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.