Agriculture minister Gerry Ritz won praise from livestock industry leaders late last week when he agreed to extend to Sept. 30, 2010, the need for producer repayment of cash advances issued last year to help the industry through a cash flow crisis.
Ritz also said emergency cash advances will be available until March 31, with the first $100,000 interest free.
The original requirement that more than $450 million in advances taken in 2008 would have to be repaid this year had thrown beef and pork sectors into panic.
“We made strong representations that many of our producers do not now have the ability to repay,” Canadian Pork Council executive director Martin Rice said Jan. 23. “This extension is very important for us.”
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The U.S. national live price average for barrows and gilts was $81.21 Sept. 17. It was $78.37 Sept. 9. U.S. hogs averaged $106.71 on a carcass basis Sept. 17, up from $106.10 Sept. 9.
Canadian Cattlemen’s Association president Brad Wildeman said it was a critical decision for his sector.
“A lot of guys still face tough times and the credit crunch is really hurting,” he said. “Up to $400 million is out there in advance and emergency advance obligations, and meeting the repayment requirement would have been impossible for many.”
In his Jan. 23 announcement of the repayment extension, agriculture minister Ritz said it will keep many livestock producers in business “and provide relief during the current credit crunch.”
Just weeks before, as livestock producers raised the alarm about the impact of repaying hundreds of millions of dollars in advance loans while revenues and bottom lines still are soft, Ritz said in an interview he was “not inclined” to offer a repayment extension because of the possible trade implications of it appearing to be a subsidy.
Late last week, Rice from the pork council said the government decision was recognition that while the market has been improving, producers still are not making money and are in no position to repay hundreds of thousands of dollars in debt.
“The cash flow has improved but in terms of repayment, we’re not back in positive territory yet,” he said. “We’re getting close to break even and may reach it in the second quarter but that does not leave room for major repayment.”
During earlier lobbying efforts, the industry had been asking for more than a one-year repayment holiday.
Government officials say there were requests for some debt forgiveness as well as a second year of the emergency advances.
Ritz’s initial reluctance came from worries that a richer or longer program could be judged a production-distorting subsidy that might trigger trade challenges.
But in the end, he was convinced that a one-year repayment extension is not unlike credit arrangements being offered in the private sector.
CCA president Wildeman said the fact that the government is giving producers until the end of March to take advantage of the emergency advance program also is important.
“This is a critically important announcement,” he said.
“Along with announcements on trade deals, these are important developments for the livestock industry although we still hope to see changes in the (business risk management) programs that will make them work better for our industry.”
