Advance Payments interest-free limit raised to $350,000

Summary#

The Regulations Amending the Agricultural Marketing Programs Regulations (2023) raise the interest-free part of loans under the Advance Payments Program from $250,000 (for 2022) to $350,000 for the 2023 program year. The change was registered on May 4, 2023 and comes into force on the day it was registered.

What it does#

• Temporarily increases the interest-free loan limit under the Advance Payments Program to $350,000 for the 2023 program year (it remains $250,000 for 2022).
• Keeps the overall maximum advance per producer at $1 million.
• Means the federal government will pay the interest on the additional $100,000 (the amount above $250,000 and up to $350,000) once the regulation is in force.
• The change applies to outstanding and new advances after the regulation comes into force. It is not retroactive to the period between the start of the 2023 program year and the regulation’s registration; during that earlier period the government only covered interest up to $250,000.

Who's affected#

• Eligible agricultural producers across Canada, especially those who borrow more than $250,000 under the program. The department estimates about 3 450 producers will get additional interest-free benefit in 2023, totaling about $12.4 million in interest savings.
• APP administrators (about 30 industry associations that run the program) and the lenders they deal with (banks, credit unions). Administrators may lose an estimated $621,000 in interest revenue and could need to adjust fees.
• Agriculture and Agri-Food Canada is responsible for implementing and monitoring the change.
• Smaller farms and producers who do not qualify for advances over $250,000 are unlikely to see a direct benefit.

Why it matters#

• It gives farmers extra short-term, interest-free cash to buy seed, fertilizer, feed and other inputs during a year of high input costs and elevated interest rates. That helps with cash flow until they can sell their crops or livestock.
• The change reduces borrowing costs for affected producers. The government estimates it will cost about $11.8 million to cover the extra interest for 2023.
• Some smaller program administrators may need to raise fees to make up lost interest income, which could indirectly affect producers.
• Because the increase was applied only from the regulation’s registration date, producers who took advances earlier in the 2023 program year may not receive the extra interest support for that earlier period.