Highlights of the Advance Payments Program Cash Advance For Calves

APP Advances for Calves 2008-09
The cash advance program for calves was very successful for the part year it was operated in Alberta. In the period starting Oct 2007 ending March 30 2008 more than $10 million was advanced to approximately 250 producers. The Canadian Cattlemen’s Association requested several changes to the program, and was largely was successful in making the program more available to producers.

What’s New?

1. CAIS margins are no longer used to calculate advances. This had limited or disqualified producers in the past. A valid CAIS account number is still required.
2. Feeder Associations are now offering the maximum $400,000 advance as allowed under legislation. This the total from all commodities including grains. The first $100,000 is interest free. The balance is charged a competitive interest rate.
3. A new Emergency Advance has been made available to producers.
4. A new provision was made to allow “Continuous Flow” feeding operations to maximize their benefit of the APP.
5. The advance rates per head are lower due to market conditions.
6. A new application form is easier to read and fill out.
7. Changes to the priority agreement were approved by the Canadian Bankers Association should satisfy the financial institutions. This should make it easier to get lender acceptance.

Emergency Advance Provision
The emergency advance provision is made available by the Canadian Minister of Agriculture. The minister has declared the beef industry to be in severe economic hardship therefore has offered these temporary provisions.

1. The maximum emergency advance is $100,000 interest free as based on future production. (Before the cows are calved out)
2. The producer bases the advance on “future” inventory therefore does not require a priority agreement
3. The emergency advance is offered at the same rate per head as “standard” advances
4. The producer can apply for the advance anytime during the production period.
5. The producer must have a valid CAIS/AgriStability account
6. The administrator may require a credit inquiry and or PPR registration
7. Repayment terms are One Year from the issuance of the advance or the end of the current program period (Sept 30/2009) whichever comes first. The advance must be paid in full from the sale of eligible livestock as described on the emergency advance application document

Special Provision - Continuous Flow Operations

1. Livestock advances for continuous flow operations that maintain a constant inventory of animals throughout the production cycle (i.e. animals sold are replaced by new ones within days.) confirmed by CAIS numbers.
2. For advances on Continuous flow operations- a post-Production Report is required by October 1 2008.
3. Producers operating continuous flow operations are advanced at a rate for finished cattle as seen above (over 1250lbs) $550.00/head
4. Producer will be able to keep their advance for 12 months and repay 100% of the advance within 15 calendar days of the end of the 12 month period provided they can demonstrate that they have sufficient animals in inventory throughout the period to cover the advance. (Not exceeding the end of Sept 30 2009)

Cash Advance For Calves - 2008-09

The Advance Payments Program (APP) is an Agriculture and Agri-Food Canada program created to increase credit availability to producers for making production and/or marketing decisions. The Feeder Association’s of Alberta Ltd. administers the program to cow/calf producers in Alberta through the member Feeder Associations.

1. General Information

• The 2008 – 09 Advance Payments Program (APP) production period runs from April 1, 2008 to September 30, 2009.
• You can apply for a maximum of $100,000 interest free advance for all eligible agricultural products offered by all administrators under this program. In addition we can now offer interest bearing advances over the $100,000 to a maximum of $400,000 from all administrators. (Canola Growers, Cdn.Wheat Board, and Feeder Assoc.)
• Total eligible production units (calves) cannot exceed the average calf numbers listed in the previous two years of approved CAIS livestock inventory schedules. Amounts greater than the average must be substantiated with purchase documents.
• You must be currently enrolled in CAIS/AgriStability
• The production unit (calf) value is the amount equal to 50% of the average price that in the minister’s opinion will be payable to producers in the area for the agricultural product (calf) when sold. (Future sale value) The amounts are established by Agriculture and Agri-Food Canada for the current production period are:

  Agricultural Product	Description	Advance Rate per Unit
  Feeder calf (4-700 lbs)	Calf sold in fall	$250.00/Head
  Feeder cattle (7-900 lbs)	Calf fed past Jan 09	$385.00/Head
  Finished cattle (over 1250 lbs)	Fat Cattle	$550.00/head

• The eligible amount of the advance is calculated using the eligible production units
• Regardless of the advance amount, you are allowed to market the calves at your discretion without penalty.

• All applicants are required to repay the advance upon sale of their livestock.
• The repayment rate is the greater of:
  1. The rate at which the advance was issued,
  2. Any repayment rate above the original advance rate per head.
• A copy of the sales invoice for the livestock must accompany the repayment amount submitted. Any payments received without a sales invoice are considered cash payments
• Cash repayments of the greater of either $1,000 or 10% of the issued value of the advance are permitted. Cash repayments in excess of this limit will be assessed the relevant interest as per the APP agreements.
• REPAYMENT MUST BE ISSUED WITHIN 7 DAYS OF THE DATE ON WHICH THE PRODUCER RECEIVES PAYMENT FOR THE LIVESTOCK.

• CAIS margins are no longer used in the calculation for an advance.
• Agriculture and Agrifoods Canada will register an assignment on any CAIS/AgriStability payouts up to the amount owing on the advance plus any interest in the event of a default.

• A priority agreement must be completed by every financial institution with which the applicant deals as well as every financial institution or secured party (Breeder Co-op) that has a lien on the livestock. (Anyone having a financial interest in the livestock)

• 5% of all applications to be inspected prior to issuance of advance
• 5% of all approved advances randomly inspected subsequent to issuance of advance

• The maximum emergency amount available to eligible producers facing conditions of severe economic hardship is $100,000.00 interest free
• The producer will be allowed to keep their advance for 12 months and repay 50% of the advance within 15 calendar days of the end of the 12 month period, and the balance within 45 calendar days of the 12 month period. (Not exceeding the end of the production period Sept. 30 2009.)
• The producer must provide appropriate documentation to support their expected production, historical inventory values shown on CAIS Schedule 2 forms, marketing sales records, or acceptable sales inventory records.
• Advance rates are same as those found above.
• Additional credit criteria will be required

• Livestock advances for continuous flow operations that maintain a constant inventory of animals throughout the production cycle (i.e. animals sold are replaced by new ones within days.)
• For advances on Continuous flow operations a post-Production Report by October 1 2008.
• Producers operating continuous flow operations are advanced at a rate for finished cattle as seen above (over 1250lbs) $550.00/head
• Producer will be able to keep their advance for 12 months and repay 100% of the advance within 15 calendar days of the end of the 12 month period provided they can demonstrate that they have sufficient animals in inventory throughout the period to cover the advance.
• Advance benefit not exceeding the end of Sept 30 2009

Frequently Asked Questions

The APP Cash Advance Program:
Allows an eligible producer to draw an interest free advance on his eligible livestock (calves) under the Advance Payments Program. This program is available to all Alberta cattle producers from the Feeder Associations of Alberta.

1. If I have a Wheat Board or Canola advance can I also have an advance on my calves?
A - The total of all advances from all administrators cannot exceed $400,000, however only the first $100,000 is interest free. Feeder Associations can advance up to $400,000.

2. What is the “program period” and when do I have to repay the advance?
A - The program year starts April 1 of each year and advances can be made in that program period until Mar 31 the year following, however you have until Sept 30 to repay your advance through the sale of your livestock. In fact if you take an advance in April 2008, you will have until Sept 30 2009 to repay it interest free.
See example:

Program Year __________________ 18 MONTHS

Ex: TIMELINE

APR 1/07 MAR 31/08 SEP 30/08
_________________________________

APR 1/08____________________MAR31/09__________SEP 30/09
APR 1/09___________________________MAR31/10

4. This program is going to compete with some of our FA self purchase members, why is this program in place?
A -The APP advance program was coming to Alberta regardless of who was the administrator. The Provincial Board recognized this fact last May and realized we must keep our members under our umbrella regardless of the program they choose. The Canadian Canola Growers would have been delivering this program in Alberta as they are in B.C, Saskatchewan and Manitoba.

5. What are the eligibility requirements?
A - You must be a Canadian producer who owns the eligible calves in Alberta. In addition you must have a current CAIS/AgriStability number as CAIS/AgriStability is the security for the advance not the calves. Your reference margin is NOT used to limit the advance amount.

6. We have a multi-family operation with livestock and grains. Can we qualify for more than one advance?
A - The answer is complex. Husband and wife operations are considered one entity regardless of CAIS. The farm operation will qualify for a maximum of $400,000. If you have more than one CAIS account and Farm Tax return you may be eligible for an advance on your other operations. The operations must have “arms length” from each other. Each “entity” can apply however the administrator may decline your advance or request more information.

7. Are local Associations liable for collection of the cash advance?
A - No! The provincial office has requirements in the event a producer defaults on his advance. Once the required collection process has been completed and the producer does not comply, the account is handed to APP staff for collection. There are no liabilities on the local association whatsoever!

8. What if I decide to keep my heifers as replacements, can I repay the advance with cash?
A - Yes and No- The cash advance must be repaid from the sale of your calves. However, there is a provision in which you can repay 10% of the advance in cash without penalty. If you do repay the advance in cash, interest is charged on the amount in excess of 10% of the original advance.

9. How is the advance repaid if I sell my cattle privately or at an Auction?
A - It is a regulation that you must repay the advance within 7 working days of the sale of the animals you had taken the advance on. On first sale of any animals- you must repay the advance at the same rate you took the advance. NEXT PAGE-
ie. If you received a $385/hd advance you must repay a minimum of that same rate. You could however, repay the entire advance on the first sale of the calves if you choose. In addition if you have both interest bearing and interest free, the interest free portion will be repaid first.
IT IS THE PRODUCER’S RESPONSIBILITY TO REPAY THE ADVANCE!

10. What happens if a producer does not pay the advance before Sept 30?
A -The advance will be placed in “default”. (See “default” in the forms)
-He will be sent a letter advising him of the default. He will be charged all the interest from day 1 of the advance plus a penalty.
-He will not be allowed to draw any new advances from FAA for 1 year.
-Should he make acceptable repayment arrangements to the administrator, no other actions will be taken.
-If he does not cooperate his advance file will be forwarded to Agrifoods Canada where several collection procedures will occur including withholding CAIS claims, tax refunds and other government payments until the advance is repaid

11. For people who live out of the Province of Alberta but have cattle
placed in Alberta Ranches or Feedlots, where do they apply for cash advance?
A - They may apply at the nearest Feeder Association Office that is
administrating the Program in Alberta

12. Do I have to brand my calves?
A- No. Your CAIS program is the security for the advance

13. Is there any audit requirements.
A - Yes. There will be an inspection on 5% of all advances before they are issued and an additional inspection on 5% during the program year. The audits are randomly selected across Alberta and will be performed by a local Feeder Assoc. supervisor. In addition we ask that the local Association contact the administrator if they believe some applications may be unsatisfactory or the producer has some reputation that would cause the advance to be in jeopardy.

14. – How does FAA determine who inspects? The Applicants nearest Association may not be be administering APP programsand may have to go elsewhere. Will an Inspector from Association A be inspecting an application from Association B a hundred miles away?
A - We are assuming most Associations will administer the Cash Advance, however we will contact the nearest supervisor in any event.

14. Does the overpayment on CAIS affect their APP cash advance?
A – NO- CAIS is no longer used in the Advance calculation.

15. – If a person applies and finds the amount he qualifies for is too small or unacceptable and no money is advanced, is there still a fee payable
and how will it be collected?
A - Producers can quickly calculate their potential advance based on the rates per head, however a $25 charge for the application forms is paid up front.

16. Is the Feeder Associations of Alberta the only Administrator in Alberta?
A - Yes. If we operate the program in a diligent manner, FAA will remain the administrator in Alberta for years to come. However, Agrifoods Canada will review the Agreement with us annually.

17. Why would I use the Emergency Advance provisions?
A - The emergency advance is a temporary measure by Agrifoods Canada to assist beef producers with cash flow needs. A producer can take the emergency advance anytime during the production period based on future inventory. For example- he can get an advance in January based on calves that will be born in April. There must be proof of historical sales and cow inventory. In addition there will be additional credit requirements.

18. Why would a producer consider the Continuous Flow provision
A - The Continuous Flow was set up for a cattle feeder who maintains his inventory at a relatively constant number. It allows a total $400,000, $100,000 which is interest free based on the same rates per head as the standard advance. The producer must obtain a release from his lender and all other rules and criteria apply the same as a standard advance. The advance must be repaid within 15 days of a 12 month period or Sept 30 2009 which ever is comes first. A producer may then reapply in the new program period.

19. Can we use this Continuous Flow program together with a Feeder Association loan to assist with feed bills.
A - NO- The requirements of the advance application is to obtain a release of security from the lien holders. In this case the Feeder Association cannot release the cattle until they are repaid in full. Other lenders may consider other options for security and may release their interest. See your lender.
If you have further questions please call the Provincial Office 780 674 2622