Evaluation of the Agricultural Marketing Programs Act

Abbreviations

AAFC

Agriculture and Agri-Food Canada

AMPA

Agricultural Marketing Programs Act

APP

Advance Payments Program

Executive summary

Purpose

The Office of Audit and Evaluation at Agriculture and Agri-Food Canada (AAFC) undertook an evaluation of Agricultural Marketing Programs Act (AMPA) programs to assess relevance, design, delivery and performance. This evaluation fulfils a requirement of the Financial Administration Act and the Treasury Board's Policy on Results (2016) and is intended to inform current and future program and policy decisions.

Scope and methodology

The evaluation assessed AMPA program activities between 2019-20 to 2024-25, with a focus on the Advance Payments Program (APP). The Price Pooling Program and the Government Purchases Program were mostly out of scope due to their minimal use. Multiple lines of evidence were conducted, including a document and literature review, analysis of primary and secondary data, interviews with stakeholders and a survey of producers.

Background

The AMPA established a suite of programs that provide support for the marketing of agricultural products so producers can better manage the financial risks involved in farming. The APP provides producers with access to short-term cash flow to market their products at optimal times, while the Price Pooling Program offers price guarantees for cooperatives and the Government Purchases Program enables the Minister to stabilize agricultural markets through the buying and selling of commodities. The APP is administered through third-party producer organizations who provide producers guaranteed loans with an interest-free portion paid by AAFC (up to $100,000) and an interest-bearing portion paid by the producer.

Findings

• Small and medium-sized producers, as well as niche commodity producers, continue to need access to affordable short-term cash flow for marketing purposes.
• Frequent changes to the APP’s interest-free limit in response to market pressures adversely affected program delivery, increasing program costs, impacting administrators’ cost-recovery and creating financial uncertainty for producers.
• AAFC’s cost to cover interest expenses have more than doubled since the last evaluation due to temporary increases to the interest-free limit. Nevertheless, program administration costs were similar to other AAFC programs.
• Smaller operations and newer, younger producers had lower APP participation rates and were less likely to benefit from temporary interest-free limit increases.
• A trend of administrator consolidation and lack of new administrators is a risk to continued producer access, particularly for underrepresented producer groups.
• The APP contributed to its ultimate outcome, as increased cash flow from the program enabled producers to improve financial resilience by delaying the marketing of products.

Conclusion

The APP provided a unique and important source of financial support for Canadian agricultural producers to increase cash flow for improved marketing flexibility. However, recent ad hoc changes to the interest-free limit in response to macroeconomic factors may fall outside of the APP’s intended objectives, straining program staff resources and impinging on program delivery for administrators and producers. Administrative costs were on par with other AAFC programming but large administrators continue to secure better interest rates than small administrators and profit from a greater spread on interest-bearing loans. This situation perpetuated an uneven playing field for small administrators, reducing their ability to pass along interest savings to producers. Coupled with a trend of administrator consolidation, lack of recruitment of new administrators and producer attrition from the program, the APP faces a risk of declining and inequitable access for smaller, newer farming operations and underrepresented groups. Access for certain producer groups and specific commodity types may be further limited by lack of program awareness and/or the APP’s security requirements.

Recommendations

Recommendation 1: The Assistant Deputy Minister of Programs Branch should implement solutions to minimize the adverse impacts of short-term program changes on producers and administrators.

Recommendation 2: The Assistant Deputy Minister of Programs Branch should address administrator consolidation risk by developing and executing a plan to better support producers when administrators exit the program.

Recommendation 3: The Assistant Deputy Minister of Programs Branch should implement a strategy to improve access for underrepresented producer groups.

Management agrees with the evaluation recommendations and has developed an action plan to address them by the 2027 program year. For further details, see Annex B

1.0 Introduction

The Office of Audit and Evaluation at Agriculture and Agri-food Canada (AAFC) conducted an evaluation of the Agricultural Marketing Programs Act (AMPA) as part of the 2021-22 to 2025-26 Integrated Audit and Evaluation Plan. This evaluation fulfills the requirements of the Treasury Board of Canada's Policy on Results (2016) and the Financial Administration Act. Findings are intended to inform current and future program and policy decisions.

2.0 Scope and methodology

The evaluation assessed the relevance, design, delivery, efficiency and effectiveness of the AMPA, with a focus on Advance Payments Program (APP) activities from 2019-20 to 2024-25. The Price Pooling Program and the Government Purchases Program were mostly out of scope due to their low risk and limited use. Multiple lines of evidence informed this evaluation, including a survey of producers, a document and project file review, a literature and comparative review, key informant interviews and an analysis of primary and secondary data. For a detailed methodology, see Annex A.

3.0 Program profile

The AMPA (1997) is legislation that established programs for the marketing of agricultural products. Predecessor programs included the Prairie Grain Advance Payments Act (1959) and the Advance Payments for Crops Act (1977). There are 3 programs under the current act:

• The Price Pooling Program offers cooperatives price guarantees to shield against unexpected market declines and helps agencies obtain financing for product delivery.
• The Government Purchases Program grants AAFC’s Minister the authority to buy, sell or store agricultural products in case of severe market conditions.
• The APP, the program most widely used of the 3, provides access to low-cost cash advances so producers can meet their financial needs while waiting for profitable market conditions to sell their product.

Short-term cash advances through the APP are facilitated through third-party administrators; that is, organizations that represent different agricultural commodities and products across the sector. The APP provides up to $1 million in total advances based on the value of a producer’s eligible agricultural product, which is calculated based on up to 50% of the product’s anticipated market value. AAFC pays the interest on part of this advance — referred to as the interest-free portion (as opposed to interest-bearing, which is the portion of the loan the producer pays interest on). The interest-free limit is legislated at $100,000, although there were 3 temporary increases to this amount during the evaluation period. Producers typically have 18 months to repay administrators for the advance once their product is sold.

Producers eligible for the APP must be Canadian citizens, permanent residents, corporations, cooperatives or partnerships, and must be responsible for marketing their products. Producers must also produce eligible agricultural products (that is, field crops, fruits and vegetables, livestock and breeding animals not sent for slaughter, floriculture and nursey products, sod and other products like honey and maple syrup).

3.1 Governance

The AMPA falls under Programs Branch’s Financial Guarantee Programs Division at AAFC. This team provides federal oversight by working with third-party administrators to ensure the program mitigates costs and respects related agreements, guidelines and regulations. AAFC also guarantees advances issued to producers and pays the interest on the interest-free portion.

Annual Advance Guarantee Agreements, which outline the terms of the guarantees, are signed by administrators, the Minister of AAFC and lending institutions. These agreements enable administrators to negotiate preferential interest rates with lenders and authorizes the administrator to deliver the APP on AAFC’s behalf. Once the agreement is signed, APP administrators become responsible for the day-to-day delivery of the program, such as assessing a producer's eligibility for APP loans, coordinating the application process, determining and issuing advance amounts, and managing producer advances until repaid.

3.2 Resources

From 2019-20 to 2023-24, AMPA expenses totalled $343.6 million (see Table 1), with an annual average of 27 full-time equivalents.

The APP is funded by producers, AAFC and in-kind contributions from some administrators. From 2018-19 to 2023-24, 95% of the APP’s $421.9 million in gross spending paid for interest costs and default payments on producer advances. Defaults made up one-third of APP expenditures over the evaluation period ($132 million), two-thirds of which were recovered by AAFC ($78 million). Default recoveries reduced program expenditures by 19%, resulting in a 5 year net expense of $343.6 million.

3.3 Intended outcomes

The AMPA falls under AAFC’s core responsibility of addressing sector risk. Expected outcomes as found in the performance information profile are listed in Table 2.^{Endnote 1}

Table 2: AMPA program outcomes

Immediate outcomes

APP: Administrators have access to low-cost capital.
Price Pooling Program: Marketing agencies have access to low-cost capital.

Intermediate outcomes

APP: Producers can access low-cost capital to address cash flow needs over the production period and provide market flexibility.
Price Pooling Program: Producers have access to timely payments upon delivery of eligible commodities to pool.

Ultimate outcomes

APP: Producers are able to manage business risks associated with cash flow demands and sell their products based on market conditions.
Price Pooling Program: Producers have access to co-operative marketing opportunities.

4.0 Relevance

4.1 Gaps addressed by the Agricultural Marketing Programs Act

The need for affordable short-term financing to support marketing flexibility

Prior to the advent of the APP, predecessor programs like the Prairie Grain Advance Payments Act (1959) and the Advance Payments for Crops Act (1977) provided field crop producers with short-term cash flow support for delayed marketing. Over time, this kind of support became entrenched in Canada’s agricultural landscape. The APP’s current objective is to support a broad range of agricultural producers in managing cash flow to address fluctuations in commodity prices, enabling them to delay the marketing of products until market conditions improve. Effective cash flow management helps producers avoid negative financial impacts of market conditions such as:

• selling commodities at suboptimal times, which reduces profits that could be reinvested into the business
• limited access to storage facilities, which forces immediate sales at low prices
• economic downturns or market disruptions, which lowers commodity prices

The APP is particularly relevant for less experienced producers, small or medium-sized farms^{Endnote 2} and niche crop producers, as these sectors are more vulnerable to market volatility and/or their products are less desirable as loan security. Interviewees agreed that delayed marketing helps these producers to take advantage of higher market prices and protect their margins, lessening short-term financial pressures. Sector representatives at the Standing Committee on Agriculture confirmed this finding, noting that farms across Canada are relying on AAFC suite of sector risk programs, such as the APP, to manage cash flow, particularly during times when cash receipts are down and farm debt levels are at record highs.

Credit from financial institutions such as chartered banks, caisses populaires and credit unions is widely available to agricultural producers in Canada. In spite of this, federal and provincial agencies have been major providers of farm credit. Combined, these agencies held approximately one-third of outstanding agricultural debt in Canada from 2019 to 2023.^{Endnote 3} After reviewing 17 federal and provincial agricultural loan programs for overlap and duplication, it was determined that the APP is a strategic part of AAFC’s sector risk programming, which is designed to protect producers against business risks.^{Endnote 4}

The APP is unique in its national coverage for a range of agricultural commodities and lack of restrictions on how the loan can be used. Neither provincial programs nor crown corporations have an interest-free portion to their loans, nor base security for the loan off the value of the producer’s agricultural product. Unlike financial institutions, the APP provides access to low-cost and even no-cost financing that is intended to address the cash flow needs of producers.

Expanding use of the APP beyond program objectives

The evaluation found that the APP was increasingly used by larger producers as a means to secure access to low-cost operating loans. According to a survey conducted on a representative sample of APP participants, the program was used primarily for cash flow purposes (68%), particularly for farms generating more than $250,000 in revenue. Less than 10% of respondents used the APP for marketing-only purposes (the original intent of the program), while a quarter of respondents used the APP for both cash flow and marketing purposes.

In recent years, AAFC has used the APP as a flexible tool to respond to sector crises such as rising input costs and trade disruptions, which is a shift from the original intent of the program. This expanded macroeconomic application of the APP has raised concerns regarding program relevance. A few experienced stakeholders noted that the APP now functions more like a continuous line of credit, rather than for improving marketing opportunities. Access to low-cost cash flow in response to macroeconomic pressures is a gap for Canadian producers, but this is not a stated objective of the program.

4.2 Alignment with AAFC and government priorities, roles and responsibilities

The APP is aligned with federal and departmental priorities, as per recent federal budget statements that committed to providing interest relief to producers, the 2019 Mandate Letter to the Minister prioritizing strengthening export protections in response to trade disputes, and AAFC’s Guelph Statement and Sustainable Canadian Agricultural Partnership, which prioritized sector resilience.

4.3 The Government Purchases Program and the Price Pooling Program

Since the Government Purchases Program was incorporated into the AMPA in 1997, there have been no catastrophic events which required its use. The document review found that AAFC has other disaster response and market stability mechanisms available under the Farm Income Protection Act, such as AgriRecovery and AgriStability, but pointed to the benefits of retaining a statutory authority to address a drastic disaster situation where market intervention may be needed or at a time when food supply needs to be secured.

The Price Pooling Program was used by 2 cooperatives during the evaluation period. Many producers belonging to cooperatives have moved away from using the Price Pooling Program, opting instead for more sophisticated marketing plans and tools like forward contracts to maximize profits. Given the limited historical use of the Price Pooling Program, and the ability of cooperatives to access APP and other federal sector risk programming, the evaluation found there is little need for this program.

5.0 Program design and delivery

5.1 The impact of ad hoc design changes on Program delivery

Section 9(1) of the AMPA allows APP’s interest-free limit to be fixed temporarily by regulation, which was enacted 3 times during the evaluation period in response to sector crises such as^{Endnote 5}

• inflation rising nearly 18% from 2018 to 2023;
• increasing input costs that have outpaced revenues
• trade disputes, such as the suspension of export licences for 2 of Canada’s largest canola exporters in 2019

The evaluation found that each instance of increasing the interest-free limit put a strain on resources for program staff, administrators and producers given the complex and time-consuming change process. Even when expedited, the change could take several months to implement, as program staff needed to coordinate and consult with other departments including Finance and Justice, as well as the Privy Council Office and Treasury Board Secretariat.

Due to the sensitive nature of regulatory amendments, program officials were not able to notify APP administrators of changes to the interest-free limit until after approval. As a result, administrators did not have time to adjust their cost-recovery models, which negatively impacted revenue from the interest spread. Nonetheless, costs were largely recovered from revenues on the interest-bearing portion of loans in years without a limit increase. The lack of adequate notice also led to duplicate application processing, which further strained resources for producers and administrators.

Multiple administrators and lenders explained that the unpredictability of the interest-free limit created challenges for producers trying to plan the most cost-effective financing options for their operations, particularly those applying for spring advances. 1 former APP administrator with relevant insight on this issue noted challenges with the interest-free limit increases as their reason for exiting the program. This is direct evidence of the adverse impact of short-term changes to the interest-free limit on multiple APP stakeholders (producers, administrators and program staff).

5.2 The APP’s third-party delivery model

The APP employs a third-party delivery model whereby non-profit producer organizations deliver the program to their member networks. While producer organizations are not regulated by the Office of the Superintendent of Financial Institutions, program staff noted that administrators are well-positioned to provide support to producers given their strong relationships, deep understanding of member needs and strategic placement across Canada. This integrated network of small and large^{Endnote 6} APP administrators providing support to producers across the sector is a program design strength.

While examining a single administrator model as an alternative for the APP, the evaluation found benefits and drawbacks. A single administrator or lender delivering the APP may result in more consistent expenses and interest-bearing rates charged to producers. However, evidence points to a value-add from retaining a mix of small and large administrators across Canada to serve the varying needs of different producer groups. Nearly 70% of surveyed large, medium and small producers preferred the current third-party delivery model over a single administrator option.

5.3 Consolidation risk

The evaluation identified the trend of consolidation into fewer and fewer administrators as a significant risk to the third-party delivery model. The 4 largest APP administrators currently account for over 85% of all advances and total dollars advanced. The number of administrators decreased by 36% over the last 10 years, from 42 in 2014 to 27 in 2024. All administrators who exited the program during the evaluation period were smaller administrators accounting for a relatively low amount of dollars advanced; during this time, no new administrators entered the program. Further consolidation is anticipated as smaller administrators are more likely to deliver the APP at a loss and are adversely impacted by short-term program changes to the interest-free limit. As the number of administrators decreases, there is greater risk that Canadian agricultural producers will lose access to the APP.

Analysis on a sample of 7 former APP administrators revealed that one-half of producers did not seek advances from another administrator when their original administrator left the program. In 2 cases, the average attrition rate was 80% (see Table 3). Although program staff developed an administrator expansion policy framework after the last evaluation to ensure a seamless transfer of producers to other administrators to mitigate this risk, high attrition rates suggest this framework may not be effective. The centralization of delivery through administrator consolidation poses a risk to producer access, as both small and large administrators are needed to serve the heterogeneous needs of agricultural producers across Canada. Currently, there is no strategy to recruit new administrators and the preference for known APP providers, along with increasing sector-specific consolidation, indicates a growing business risk for the program.

5.4 The financial surplus policy

The AMPA permits administrators to recover APP delivery costs from producers through application fees, default management fees and a spread on the interest rate from interest-bearing loans.^{Endnote 7} However, the act does not require administrators (which are not-for-profit organizations) to identify all sources of revenue nor provide explicit direction to govern financial surpluses. The previous evaluation found that large administrators generated $30.6 million in revenue from the interest spread charged on loans.^{Endnote 8} Without formal reporting requirements, there was concern that the revenue generated by large administrators was not used to benefit producers. To improve financial transparency, program officials introduced a financial surplus policy in 2020 that required administrators to publicly report on APP costs and revenues and ensure surpluses are directed into a contingency fund to improve program delivery.

Interviewed program officials and APP administrators revealed that a one-size-fits-all financial surplus policy was not effective for all administrators. For example, reporting processes were particularly burdensome for smaller administrators who lack the internal resources and generate relatively small surpluses from program delivery. In 2024, the program implemented revised reporting and monitoring requirements, as well as default mitigation measures, according to an administrator’s level of materiality risk. This change is intended to ease financial reporting burden on smaller administrators.

Although some administrators disseminated APP revenue and cost information to their members via newsletters and/or bulletins, only 7 of the 27 administrators published APP financial statements on their website. To better ensure compliance, the program conducted due diligence checks on the management of producer files, which led to reimbursement requests from administrators on 5 separate occasions over the evaluation period. A total of $1 million was reimbursed to the program as a result. According to program officials, this process has proven to be an effective incentive for promoting accountability among administrators.

6.0 Performance measurement

AMPA shares its performance information profile, including performance metrics, with the Canadian Agricultural Loans Act Program. The framework contains indicators and data sources for the APP and the Price Pooling Program but not for the Government Purchases Program. Performance data for the APP was available through GC InfoBase. However, this information was not available for the Price Pooling Program or the Government Purchases Program.

The evaluation identified several shortcomings for performance measurement. For example, financial data for programs under the AMPA did not include separated expenditures for the APP and the Price Pooling Program but combined both programs in financial tables. No financial data was available for the Government Purchases Program, as there were no activities associated with this program for the evaluation period. Financial information from APP administrators was also unavailable in certain instances and inconsistent over the evaluation period. The APP’s ultimate outcome performance indicators do not include measures on the impact of the program on producers’ financial state, instead focusing on producer satisfaction with the program, the APP’s share of farm debt and APP default rates. Indicators for the 3 separate programs under the AMPA may not be of the right type and do not adequately measure outcomes. Efforts are currently underway (Winter 2025) to update the performance information profile, based on findings from the Canadian Agricultural Loans Act evaluation.

Starting in 2023-24, the program collected data in support of Gender-based Analysis Plus from APP applicants. An examination of program data revealed that the reliability of this information was insufficient (in many cases missing data) to support a comprehensive analysis. Thus, the extent to which the programs under the AMPA support underrepresented and marginalized groups is unknown.

7.0 Efficiency

7.1 Program grants and contributions expenditures

The APP’s budget increased from $72 million in 2019 to $120 million in 2023 to account for rising interest rates and to accommodate temporary increases to the interest-free limit (see Figure 1).^{Endnote 9} AAFC’s administration costs accounted for nearly 6% of expenditures, which is similar to comparable AAFC programming.^{Endnote 10} The average cost to AAFC per $1,000 advanced was $1.29, with slight efficiency increases in 2022 and 2023. Even in years where the program expended additional resources due to increases in the interest-free limit, administrative costs were stable.

Between 2018 and 2023, the amount advanced under the APP doubled, representing $4.6 billion in loan guarantees. The greater amounts advanced and higher interest rates in 2023 created a significant financial cost to AAFC in interest payments. In fact, costs have more than doubled from the previous evaluation period ($72.9 million per year for the current evaluation compared to $36.2 million per year). Further, the risk of loans defaulting also increased as interest rates rose, and the department may yet face defaults stemming from the 2023-24 program year, which would further increase costs. If APP participants with large loans and/or many program participants were to default due to unfavourable market dynamics such as interest rates spikes, trade disruptions, inflation and periods of economic recession, AAFC would face significant material risk due to the loan guarantee provision of the program.^{Endnote 11} This could threaten program continuity.

Note: Shaded sections represent program years with increases to the interest-free limit.

Note: Excludes default recoveries; 2019 recoveries resulted in net lower program expenditures.

Source: Program financial data and Statistics Canada. Table 10-10-0145-01 Financial market statistics, as of Wednesday, Bank of Canada

7.2 Increases to the interest-free limit

Increases to the interest-free limit had an exponential impact on AAFC’s interest payments for the APP. When the interest-free limit was increased to $250,000 in 2022, interest payments were 3 times higher than average, and when increased to $350,000 in 2023, interest payments were 7 times the typical amount. AAFC’s interest expenses were also influenced by rising interest rates over the evaluation period which increased total interest payments for the department. However, program costs were largely driven by the impact of interest-free limit increases on participation and the amounts advanced to participants. In other words, more producers took on larger loan amounts. Ad hoc increases to the interest-free limit also negatively impacted the overall efficiency of the APP by requiring administrators to revise existing Repayment Agreements with producers. Loan amounts were often adjusted with more interest relief and less interest-bearing costs. The resulting reduction in interest-bearing spread represented an estimated loss of $8 million in revenue for APP administrators over the evaluation period. However, the increase in interest-bearing advances in 2020 and 2021 generated $8.5 million more in revenue than expected.^{Endnote 12} Thus, the loss in revenue for administrator surpluses was largely offset in program years with no temporary increases to the interest free limit.

7.3 Administrator revenues and costs

Consistent with the 2021 Parliamentary review, the evaluation found large administrators continued to generate substantive surpluses from the interest-bearing spread on APP advances. Administrators also collected fees from producers for defaults on APP loans, penalties for repayments without proof of sale and other up-front application fees associated with program delivery such as obtaining credit reports and/or registering liens. Administrators were estimated to have collected between $104 million and $146 million from producers over the evaluation period. Per-producer cost to deliver the APP was between $1,000 to $1,500, resulting in a total cost of $101 million to $152 million to administer the program. As such, administrator revenues largely offset program costs.

7.4 APP defaults

The department covers the risk and associated cost of defaulted loans that are not repaid on behalf of producers. Program data revealed that less than 3% of all APP dollars advanced between 2019 and 2023 were defaulted ($53.6 million), which is 1% lower than the previous five-year program cycle but still represents a significant cost to the department. Notably, in this same period, financial institutions received $340 million in interest payments from AAFC and producers. Lower default rates indicated that producers were better able to manage business risks associated with their cash flow. Evidence suggested that the lower default rate may be attributable to adjustments to the Applicant Risk Assessment, which requires administrators to be more exacting in their assessment of producer credit worthiness, and requires penalties of ineligibility following a default. A reduction in defaults may also be explained by lower interest rates and higher commodity price during the evaluation period (as noted above, default rates are susceptible to unfavourable market dynamics).

8.0 Effectiveness

8.1 Immediate outcome: Administrators secure low-cost capital

The APP achieved its outcome of securing low-cost capital as both small and large administrators secured loans under the target of prime minus 0.25% (see Table 4).^{Endnote 13} Under the current third-party delivery model, multiple administrators unilaterally negotiated interest rates with lenders which resulted in rate variability across administrators. As such, there was a disparity between rates secured by large and small administrators, where large administrators received interest-bearing interest rates 0.62% lower than small administrators. Program data showed that large administrators generated higher revenues from APP cash advances — $41.5 million over the evaluation period, compared to $5.3 million for small administrators. The evaluation found that some administrators operated the program at a deficit, shouldering the cost as a service to their members. This finding was confirmed by program documents.

Large administrators typically negotiated larger guarantee amounts with lenders, which led to preferential rates for producers as well as cost efficiencies for AAFC in terms of interest savings on the interest-free portion of the loans. In response to a recommendation from the previous evaluation of the APP, program officials implemented the Applicant Risk Assessment process where lender interest-bearing rates are reviewed annually to ensure that administrators secure target interest rates that can be passed on to producers. Evaluation evidence showed that since 2019, the lender interest-bearing rates of 9 administrators were significantly reduced and more closely aligned with other administrators.

8.2 Intermediate outcome: Producer access to low-cost capital to address cash flow needs and market flexibility

For the most part, the APP provided Canadian agricultural producers with access to low-cost capital to address cash flow needs and market flexibility. The amount of cash advanced by the APP steadily increased over the evaluation period, exceeding its $2.2 billion target, but the number of participating producers fell short of targets in 2 of 5 program years (see Figure 2). In years with an interest-free limit increase, the program saw an influx of new and former participants to take advantage of larger interest-free advances. However, the percentage of farms participating in the APP decreased faster than the overall farm attrition rate in Canada, indicating that fewer producers are participating in the program over the long term. The significant drop in APP participation relative to the farm attrition rate may signal a genuine lack of business need for the program or perhaps other underlying factors that should be identified and addressed to improve access.

The influence of producer characteristics on APP participation

Over the evaluation period, 32,248 different producers obtained advances under the APP, representing 21% of Canadian farms. On average, nearly 20,000 producers accessed the program each year. Grain and oilseed producers in Saskatchewan and Manitoba received the most advances, whereas nearly one-quarter of Quebec sweetener farms participated. Continuous flow livestock producers had relatively low APP participation rates, likely due to additional loan security requirements for this particular producer group.

Note: Shaded sections represent program years with increases to the interest-free limit.

Source: Program administrative data.

The APP is an important source of low-cost credit for new and young producers, as well as those with smaller operations who may have difficulty accessing traditional short-term credit. The APP producer survey showed that farms operating less than 6 years or run by operators under the age of 40 faced more difficulty accessing credit and were more likely to report improved cash flow from the APP than older, more experienced producers. Analysis of program data revealed that medium and large farms participated in the APP at a greater rate than small or micro farms (see Table 5), and that producers who previously took interest-bearing loans beyond the maximum interest-free limit at $100,000 were instead obtaining interest-free advances at the new higher limits. As such, medium and large producers were more likely to benefit from increases to the APP’s interest-free limits and more likely to participate in the program.

The evaluation found that relatively low participation rates by smaller, younger and less experienced producers limited the program’s impact on the overall sector. Although many administrators and some AAFC staff advocated for a permanent increase to the interest-free limit, the $100,000 limit was considered sufficient to cover the production capacity of the majority of Canadian farming operations, which are small or micro farms.^{Endnote 14} Thus, production capacity is not a limiting factor for smaller, less experienced or niche producer groups to access the APP, a finding which is consistent with the previous evaluation of the program and Parliamentary review.

While the absence of a business need might explain why some producers are not using the APP, the following potential participation limitations were also identified:

• Nearly half of Canadian agricultural producers were not aware of the APP.^{Endnote 15}
• Producers may not be members of their producer association, which could limit access to the APP.
• The need to secure crop insurance for Indigenous producers farming on reserve land may prevent eligibility for the program.
• The length and complexity of application forms, as well as the need to collect signatures from lenders, was a disincentive for participation. Producers dealing with smaller administrators were more likely to encounter challenges with the application process.

A better understanding of the factors that contribute to the APP’s usage patterns is crucial for achieving program outcomes, as these factors highlight potential areas for improvement in supporting more equitable access to the APP.

8.3 Ultimate outcome: Producer use of the APP to manage business risks associated with cash flow demands

The APP is a complementary component to several other AAFC sector risk programs that are designed to improve the financial resilience of the sector by mitigating risks beyond the producer’s control. For example, the APP addresses risks associated with seasonal commodity markets and the impacts of poor cash flow. This directly complements AgriStability, a margin insurance program, by protecting producers margin in ensuring greater revenues from delayed marketing and reducing costs by improving producers’ cash flow.

Importance of the APP for short-term debt

Farm debt increased by over 33% from 2018 to 2023. The APP typically comprised 12 to 14% of producer short-term debt; however, in years with an interest-free limit increase, this amount increased to 16 to 23% (see Figure 3). The APP and Farm Credit Canada both increased the amount of short-term debt issued to producers, though total short-term debt declined over the evaluation period. This suggests that other lenders may be exiting the market, potentially creating a gap in the availability of short-term credit for Canadian producers. Thus, the APP plays an increasingly significant role in producers’ short-term debt load.

Note: Shaded sections represent program years with increases to the interest-free limit.

Source: Office of Audit and Evaluation calculations based on Statistics Canada data.

Use of APP funds

According to the producer survey, most participating producers were satisfied with the APP, as it enabled them to manage their cash flow, reduce their expenses and increase their revenues. The way producers used the APP and the impacts on margin were sector-specific. Producers of commodities that cannot be stored, or those that experience only minor price variations over a production period, received limited benefit from delayed marketing. However, almost all interviewed administrators stated that producers participating in the APP benefitted from improvements in cash flow and lower interest expenses.

In AAFC’s 2021 Farm Financial Survey, two-thirds of producers who participated in the APP described APP loans as effective for managing their operations’ cash flow. Producers reported in the 2024 APP producer survey that they preferred the APP to manage their operation’s cash flow, more so than other financing options such as Farm Credit Canada. Producers primarily used APP advances to address current financial obligations, such as paying bills on time or addressing unexpected expenses. However, most producers also reported that they used the APP to improve their financing position by covering other debts.

The use of APP advances to address other debts is known by AAFC staff and administrators, as the program does not restrict how the funds can be spent. Producers reported that they were able to invest in their operations due to improved cash flow, including purchasing inputs to improve their operation’s productivity or renting more land to expand their operation. According to producer survey results and a review of literature, new producers, who commonly need to rely on off-farm income to address cash flow needs, were more likely to use the APP to focus on their operations instead of securing off-farm income.

Impact on interest expenses

Interest costs typically represent about 5% of all farm expenses. Administrators, AAFC representatives and producers agreed that interest rates offered through the APP were up to 3% lower than what other lenders could offer small and medium producers. However, producers with larger farms reported receiving comparable interest rates from other lenders. The average medium-sized farm pays $26,363 in interest expenses each year. The interest-free component of APP advances saved producers over $5,000 in interest expenses compared to loans through other lenders; the interest-bearing component of APP loans was estimated to save medium-sized farms an additional $8,000 to $10,000 when used to repay other debts due to lower interest rates. Thus, it is possible for a medium-sized farm to reduce their interest expenses by over half through participation in the APP.

9.0 Conclusions and recommendations

The APP provided Canadian producers with increased cash flow for improved marketing flexibility. Although use of the APP to address short-term cash flow and macroeconomic factors may fall outside of its intended objectives, the program contributed to most of its outcomes. Further, despite the significant increase in overall program costs since the previous evaluation period, administrative costs were on par with other AAFC programming.

The following conclusions led to 3 recommendations to improve the APP. First, ad hoc changes to the interest-free limit of the APP adversely impacted administrators and resulted in inconsistent producer support. Producers require adequate time to plan financing options for their operations and administrators need predictability in program design to adjust their cost-recovery models.

Second, the APP’s program delivery model relies on an effective mix of small and large administrators that is better able to serve the heterogeneous needs of agricultural producers across Canada. However, centralization of program delivery through administrator consolidation, and the absence of new administrators in recent years, is an ongoing risk to producer access to the APP.

Finally, there is a marked under representation of smaller and newer farming operations and specific commodity groups participating in the APP, which may be attributable to limitations, such as lack of awareness or loan security requirements. A more equitable approach is needed to improve access to and participation in the program, particularly for underrepresented producer groups.

Recommendations

• The Assistant Deputy Minister of Programs Branch should implement solutions to minimize the adverse impacts of short-term program changes on producers and administrators.
• The Assistant Deputy Minister of Programs Branch should address administrator consolidation risk by developing and executing a plan to better support producers when administrators exit the program.
• The Assistant Deputy Minister of Programs Branch should implement a strategy to improve access for underrepresented producer groups.

Management response and action plan

Management from the Programs Branch are supportive of this evaluation as well as the recommendations and have outlined an action plan to address them by the 2027 program year. Please see Annex B.

Annex A: Evaluation methodology

Document and comparative review

The evaluation reviewed the program’s foundational and governance documents, department and federal documents outlining Government of Canada priorities, and other key documentation. The comparative review included an environmental scan of potential domestic and international comparator programs.

Literature review

With support from the Canadian Agriculture Library, the evaluation examined select academic literature and other secondary sources to support the assessment of relevance.

Project file review

The evaluation reviewed project files for 15 APP administrators.

Program and secondary data

The program data analysis involved a longitudinal analysis of administrative data between 2006 and 2023, as well as an analysis of program financial data from 2013 to 2023. Secondary data was used to provide insight into the role of the APP as a financial product for the agricultural sector.

Key informant interviews

The evaluation involved 25 interviews with stakeholders, including: AAFC program staff (5), current APP administrators (15), former APP administrators (1), producer organizations that are not APP administrators (2) and financial institution lenders (2).

Producer survey

With support from the Public Opinion Research and Consultations division, the evaluation developed and disseminated a producer survey in fall 2024. A random, representative sample of 13,742 producers who took an APP advance were contacted to take part in the survey. The survey had a response rate of 12% (n=1,650).

Methodological limitations

Response bias: Interviewees may have been biased in their responses based on their role and responsibility in relation to the APP.

The evaluation included interviewees who represented a diversity of views. Interview data was triangulated with other lines of evidence and findings were reviewed by multiple team members to identify elements of bias.

• Impact on evaluation: low

Response bias: Interviewees may have been biased in their responses based on their role and responsibility in relation to the APP.

To limit survey response bias, the survey sample was stratified based on producers obtaining interest-free or interest-bearing advances, and other key variables such as region, commodity and demographics. The stratified, random sample of producers is ensuring survey results are representative.

• Impact on evaluation: low

Annex B: Management response and action plan