Rising interest rates mean the federal government’s move to expand the interest-free portion of its advance payment program will save farmers — and cost government — more than originally expected.
Last June, the government increased the interest-free amount that farmers can borrow through the cash advance program for 2022 and 2023 from $100 thousand to $250 thousand.
“By suspending interest on the first $250 thousand of their Advance Payments Program loans, we are providing relief to those women and men who work so hard to feed us and the world in these uncertain times,” said Agriculture Minister Marie-Claude Bibeau, at the time.
The government originally projected the change would save farmers — and cost government — $61 million in interest payments.
As of January 30, 2023, the two-year program is now expected to save producers $75.7 million — a nearly $15 million increase in borrowing costs for the government. That’s according to a response from Finance Canada to a written question about fertilizer tariff revenue from Conservative MP Richard Lehoux that was shared with the House of Commons on Monday (read more here, under Question No. 1098.)
The changes to the Advance Payments Program were originally described by Bibeau, in part, as relief to farmers in Eastern Canada who were forced to pay more for fertilizer in the spring of 2022 due to 35 per cent tariffs on fertilizer imports from Russia.
As for those tariffs, Finance Canada has also reduced the amount it says was collected.
In the Jan. 30 response to MP Lehoux’s question, the department says it collected $33.5 million in tariffs on $95.8 million in fertilizer imports from Russia in 2022. In an earlier response to questions from a different Conservative MP, the department said it had collected $34.1 million in tariffs on $97.5 million worth of fertilizer from Russia.
While Canada’s tariff proceeds have been committed to repairing Ukraine’s power grid, Finance Minister Chrystia Freeland and Agriculture Minister Marie-Claude Bibeau have said they’re looking at options to spend the equivalent amount collected on fertilizer to support farmers who paid the tariffs.
In late December, Bibeau told RealAgriculture the government had “been in discussions for a few weeks now with various associations in Eastern Canada to determine the best mechanisms to reinvest the equivalent of the $34.1 million collected from Canadian farmers on fertilizer imports into the sector.”
It’s not clear whether the amount Bibeau plans to announce will also be revised lower with the new number from Finance Canada.
An announcement regarding the fertilizer tariff compensation is expected in the coming weeks.
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