About the evaluation
- The evaluation reported on the relevance, design, delivery, and performance of the programs governed by Agricultural Marketing Programs Act, focusing on the Advance Payments Program (APP).
- The evaluation’s scope covered April 1, 2014 to March 31, 2019; the analysis extended further back to assess longer-term trends, when appropriate.
- The evaluation assessed the Program by: reviewing documents and literature; interviewing various stakeholders; analysing program and secondary survey data; surveying producers and producer associations; and working with Statistics Canada to link program and tax data.
What we found
The Advance Payments program
- The Agricultural Marketing Program Act governs the APP, alongside the Price Pooling Program and the Government Purchase Program.
- The APP is a loan guarantee program that utilises third party administrators to deliver $2.2-billion dollars in low cost advances to 21,400 agricultural producers each year.
- The objective of the APP is to improve marketing opportunities for producers through short-term loans or advances.
- The APP permits producers to take out advances up to 50 percent of the expected value of eligible products, with interest on the first $100,000 paid by the government and preferential interest rates on the next $300,000 ($400,000 overall).
- The APP improves access to affordable short-term credit for Canadian agricultural producers to improve cash flow and marketing, notably for beginning farmers and those who do not have sufficient farming experience and/or available security required for traditional loans.
- The APP aligns with AAFC and Government of Canada priorities to help producers anticipate, mitigate, and respond to sector risk.
- The APP aligns with federal government roles and responsibilities and complements programs in the BRM suite by providing a proactive risk management tool that differs from stabilization tools.
Design and delivery
- The APP delivery model is relatively low cost to deliver funding and provides options to producers in a government program.
- However, inconsistencies among administrators result in disparities in delivery across the Program that ultimately affect producers and AAFC.
- Benefits that accrued to large administrators, for instance lower bank interest rates, did not fully accrue to producers.
- Overall, the APP produced all of its intended outputs and enables producers to manage business risks associated with cash flow and marketing.
- The advance limits for APP were found to be sufficient for the majority of producers.
- Most of the estimated benefits for participants came from delayed marketing, with a secondary benefit of favourable interest rates.
R1: The Assistant Deputy Minister, Programs Branch, should assess whether comparable interest rates across APP administrators could be achieved.
R2: The Assistant Deputy Minister, Programs Branch, should address inconsistencies in the APP third party delivery model to maximize producer benefits.
R3: The Assistant Deputy Minister, Programs Branch, should revisit the Program Risk Management Framework to reduce APP liabilities.
Management has agreed to, and already taken action to, address aspects of the recommendations. Specifically, the Financial Guarantee Programs Division recently implemented a new annual procedure to conduct interest rate analysis for every Advance Guarantee Agreement (AGA) for APP to ensure that competitive interest rates are being offered. Additionally, financial oversight has been strengthened by requiring large administrators to be transparent and publicly disclose APP financials to ensure APP benefits are focused towards producers. Improvements to the Risk Management Framework are ongoing. All management actions will be completed by December 2020.