APP, SCAP, ESCAP: Confusion in the Countryside

If you are confused about the federal cash advance options that have been available for the 2006 crop, you are not alone.

From an historical perspective, commodity prices are generally lower at harvest and at a time when producers need cash-flow for paying the bills. The Advance Payment Program (APP) was originally introduced by the federal government to improve marketing opportunities for producers by improving cash-flow at harvest with loans based on crop in storage. It enables producers to spread the marketing of their crops throughout the year when marketing conditions are better and also to meet some of their short-term financial obligations. Producers are eligible for loans up to $250,000 with the first $50,000 being interest-free. Repayment of the loans occurs as the crop is sold.

Sometime in the early 1990’s, OCPA was successful in lobbying the federal government for expansion of the APP to include farmfed grains. Feeding has been recognized by Agriculture and Agri-Food Canada (AAFC) as representing one marketing option. Many livestock producers have made good use of the APP since the mid-1990’s.

In 2000, the Spring Credit Advance Program (SCAP) was implemented, initially for two years, to assist producers with cashflow for their spring planting. Based on their production insurance information, producers received up to 60% of the requested loan. The remainder of the loan would be issued when the Final Acreage Reports were submitted to the administrator. After harvest, producers could apply for the fall APP and use the funds to payout their SCAP loans.

As a result of a budget commitment made by the federal government in 2006, the Enhanced Spring Credit Advance Program (ESCAP) was launched as a means of ensuring that producers could get access to more money in the spring of 2006. With ESCAP, producers could apply for up to $100,000 in interest-free advances and the repayment deadline was extended to September 30, 2007.

OCPA, in partnership with the Ontario Soybean Growers (OSG), successfully applied to administer SCAP and ESCAP for corn and soybeans; one application, one administration fee for two crops. This initiative was well received by most of our members. On the basis that producers want choice (according to the 2004 consultations that AAFC conducted), multiple administrators were permitted.

If producer choice is important to AAFC, then we question why the farm-fed option has been eliminated from the grains programs commencing with the 2007 crop. AAFC is adamant that the grains program was designed to be a marketing program. Agreed. However, AAFC has recognized feeding as one marketing option. AAFC claims that they held consultations before eliminating the farm-fed option from the grains program. OCPA and our counterparts in Manitoba and Quebec were not consulted before the decisions were made by the government. The only option available to livestock producers who feed their grains will be the livestock programs.

OCPA has offered the federal APP as a value-added and costeffective business risk management tool to our members for over 20 years. In partnership with OSG, we were able to bring more value to our members with a joint application under the 2006 SCAP and ESCAP. We have seen the administration fees of other administrators in Ontario lowered as a result or our participation in ESCAP, thereby benefiting Ontario producers with more affordable programs.

The new federal APP program, which offers up to 18 months of financing, will be available this spring for the 2007 crop. The program will have a maximum level of $400,000 with the first $100,000 being interest-free. More crops and livestock have been added to the program.

With the changes being made by AAFC and a change in the policy direction of the OSG in regards to program administration, it has become more challenging for OCPA, as an individual comodity group, to continue with the administration of the federal programs. The Board of Directors of OCPA has decided that OCPA will not apply as an administrator of the federal cash advance programs at this time; a decision that wasn’t taken lightly. After all, it is a service we have offered our members for over two decades. Article III of OCPA’s Constitution and By-laws refers to OCPA administering financial programs that will bring greater financial stability and economic benefit to producers and participation in future federal advance payment programs. Administration of the federal cash advance programs is also one of OCPA’s short-term safety net goals.

The administration of the new federal APP for the 2007 crop in Ontario will most likely be done by a single administrator. OCPA sincerely hopes, in light of the fact that with recent by-law changes resulting in OCPA no longer having representation at ACC Farmers’ Financial’s board table, that the federal cash advance programs in Ontario will remain as affordable for Ontario producers as we have seen become possible over the past year.

OCPA appreciates the patience of producers and the trade with the confusion that has been experienced with the 2006 crop.