied to existing advances under the 2022 Advance Payments Program as of June 20, 2022, when the regulatory amendments came into force.
Earlier this year, the federal government also announced producers would be able to receive 100% of their 2022 pre-production advances immediately when they apply, rather than receiving them in pre-seeding and post-seeding installments.
Additionally, Farm Credit Canada back in December proactively offered credit limit increases of 30% for crop input financing to customers that met specific pre-approval criteria.
Source: DePutter Publishing Ltd.
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