When agriculture minister Andy Mitchell announced Sept. 10 a federal plan to help the Canadian packing industry expand, he predicted it will bear fruit within two years.
It is not aimed at helping the big players, he said. It is designed to assist “what would generally be smaller operations who are having some difficulties in securing the necessary financial support.”
Last week, officials at Agriculture Canada and the Canadian Food Inspection Agency began the complicated process of figuring out how to make the plan work.
It will not involve direct federal money to support packing plant construction. Instead, the $66.2 million will be used indirectly to make it easier for the private sector to do the building and expanding.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
Up to $38 million will be set aside as a loan loss reserve that will cover some of the losses incurred by a private lender if a plant it has financed goes under.
Gordon Andrusiak, chief of finance and taxation for Agriculture Canada, has started early discussions with lenders, including banks, Farm Credit Canada and the Business Development Bank, to work out the details.
“We want to get this done in a month if we can because money can’t flow until the rules are in place,” he said . “It is a tight and optimistic deadline, but that is what we’re shooting for.”
Andrusiak said private lenders will negotiate commercial loans with packing plant developers. Using a model developed by Western Economic Diversification, Ottawa will send a portion of the loan to the lender as a reserve to cover a portion of potential losses.
If there are no losses, the money will eventually be returned to Ottawa with interest.
After Mitchell’s announcement, there was some confusion and many in industry and the political opposition thought it was direct federal investment.
“Everyone agrees that slaughter capacity must be increased but $66 million for slaughter capacity is barely enough to get one plant up and running, let alone stimulate an entire industry as the Liberals have promised,” said Regina-Qu’Appelle Conservative MP Andrew Scheer.
The Agriculture Canada official said that is not how it will work.
“There will be no direct money and certainly no equity,” Andrusiak said. “This loan loss reserve is meant to take some of the risk out of it for the lender and to make it easier for those with a credible plan to get financing.”
The remaining $28 million will be spent on the CFIA, speeding up the approval process for proposed new federally inspected plants and eventually hiring more inspectors to handle the increased workload from new plants or more shifts in existing plants.
Bill Hewett, director of international affairs for CFIA and part of the BSE response team, said it is too early to say how many staff will be hired.
“We will be driven by industry demand,” he said. “We will keep in close contact with industry as their plans develop so we can have our staff hired and trained when they are needed.”
Hewett said CFIA also will try to revise the requirements for new federally inspected plants to improve and simplify them.
