The federal Advance Payments Program for Canadian farmers has been well managed over the years. As a result, it has helped thousands of farmers through challenging financial times.
That said, an increase to eligibility amounts is well worth considering.
Farmers can now borrow up to 50 percent of the value of their harvested product in the harvest year with an 18-month repayment period and low interest rates, to a total of $400,000. There is no interest on the first $100,000, and the remaining advance is offered at commercial banking rates.
But that $400,000 number was established years ago, when farms were smaller and farm receipts were lower.
An appeal has been made to Ottawa to increase the amount eligible to as much as $800,000. That suggestion was rejected by former Conservative Agriculture Minister Gerry Ritz, but Liberal Agriculture Minister Lawrence MacAulay should take a second look.
The number of farmers using the program is testament to its popularity. In 2014-15, almost 21,000 farmers accessed about $1.9 billion in cash advances, up from $1.6 billion in 2013-14 and $1.1 billion the year before that.
By borrowing funds at low interest rates to help pay the bills while inventory is sold, farmers can withstand difficult harvests such as this one and have more opportunity to market commodities throughout the year as prices become more favourable.
The program is administered by more than 40 producer organizations, most notably the Canadian Canola Growers Association, which is the largest administrator. It oversees more than $1 billion a year. The canola growers have asked for an increase in available program funds.
The numbers show why. From 1981 to 2011, the number of farms with cash receipts of more than $500,000 grew from about 2,000 to more than 10,000. The number of farms with receipts of $1 million to $2 million grew from a handful in 1981 to more than 5,000 in 2011.
That trend has continued over the last five years. A greater number of larger farms naturally means larger cash outlays.
The $400,000 eligible under the cash advance program covered most farms back in the day, but now more of them would benefit from advance payments.
Earlier this year, administrative changes allowed classes of breeding cattle, hogs, sheep and goats to be eligible for advance payments, and permitted a wider choice of security.
In 2015, changes included stipulating that applicants no longer had to be principally occupied by farming, and a one-stop application process for up to 45 commodities was introduced. In 2014, the payment deadline was extended by six months to account for difficulties in marketing and transportation of a massive crop.
Ottawa has shown flexibility, seemingly understanding the utility of the Advance Payments Program to farmers. Increasing the limit on borrowing is another change that makes sense in today’s farming environment.