Demand for cash advances at an all-time high

Cash shortage | Lack of rail service sees more than $270 million advanced to Canadian farmers in April

There is no let-up in the demand for cash advances as farmers head into a new planting season.


“It’s certainly appreciated that the federal government has this program and farmers are using it like they’ve never used it before,” said Rick White, general manager of the Canadian Canola Growers Association, which administers the Advance Payments Program.


The 2013-14 program, which ended March 31, was used by 12,738 farmers, up from 10,178 the previous year. Growers were advanced $1.6 billion, up from $1.1 billion the previous year.


“It has never been higher,” said White. “That is driven largely by the lack of rail service that the West has experienced this year.”


The 2014-15 program is also starting off with a bang. Approximately 3,800 growers took $271 million in advances in April. 


Applications are up by 200 from April 2013, but the dollar value is down slightly from last year’s $295 million because of lower commodity prices.


White said April is always a busy month for the program because the association takes pre-applications in March for growers holding off until the new year begins. There is normally a lull in applications in February and March for that reason.


“Usually it tapers off that time of the year as farmers wait for the new spring program to kick in,” he said.


“This year they couldn’t wait. We saw heavy cash advance activity right up until the end of March.”


White said this winter’s railway backlog is costing farmers a fortune. 


The first $100,000 in cash advance money is interest-free, but there are a lot of advances exceeding $100,000 that are incurring interest.


He hasn’t seen any credible estimates about how much the rail backlog is costing farmers.


“Whatever it is, it’s a big number,” said White. “Short-term credit is fine, but you can only do that so long. The grain has got to move. Farmers need to get that grain sold and get that money in their pockets.”


Agriculture Canada is forecasting 22.5 million tonnes of total grains and oilseeds carryout for 2013-14, or 2.5 times the previous year’s ending stocks.


“That carryout is going to be frontloading the problem right onto the new crop that comes off in September,” said White. “Even a moderate crop next year is going to be a bumper just because of the carryout.”


Ottawa has turned down the association’s request to double the program’s individual limit to $800,000.


“The government has received the message and we respect their decision.”