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Reduction of Advance Payment Program Interest-Free Portion raises concerns

The recent decision to reduce the interest-free portion of the Advance Payment Program (APP) from $350,000 to $100,000 has reverberated throughout the agricultural community, causing widespread apprehension among farmers and ranchers across Canada.

The Advance Payment Program, a federal loan guarantee initiative, has long been a crucial lifeline for agricultural producers, offering them reliable access to low-cost cash advances to manage cash flow and navigate the uncertainties inherent in agriculture. However, the drastic reduction in the interest-free portion has heightened the financial concerns and uncertainty among farmers.Ian Boxall, president of the Agricultural Producers Association of Saskatchewan (APAS), voiced concern over the decision. 

“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. 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,” he said.

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. The implications of this decision extend far beyond financial strain and will have wide-ranging impacts on farm financial management. With smaller interest-free portions, farmers may turn to high-interest loans and credit lines, exacerbating financial challenges already faced by many producers today.

"Farmers are already grappling with rapidly declining commodity prices, market volatility, and stubbornly high input costs," added Boxall. "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. Returning the interestfree limit to $100,000, is a short-sighted decision that fails to acknowledge the persisting challenges faced by farmers. This will be our message to the Minister of Agriculture when we meet with him next week."

In response to these concerns, APAS and the Saskatchewan Cattlemen’s Association have sent a joint letter to the federal Agriculture Minister urging the federal government to reconsider its decision and reinstate the $350,000 interest-free portion of the Advance Payment Program for 2024. They emphasize that adequate support for farmers is not only essential for the viability of agricultural businesses and the rural economy but also critical for ensuring a stable and secure food supply for all Canadians.


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