Ritz says no to higher loan limit

Program use rises | Minister advises farmers close to $400,000 limit to use AgriInvest

Gerry Ritz isn’t interested in raising cash advance limits.

The Canadian Canola Growers Association recently approached the federal agriculture minister about doubling the $400,000 limit because farmers are unable to market their grain due to plugged elevators and slow rail service.

“There is a big run on (advance) money right now. It’s looking like we need to increase those limits and we’ve asked minister Ritz to do that,” said Rick White, general manager of the association, which administers the cash advance program for about 25 commodities.

He said demand for the Advance Payments Program is overwhelming this year.

“No question about it. It is our biggest year ever with the program. It’s abnormally busy,” said White.

More than 12,000 farmers have received advances this year, up from 10,000 last year.

However, it is the amount being advanced that really tells the tale. The money doled out is up almost 40 percent year-on-year.

As well, the program has been active in February, which is typically a slow month because farmers usually wait for the new program to begin April 1.

“It tells me that farmers are not able to deliver the grain, that they need to pay the bills,” said White.

“The squeeze is coming from lack of delivery opportunities, lack of marketing availability. It’s catching farmers in a bad spot right now.”

Most farm input loans come due Feb. 15. Some banks have given farmers a one-month extension, but the prospects of being able to move grain to pay the loans is grim.

White said many larger operations are running out of room on their cash advance limits.

“We’ve got many more farmers at the $400,000 maximum than we’ve had in the past, that’s for sure. At least double,” he said.

However, Ritz has no appetite for raising the $400,000 limit.

“The short answer is no,” he said.

For one thing, he thinks the program is underused. Cash advance numbers are up, but only 27 percent of farmers are taking advantage of a program that advances them up to $100,000 interest-free.

He said some big farmers have bumped up against the cap, but they represent a small portion of total applicants.

“I’m not going to give you the number, but I can tell you it’s almost single digits. It’s less than 10 percent of farmers that ever hit that cap,” said Ritz.

He said raising the limit may help big operations, but he’s more concerned about small and mid-sized farms.

“Certainly it would be appreciated by the five percent of farmers that are of that scale, but that to me just makes the big guys bigger and that’s not what government programs are or should be for,” he said.

Ritz said farmers who are concerned about being able to service their input loans should take out a cash advance if they haven’t already and then access some of the $2 billion sitting in AgriInvest accounts.

He also had advice for farmers with input loans due from grain companies that also haven’t honoured their grain contracts.

“I think I’d go in and do a little arm wrestling with them,” said Ritz.

White said doubling the limit to $800,000 would require legislative change, which would be time-consuming.

He thinks an interim solution would be an order in council allowing growers to receive an extra $400,000 when the new program year begins April 1, which would essentially give them $800,000 until the 2013-14 advances come due Sept. 30.

Ritz said that solution would still require the same political process.

“Whether you do it in two shots of $400,000 or one shot of $800,000, it’s still going to take legislation to do it.”