Delinquent cash advances valued at $160M

The Advance Payments Program, a federal loan guarantee that offers Canadian farmers cash advances on unsold agricultural commodities, has provided advances worth nearly $20 billion over the past decade, according to Agriculture Canada.

However, the value of delinquent accounts — accounts that are in arrears and have been turned over to Ottawa collection — are valued at nearly $160 million.

“There are currently 1,721 (outstanding) files that the federal government is managing for a value of $159 million,” Agriculture Canada said in a recent email to The Western Producer.

“When a repayment arrangement cannot be made with the producer, then (Agriculture Canada) undertakes collection activities that could include legal actions and working with Canada Revenue Agency to further reduce (unrecovered payments).”

The Advance Payments Program (APP) provides agricultural producers with low-interest cash advances.

Advances can be obtained through 35 program administrators across Canada. Most program administrators are producer organizations.

In a recent email, Agriculture Canada officials said more than 224,000 APP advances have been made over the last 10 years, resulting in total advances worth $19.9 billion.

Under current APP guidelines, producers are eligible to receive as much as $400,000 per year.

The federal government pays interest on the first $100,000 advanced.

Interest rates on any additional amounts advanced are determined by program administrators.

According to Agriculture Canada, producers who receive an APP advance agree to repay their loan as they sell their agricultural products during the year.

Producers are considered to be in default if they breach any of the obligations outlined in the repayment agreement that is negotiated with their program administrator.

Repayment agreements normally stipulate that the cash advance and any interest owing must be repaid within a specified time period.

In circumstances where producers have breached their APP repayment agreement, the APP program administrator will attempt to establish a new repayment schedule.

As of late August 2018, a total of 964 producers were in default and had negotiated new repayment schedules on total advances valued at $83.5 million.

Officials at Agriculture Canada said the number of producers going in default varies from year to year, based on the economic conditions and on the producer’s specific financial situation.

“From 2009 to 2016, the program has had on average over 1,220 yearly defaults for an average amount of $60,612,” Agriculture Canada officials said. “This amount of defaults represents five percent of the number of producers who received an advance.”

In cases where a program administrator is unable to successfully collect funds through a renegotiated repayment schedule, the federal government will use public funds to reimburse the financial institution on behalf of the producer.

Agriculture Canada will then try to come to an arrangement with the producer to collect the unpaid funds, through negotiation, court action or collection activities that involve the Canada Revenue Agency.

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