BC Feeder Associations
Loan Guarantee Program

The Bred Heifer Program

The Bred Heifer Program was introduced in 1998 as an extension of the Feeder Association Loan Guarantee (FALG) program. The program allows farmers to start a cow herd or increase an existing herd under an expanded provincial feeder associations program.

The Bred Heifer Program is based on the FALG program. It was introduced to help BC cattle and sheep producers expand their livestock operations by helping them raise calves or lambs to heavier weights before selling. The FALG program makes livestock feeding credit available through the creation of farmer-owned cooperatives called feeder associations. The feeder associations borrow money from banks or credit unions to purchase cattle or sheep for grassing or feeding out on members' farms or feedlots. The BC Government provides a loan guarantee to the associations' lenders.

Under the Bred Heifer Program, association members may purchase heifers or young cows for their herd, repaying the association loan by selling the calves from these cows.

The Bred Heifer Program helps many areas of the province to diversify farm operations, and assists in stabilizing the rural economy.

Bred Heifer Associations

The first step in starting a bred heifer association is to incorporate a cooperative. A sustainable organization usually has a minimum of 20 active members.

Typically, a cooperative:

• contracts a secretary treasurer and a livestock supervisor,
• sets up an administration system,
• obtains a line of credit from a lender, and
• arranges for a loan guarantee from the province.

Members of the cooperative must be:

• residents of BC,
• at least 19 years old, and
• owners or leasees of a farm in BC

The Guaranteed Loan

Guaranteed loans may be used only to purchase bred heifers or young cows. They must be confirmed to be in calf and of appropriate size, quality and breeding acceptable to the association. The loan may be for up to 100 per cent of the purchase cost.

All cattle are branded with the association brand when purchased. All calves are also branded. The association owns the livestock. All cattle are sold in the name of the association.

The association determines each member's limit up to a maximum of:

• $25,000 outstanding for members' first year in the association,
• $50,000 outstanding for members active for 1 year but less than 2 years,
• $75,000 outstanding for members active 2 years but less than 3 years,
• $100,000 outstanding for members active more than 3 years,
• $150,000 outstanding for any one family unit.

The loan for the purchase of the cattle is for a five-year term, with annual payments of principal plus interest. Two repayment options allow for:

• equal annual principal payments, or
• smaller payments in the initial two years of the term, with larger payments in the following three years.

Each year, the association sells the calves born that year (offspring of the original cattle). The proceeds from the sale of calves are applied to the association loan. If sale proceeds exceed the amount of the annual payment, the surplus is paid to the member. If the proceeds are not enough to cover the payment, the member pays the difference.

The sale proceeds of any cattle that are culled over the term of the loan are applied directly to the loan as a permanent principal reduction, not as part of the annual payment.

When the final payment is made on the loan, the association signs over ownership of the livestock, and any unsold offspring, to the member.

Assurance Fund

Each member places a cash deposit of 10 per cent of the value of the cattle purchased with the association. The collective deposits of all members - called the assurance fund - is held by the lender as cash collateral for all loans to the association. If the association, after all recourse to the member involved, is unable to repay a loan taken out on behalf of a member, the lender will repay the loan from the assurance fund.

Provincial Loan Guarantee

The provincial loan guarantee is for 15 per cent of the association's highest annual loan balance. The guarantee provides the additional comfort needed to allow commercial lenders to finance the livestock at an initial level of borrowers' equity of 10 percent.

Advantages of the Bred Heifer Program

The members of the cooperative benefit because they can pay for a cow herd with:

• dependable, simple, quick access to financing,
• a market rate of interest,
• a low down payment (10 per cent) and
• assistance of other members and staff in livestock management, if necessary.

Industry Group Contact:

BC Breeders and Feeders Association website: http://www.bcbfa.ca

For further information contact:

Ken Corraini
Assistant Director, Industry Competitiveness Branch
Ministry of Agriculture and  Lands
PO Box 9120 Stn Prov Govt.
Victoria, BC  V8W 9E4
250 356-1648

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Update: February 24, 2004