Feeder Associations of Alberta: Program Information

 
 
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History of the Feeder Association Loan Guarantee Program

The Feeder Association Loan Guarantee Program was first established in September 1936, and it guaranteed 25% of the deficits incurred by the lender in respect of borrowings by the Lacombe, Olds, and Lethbridge Feeders Associations and the Central Alberta Livestock Feeders Association Limited. The first lender was the Dominion Agricultural Credit Company Limited and the total amount of guaranteed borrowings was $200,000.

With over 80 years of operation, the program has provided a guarantee for $9 billion of private financing for feeder association members in Alberta. The program has financed 17-24% of the calf crop each year, providing a significant portion of the lending requirement of the industry.

In 2016 the provincial loan guarantee is being increased to $100 million from $55 million, to help provide cattle feeders and new entrants with greater flexibility and access to capital in response to market prices and an increased demand for feeder cattle.

Previous changes to the program in 2014 doubled the maximum individual loan limit to $1 million.

Feeder Association Loan Guarantee Program Description

Legislative Authority
Local feeder associations are formed under the Co-operatives Act and Regulations. Once a feeder association has been created, it must comply with the Feeder Associations Guarantee Act ("Act") and Regulation. The Act authorizes the Minister of Finance to give guarantees to the financial institutions that lend to the local feeder associations. An Order in Council sets out the maximum amount of the total outstanding liability of the Crown under the loan guarantee program (now $100 million).

Eligibility
To be eligible for financing under the Feeder Associations Loan Guarantee Program, an individual must be a farmer who is at least 18 years old, resides in Alberta and owns or leases land. Eligible individuals must also be approved by a local feeder association. Click here for a list of the 45 local feeder associations located throughout Alberta.

Member Benefits
The program provides farmers with a competitive method of financing cattle for growing and finishing purposes. Financing of 100% of the value of the cattle (less 5% pooled security deposit) is provided.

Local associations make their own financial arrangements with their lender regarding interest rate and total loan limit. The government guarantee is commonly 15% of the total amount of financing available to the local association.

The maximum amount of borrowing per member is $1 million. However, local boards set the limit for each member which may be lower based on their experience, feed supply, etc.

Feeder Associations Retain Ownership
The local feeder association retains legal ownership of the cattle purchased under the program. The livestock purchased are fed, managed and ultimately marketed by the individual feeder association member. All cattle financed by the local feeder association must be branded with the split bar brand specific to the local feeder association. Members are responsible for manifesting cattle in the name of the local feeder association at time of sale and ensuring payment is made to the local feeder association to the credit of their individual account. After a member's account is paid in full, all surplus funds are paid to the member.

Feeder Associations Supervise Loans
In each feeder association, a Board of Directors approves and monitors loans to individual members. Each board hires a Supervisor to work with members and an Administrator to oversee loans and maintain financial records.

The contract between the individual feeder association member and the local feeder association is for a term of one year or less for feeder steers and heifers and 120 days or less for feeder cows.

Before receiving cattle, individual feeder association members must submit a security deposit of 5% of the value of the contract to their local feeder association. The pooled security deposits amount to significant protection for the lender against loan default.

Alberta Agriculture and Forestry (AF) Manages the Program
Alberta Agriculture and Forestry employs the Provincial Supervisor, Inspection and Investigation Section, Animal Health and Assurance Branch, to manage the program. There are eight regional inspectors that are assigned to specific local associations. These inspectors are trained in audit/inspection procedures that are designed to minimize risk and protect the association members, the lenders and the government guarantee.

The Manual of Directives and Procedures provides specific instructions to associations and staff regarding proper risk management practices. AF staff work closely with the provincial umbrella organization (Feeder Associations of Alberta Limited) in developing and enforcing proper risk management policies and procedures.

Role of Feeder Associations of Alberta Limited (FAA)

The Feeder Associations of Alberta Limited (FAA) is the "umbrella" organization for local feeder association co-ops and is government’s key partner in delivering the program. All 45 local feeder association co-ops are members. FAA has a key role in creating and maintaining partnerships with government, lenders and other industry stakeholders. Specific roles are related to:

  • Establishing vision and direction for the future;
  • Assisting with development of program policies and procedures;
  • Communicating with local associations;
  • Marketing the program to the industry at large; and
  • Liaising with other livestock industry organizations. Establishing vision and direction for the future.
FAA provides an optional livestock indemnity program to local associations that "pools" livestock mortality risk among co-operating associations. FAA also provides co-operative bonding or similar security for local association staff as required under Section 4 (3) of the Regulation.

For more information on the Feeder Associations of Alberta Limited
 
 
 
 
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For more information about the content of this document, contact Dace Cochlan.
This document is maintained by Karen Hladych.
This information published to the web on May 1, 2007.
Last Reviewed/Revised on May 5, 2017.