Take advantage of cash advances, says an expert

Farmers who are not getting cash advances to reduce their interest costs should reconsider the federal program, according to a provincial crop market analyst.

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The Advance Payment Programas it’s officially called, has expanded over the years and now covers a wider range of farms, but “many growers aren’t taking advantage of it,” said Neil Blue.

“Given rising interest rates, there are even more reasons to consider using the prepayment program,” he said.

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Producers can get a loan of up to $1 million covering half the market value of eligible “agricultural commodities” (including grain, livestock, produce and honey) pledged as collateral. The interest rate for most program administrators is generally below prime, and many offer prime minus 0.75%.

But a portion is also interest-free, and this summer the federal government increased that interest-free portion to $250,000 for program years 2022 and 2023 (up from $100,000 previously), Blue noted.

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“The program provides marketing flexibility, allowing producers to make marketing decisions based on market conditions rather than cash flow needs,” he said, adding that the decision was made to help farmers. cope with rising input costs.

Several organizations administer the program in Alberta. A list of cash advance administrators, along with their administrative fees and rates on the interest-bearing portion of loans, can be viewed at Government of Canada website.

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