Question Period Note: ADVANCE PAYMENTS PROGRAM INCREASES TO INTEREST-FREE LIMITS TO SUPPORT PRODUCERS

Q1 – Will the increased interest-free limit be extended into 2024? Q2 – How many producers have benefited from the increased interest-free limit?

R.1 - On March 25, 2024, the interest-free limit was again temporarily increased to $250,000, as farm operating costs remain uncertain heading into this crop year. R.2 - For the 2023 program year, of the over 21,400 producers who received advances, more than 6,600 producers benefited from the increased interest-free limit above $250,000, and of these, over 4,900 producers were able to maximize the interest-free benefit of $350,000.

The Advance Payments Program (APP) is a federal loan guarantee program that provides Canadian farmers with low-interest cash advances to increase marketing flexibility. The objective of the APP is to provide farmers with temporary cash flow in the form of APP advances so that they can meet their immediate financial obligations until they are able to sell the products they grow. APP cash advances are calculated based on up to 50% of the anticipated market value of the eligible agricultural products that a producer will produce or has in storage, up to $1,000,000 in total. The Government of Canada pays the interest on a portion of each advance.

On June 23, 2022, the interest-free portion of APP advances was temporarily increased from $100,000 to $250,000 for the 2022 and 2023 program years. Budget 2023 proposed to further increase the interest-free limit from $250,000 to $350,000 for the 2023 program year. As a result, recent estimates, which take into consideration interest rate increases, suggest participating producers will save an average of $19,374 in total interest costs, including $9,670 related to the increased interest-free limits, over these two years. The change represents an additional estimated savings of up to $112.8 million over the two years for the approximately 12,800 producers who took advantage of advances above $100,000.

Additionally, on March 25, 2024, the interest-free limit was again temporarily increased to $250,000. Approximately 11,950 producers are expected to save an additional $4,916 in interest as a result of the change. This represents a total interest savings of up to $58.7 million for the program year 2024, and a total savings of $171.6 million for producers over the three year period.

In 2022, the Advance Payments Program provided $3.5 billion in total advances to 18,800 producers across Canada. A total of 9,543 producers were able to benefit from the increase, and of these, 5,078 were able to maximize the $250,000 interest-free benefit.

For the 2023 program year, a total of 21,420 producers (value of $4.6 billion) received advances. A total of 6,647 producers received interest-free advances above $250,000, and of these, 4,927 received the maximum interest-free benefit of $350,000.

The 2024 program year started on April 1, 2024 and 10,122 producers (value of $1.2 billion) have received advances to date. A total of 3,805 producers have received interest-free advances above $100,000, and of these, 1,327 have been able to maximize the $250,000 interest-free benefit.

• Producers have access to the Advance Payments Program, a federal loan guarantee program which provides easy access to low-interest cash advances, helping producers meet their financial needs.
• In light of high input costs and increased interest rates, AAFC increased the interest-free portion of APP advances from $100,000 to $250,000 for the 2022 program year and further increased the limit to $350,000 for the 2023 program year.
• As farm operating costs remain uncertain heading into this crop year, the interest-free limit was increased from $100,000 to $250,000 for the 2024 program year. This change is expected to provide a total interest savings of $171.6 million over three years to approximately 12,000 producers.