My name is Reg Schmidt. I do special projects for the Feeder Associations of Alberta. With me is the chairman, George L'Heureux, and our advance payments administrator, Joy Leonard.
Dear honourable members and guests, it's an honour and a privilege to provide you with a brief today and some background on Bill C-18, and mostly in regard to the advance payments program. If we look at the Agriculture Marketing Programs Act and, more pointedly, at the advance payments program, which received a major overhaul in 2007, those sweeping changes in 2007 completely updated the latter program, including adding new commodities and new processes.
When the Feeder Associations of Alberta was first notified last fall of the new set of amendments, we were not anticipating this exceptional amount of change that is being proposed. We were thinking more of a lipstick and makeup approach. Instead what we got are a very well thought out set of amendments that bring another round of comprehensive updates to an otherwise excellent program.
Firstly, we want to comment on the advance payments program and how it pertains to the cattle industry in Alberta. In Alberta, in the last number of years, the Feeder Associations of Alberta has provided approximately $25 million annually in advances to cattle producers. This has supported an industry that was beleaguered by the after-effects of BSE and a depressed marketplace. In the current situation with the record high cattle prices, the program continues to flourish and remains strong as producers depend on it to add value and market their cattle. The Feeder Associations of Alberta expects continued growth of the program and these amendments will support that growth.
Secondly, we have made notes of the amendment sections that pertain to the program here in Alberta and the advances, and we're going to make comments from that perspective.
Number one was easing the administrative burden. The changes to the holdback provisions and the five-year advance guarantee agreement will make a big difference and be a big help in reducing work for the administrators. This is going to lower costs and the workload for administration. In addition, reducing the annual application process for producers to a simple form will be beneficial again for both administrators and producers.
Second is methods of repayment. We have always believed that producers should be able to repay an advance from any eligible commodity, especially if the producer is in mixed grain and cattle. Market conditions may be strong for cattle, but poor for grain. A producer could use cattle sales to reduce his grain advance and/or vice versa. This is simply logical and good business when you look at it from a producer's point of view.
In these cases, we believe this provision should be allowed in situations where a commodity cannot be sold to prevent a default. We want to be able to allow a cash repayment as long as the producer still has the commodity. He will sell it eventually. We don't understand why you would charge him a penalty interest at that point.
Third is advances on breeding animals. Many producers raise stock for sale and wish to use the advance payment to allow for marketing time. This provision simply matches the reality of seed stock producers.
Fourth is attribution rules for multi-family farms and farming entities. These new provisions remain complex and cumbersome. The regulations of the advance payments program clearly indicate to support one farming entity and not multiple advances for any farming group. The fact remains that a farming business and structures thereof can be complex and attribution rules therefore are also complex. We continue to speculate on whether there is an easier way to manage the relatedness of producers.
Fifth is new eligible commodities. We fully support further expansion of advance payment into other commodities. Clearly, criteria regarding marketability of a commodity, that being a livestock or product, must be established before any new advance needs be considered.
Sixth is multi-commodity administrators. We have always supported the ability of an APP administrator to deliver an advance to producers they already serve. It would make sense for producers to apply for an advance for cattle and any other commodities from the same administrator, not to mention the efficiencies in administration and to allow for some competitiveness in service and fees. In any case, a producer should be able to choose.
As for securing an advance, the advance payments program requires security for an advance, usually on the commodity for which the advance is provided. Agriculture and Agri-Food Canada uses the term “business risk management” programs. In grains there is a choice between crop production insurance, being AgriInsurance, or AgriStability. In livestock the only allowable security is AgriStability at this time. This has directly limited the uptake of advances in Alberta because many beef producers have chosen not to participate in AgriStability. Cattle producers have seen the value of AgriStability diminish greatly as their margins have fallen from 2004 through 2010 and many have since opted out.
In the last three years the use of more modern bankable programs like livestock price insurance in the west has substantially increased as producers see value in that program. The draft amendments also discuss allowing taking security on cash deposits, GICs, or an irrevocable letter of credit from the producer’s financial institution as security. These options reflect the original intent of the amendments. If producers choose to use other business risk management tools that provide bankable risk management and can be assigned to an APP administrator, that should make them eligible for an advance. If the producer offers priority over any cash security, this should provide a reasonable degree of security and we should be able to provide the advance.
To summarize, the Feeder Associations of Alberta is an umbrella organization that supports our 50 feeder co-ops in Alberta. We provide more than $300 million in financing of feeder cattle to 2,500 producers annually. In addition, as mentioned earlier, we have been the administrator for advance payments since 2007. Our board of directors strive to provide a high level of service to our membership and APP producers alike. It is very important that the FAA see these amendments carried forward so that the advance payment can be provided to many more producers
Thank you for allowing us to provide this brief today.