Farmer or banker: who profits?

News Release
FOR IMMEDIATE RELEASE
December 3, 2003

(OTTAWA) - Canadian farmers remain concerned about a key element of the federal government's proposed CAISP business risk management program: the deposit requirement. With one more provincial signature required before the Agriculture Policy Framework (APF) is implemented, the Canadian Federation of Agriculture (CFA) continues to call on the government to explore other alternatives.

The Canadian Agriculture Income Stabilization Program (CAISP) requires farmers to make an up-front deposit in order to participate. Under the proposed program the government will not flow money into accounts up front. Most producers will have to draw on their lines of credit to make even the minimum one-third down payment on their deposit. This reduces the funds available to their operations.

"Many farmers will have to take out loans to participate in a government income stabilization program, and the banks reap the profits from the interest on those loans. So who really profits from this program?" asked Bob Friesen, CFA President. "The program design has lost focus of who this program was meant to benefit: the producers, not the banks."

Just one-third of total producer deposits across Canada may add up to more that $1 billion. At an interest rate of six per cent, the cost of maintaining those deposits comes to $60 million in the first year - a figure that will rise as deposits, and interest rates, increase. "That is money going straight from farmers' pockets to banks," said Friesen.

Farmers question the fairness of the fact that, while they must make up-front payments, and pay the interest on loans to make those payments, government holds on to its money until the producer triggers a program payment. "The government says up-front payments are necessary to ensure producers are actively engaged in the program. We have to ask how engaged the government is, given it does not have to flow any money up front."

The complexity of a deposit-based program, for both producers and program administrators, is another ongoing concern. With several transactions required to trigger a payment, the transaction costs, time, accounting and interest costs incurred by the producer and the administrator seem to outweigh any benefits.

Ontario or Saskatchewan must sign the APF before CAISP can be implemented. CFA therefore believes there is still time to find workable alternatives to the deposit requirement. "We call on the federal government to work with industry and find a solution before we implement a program that costs those it was meant to benefit, and profits those it was not," said Friesen.

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Founded in 1935 to provide Canada's farmers with a single voice in Ottawa, the Canadian Federation of Agriculture is the country's largest farmers' organization. Its members include provincial general farm organizations as well as national and inter-provincial commodity organizations from every province. Through its members, CFA represents over 200,000 Canadian farmers and farm families.

Contact:

Bob Friesen, CFA President, (204) 724-0824 (cell)
Brigid Rivoire, Executive Director (613) 715-3113 (Cell)
Kieran Green, COmmunications Coordinator, (613) 236-3633