Cash advance proposal alarms critics

Not all farmers are on board with increasing the amount available under the Advance Payments Program to help farmers through the ongoing canola dispute with China.

Several speaking to the House of Commons agriculture committee said it’s a short-term solution that they might not be able to afford in the end.

The Canadian Canola Growers Association, the Saskatchewan government and others have asked for the advance to be increased from $400,000 to at least twice that or up to $1 million.

Federal Agriculture Minister Marie-Claude Bibeau has said she is considering the request.

But Stephen Vandervalk, who farms at Fort Macleod, Alta., said last week that helps with cash flow but could cause a bigger problem in the end.

“I’m not sure I want to dig a deeper hole, taking on more debt,” he told the committee. “If you don’t have enough money to put your crop in you just take on more debt and they allow you. Even if it’s interest free, hypothetically it’s not something that is a long-term solution at all. In fact, it may be making the problem worse.”

He said farmers must be able to sell their crop to pay the money back and if the markets aren’t there that won’t happen.

Mark Kaun, who farms near Red Deer, said a higher advance is just a Band-Aid solution.

“It’s nothing that I would do because I try to stay as far away from debt as I possibly can,” he said.

Manitoba farmer William Gerrard also said he wouldn’t take the advance this year.

“Down the road I guess if we were actually losing money, that’s a different story,” he said. “But I don’t think that’s a situation we want to get ourselves into.”

On the other hand, Megz Reynolds, who farms near Kyle, Sask., said some will need the help to get through this year.

“Many producers are sitting on canola, lentils and other crops from last year in the hopes that prices will go up and trade disputes will be resolved,” she said.

Tristan Skolrud, assistant professor in the University of Saskatchewan’s department of agriculture and resource economics, said he understands why some farmers wouldn’t want to accept government assistance.

“But from a financial perspective, nothing can compete with an interest-free loan, especially one that’s designed to be self-liquidating,” he said.

“If I were advising a farmer, I would insist that they budget for loan repayment based on $10 canola, with sensitivity checks ensuring a positive repayment capacity down to $9 or even $8.”

He said that even at no interest, farmers have to be able to cover the high input costs at the lowest expected prices or they will dig themselves into a larger hole.

CCGA president Bernie McClean said a central Saskatchewan farm would spend about $215 per acre on seed, fertilizer and chemical, or about $323,000 to plant 1,500 acres of canola.

“An increase to the maximum limit under the available federal advance payments program would provide farmers with more flexibility to manage their cash flow and prepare for the upcoming production season until a resolution can be found,” McClean said.

Other federal-provincial programs like AgriStability will have to cover margin declines.

Leroy Newman from Blackie, Alta., told a trade committee meeting that his margins have already dropped from $115 per acre to just $14.

He said farmers are going to take a “blood bath” and he was scared for the future.

“I’m saying, sitting in these meetings, that I’m looking at a year-and-a-half now before this is fixed, if it gets fixed,” he said.

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