Farmers of North America has launched a program that ensures growers will be paid for the crops they sell.
Farmers who join the MarketPower Assurance program and deliver grain to an insured grain buyer will receive a credit note that can be taken to any financial institution and presented as collateral against new borrowings.
“By providing insurance on sales, Market Power Assurance ensures that growers will get paid and that (the) receivable is bankable,” said an FNA news release.
FNA vice-president Terry Drabiuk described the program as an insurance on income receivables.
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“Farmers can now go and sell anywhere and as long as the buyer is insurable, we will insure the farmer for (as much as) 90 percent of the sale,” Drabiuk said. “So whether it be a feedlot in Lethbridge or a flour mill in the United Sates some place or Ma and Pa Ramesh in India, farmers can now make that trade, get it backed up by … (an underwriter) and then be guaranteed payment.”
The cost to use the program will depend on the geographic location of the buyer and the terms and duration of protection being sought.
Protection for grain sales involving buyers in continental North America or Organization for Economic Co-operation and Developments countries is expected to be less expensive than protection on sales to buyers in Africa, Asia or the Middle East.
In all cases, insurance premiums are expected to amount to less than one percent of the sale’s total value, Drabiuk said. A $100,000 canola sale to a crusher in North Dakota would likely cost around half a percent, or $500, he added.
Protection will initially be offered for a 90-day term, although longer terms are likely in the future.
Other partners in the program include Atradius Credit Insurance, Export Development Canada and Panagea Global Risk Management.
Over time, the program will create a global pool of credit-worthy buyers and will enhance direct marketing opportunities for Canadian growers.
Primary producers who use the program will reduce their marketing risk and be able to sell products directly to foreign buyers and end users with a greater confidence.
“This is a program that will work well for small to mid-sized farmers as well as the really big guys,” said Drabiuk. “Using it, farmers will become their own global traders, keeping more of the margins (that are) currently taken by middlemen.”
The program will particularly benefit farmers who previously sold grain through the CWB but are now in a position to expand their own marketing programs.
The proceeds are not taxable because the insurance note is similar to a capital loan or a cash advance.
However, interest payments and insurance premiums associated with the program are tax deductible.
For more information, visit mpa.fna.ca or call 877-362-3276.
