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Agriculture groups concerned about reduction in interest-free portion of cash advance program

The recent decision to reduce the interest-free portion of the Advance Payment Program (APP) from $350,000 to $100,000 has caused concern among farmers and ranchers across Canada.

The Advance Payment Program, a federal loan guarantee initiative, has provided producers with access to low-cost cash advances to manage cash flow.

Saskatchewan Cattlemen’s Association (SCA) and the Agricultural Producers Association of Saskatchewan (APAS) said the drastic reduction in the interest-free portion has heightened the financial concerns and uncertainty among farmers.

APAS President Ian Boxall said the implications of this decision extend far beyond financial strain and will have wide-ranging impacts on farm financial management.

“It’s been three years since the APP interest-free portion was at $100,000, and interest rates have skyrocketed, grain prices have dramatically declined, and input prices have remained high,” Boxall said. “The program needs to reflect the current realities of farm and ranch operations. Our margins are tighter today than two years ago when the amount was increased due to rapidly increasing input costs.”

The $250,000 reduction in the interest-free portion could translate to an additional estimated $30,000 for farmers to cover interest costs, representing more than three times the burden compared to 2021.

Boxall said with smaller interest-free portions, farmers may turn to high-interest loans and credit lines which will increase the financial challenges already faced by many producers.

“Farmers are already grappling with rapidly declining commodity prices, market volatility, and stubbornly high input costs,” he said. “The reduction in the interest-free portion of the Advance Payment Program only adds to the uncertainty we’re facing ahead of a critical time in the production season.”

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