Consultations on Potential Changes to the Farm Improvement and Marketing Cooperatives Loans Act (FIMCLA)
Final Report
October 31, 2006
Prepared by:
Table of Contents
- Introduction
- Executive Summary
- Potential Changes to the FIMCLA Design
- Expand the program to include beginning producers, including inter-generational farm transfers
- Expand the program to allow more flexible eligibility rules for co-operatives
- Increase the aggregate loan limits for producers and co-operatives
- Increase the eligible rate of loan amount
- Modify the registration fee to incorporate different risk categories/amounts of loans
- Potential Changes to Modernize the FIMCLA Delivery
- Other Issues
- Feedback from Participants
Appendix 1 - Sessions Participants
Appendix 2 - AAFC Representatives at Sessions*
1. Introduction
From July 18 to August 11, 2006, Agriculture and Agri-Food Canada (AAFC) held eight (8) consultation sessions with a range of interested individuals and organizations on potential changes to the design and delivery of the Farm Improvement and Marketing Co-operatives Loans Act (FIMCLA), and on issues related to the development of agricultural co-operatives.
AAFC officials from the Farm Financial Programs Branch, Financial Guarantee Programs Division (FGPD) and the Co-operatives Secretariat managed the consultative process, with facilitation and reporting provided by an independent contractor, the Fleishman-Hillard Canada. Invited participants included producers and representatives of producer groups, representatives of financial institutions and co-operatives, co-operative support organizations, and officials in federal and provincial/territorial governments. In addition to the invitation letter, participants received consultation documents in advance outlining the context for the session and proposing discussion questions for their consideration. Logistics for all sessions, along with the delivery of introductory remarks, were organized by AAFC.
Each session began with a presentation by AAFC on potential changes to the design of the FIMCLA, followed by a plenary discussion to seek participant views and reactions. In the afternoon, participants divided into two groups; one group focused on potential options for modernizing the delivery of the FIMCLA, and the other discussed general issues related to the development of agricultural co-operatives. AAFC officials also made opening presentations at each of the afternoon discussions to set the context for the discussion with participants.
A separate report was prepared on the results of each session. This report summarizes the overall feedback received from participants in all eight sessions on the design and delivery of the FIMCLA. A separate report has been prepared on the feedback from participants across the country on the development of agricultural co-operatives.
2. Executive Summary
The meetings were successful in bringing together diverse interests of producers and producer organizations, the financial sector, co-operatives, representatives of provincial governments and academics who participated in the sessions. A total of 158 people attended the sessions across the country. Participants at all sessions had a good discussion of the issues, and responded readily with suggestions on how FIMCLA could be made more relevant to the needs of the agricultural community.
Participants said that in their view, several factors are contributing to the declining take-up rate for the program, including:
- Producers' lack of awareness that the Government of Canada has a program under which they can receive a loan guarantee for a range of purposes that would contribute to the improvement of their operations and to the development of marketing co-operatives;
- Lack of interest on the part of financial institutions to promote the program to producers, since the FIMCLA requires financial institutions to provide loans to producers or co-operatives at a maximum interest rate of prime plus 1%;
- High land prices in many parts of the country, which makes producers attractive candidates for conventional loans;
- The current aggregate loan limit of $250,000 for individual producers, which is too low to interest producers given the large size of today's farm operations in comparison with when this limit was introduced (1987).
Some representatives of financial institutions added that from their perspective, the administrative burden and the registration fee paid by producers to access the program discourages both financial institutions and borrowers from using the program more extensively. In addition, these participants agreed with producers that FIMCLA does not offer competitive rates of interest, noting that most lending institutions are able to provide similar rates without the need to access the FIMCLA program.
Representatives from the co-operative sector in most parts of the country said that awareness of the FIMCLA program is relatively low among this group, although this was not the case in every location or for every type of co-operative. Many said that the main reason for low use of FIMCLA by co-operatives is ineligibility rather than lack of awareness, since FIMCLA currently requires that a co-operative's membership be comprised exclusively of producers to qualify for a loan guarantee. They said that since a significant number of co-operatives have other members, such as outside investors or non-producing members from the local community, many co-operatives cannot use the program.
Having discussed challenges to uptake, all participants agreed that the FIMCLA is needed to help certain types of users with credit challenges. Participants said that new and inter-generational producers, as well as a broader segment of agricultural co-operatives, would benefit greatly from the program if they were eligible to participate in it.
Many participants suggested that the primary objective of the FIMCLA program should be to provide access to credit to producers who need it, rather than to achieve cost-recovery. They also made the point that while each potential change was being discussed separately, in the end it would be important to consider how these changes would fit together to meet the needs of potential users.
3. Potential Changes to the FIMCLA Design
A representative of AAFC gave an opening presentation at each session. This presentation provided an overview of the FIMCLA program, shared feedback received to date on a government mandated study and summarized input from previous discussions with producers, financial institutions and co-operatives on potential changes to the FIMCLA program.
Following the opening presentation, participants were asked their point of view on potential changes to the design of the FIMCLA, based on the consultation documents they received in advance. The discussion was divided into five areas of questioning, as described below.
3.1 Expand the program to include beginning producers, including inter-generational farm transfers
All participants were supportive of expanding the FIMCLA program to include beginning producers and inter-generational farm transfers. They noted, however, that these two groups have different needs and risk profiles; for example, an inter-generational producer may have significant experience through participation in farm activities, and should not be seen a beginning producer.Several participants said that inter-generational farm transfers are often part of succession planning and should be encouraged and supported by the program. Participants noted that it is currently a challenge for retiring producers to obtain equity from their farming operation to live on in their later years, and that expanding the FIMCLA to allow loan guarantees for inter-generational transfers would be helpful in this respect.
It was generally agreed that beginning producers have more difficulty in raising capital than other producers, and that they would benefit from being allowed to obtain loan guarantees under this program.Participants also noted that opening up the program to beginning producers is consistent with the objective of rejuvenating the sector through new entrants.
Several participants questioned the definition of “beginning producer” that would be used if the program were expanded to include this group, saying that there are many in that category with a wide range of experiences. For example, a beginning producer could range from a person who purchases his or her own operation at the age of 40, after working for 20 years on a family farm, to an individual who worked on a farm as a youth and young adult, went to school, acquired equity from another source and has returned to farming, to an inexperienced first-time young producer. In giving these examples, they noted that the risk levels of the first two types of individuals are not the same risk as it is for the third type of “beginning producer”. Representatives of financial institutions and producers agreed that any new FIMCLA program should allow for assessment of risk to be done on the basis of the individual applicant's overall suitability and not whether the applicant fits a strict definition.
However, some participants said there is a need to ensure beginning producers do not over-extend themselves financially by using the program, which they said may occur if it encourages beginning producers to borrow larger amounts than they can manage to pay back. In the end, participants agreed on the need to support beginning producers and the importance of minimizing road blocks to participation in the industry, which is having difficulty attracting new entrants.If farming is to continue and prosper in the long term, they said, beginning producers must be given every opportunity to succeed through support programs such as the FIMCLA.
During the discussion on extending the program to beginning producers, some participants raised the need to consider extending the program eligibility to new immigrants. They indicated that in their view, the definition of beginning producer in a revamped FIMCLA program should include this group because many of the new producers that are moving into communities are new immigrants.
Representatives of financial institutions were supportive of extending the program to beginning producers and inter-generational farm transfers, although they expressed caution about creating rigid eligibility rules. They argued that the program should be flexible, and that it should rely on financial institutions to evaluate each applicant's risk level on a “case-by-case” basis, as they do with all loan applications. Financial institutions said they evaluate the worthiness of any applicant based on a business plan, skills, equity and other factors that are indicative of cash flow potential and ability to repay the loan, rather than the availability of a government loan guarantee.
Participants in all locations suggested that beginning producers could be encouraged (either informally or through incentives) but not required to participate in Renewal programs under the Agriculture Policy Framework (APF), such as the Canadian Agriculture Advisory Service and the Canada Farm Business Assessment Service. Some participants questioned the link between such programs and a producer's ability to succeed, and concluded that producers are more likely to see value in participating in the FIMCLA if there are as few conditions as possible attached to it. They also stressed that participating in these programs takes time away from working on producer operations at a time when as beginning producers they need to focus on farm. Others said that beginning producers may benefit more from some type of mentoring, and said it would be useful if there were a mechanism in place to have the cost of such mentoring rolled into the loan. These participants suggested that a mentorship program could also reduce the risk level of the loan.
Many participants said that inter-generational farm transfers have a built-in mentorship program in which experienced producers continue to provide guidance and support to the next generation. Some participants suggested that the definition of “inter-generational” not be restricted to transfers among family members, and said that it should include other farm transfers from one generation to another.
Participants agreed on the need to review the 80 per cent eligible rate for loans to beginning producers.Representatives of financial institutions said they were open to a higher eligible rate for beginning producers in principle, but that this rate should be flexible on a case-by-case basis depending on the financial institution's assessment of the specific situation of the applicant. All participants were supportive of the concept that the beginning producer should have a personal stake in the loan, and most said that an equity share of 10 percent was a reasonable demonstration of commitment on the producer's part. However, some participants said that more research should be conducted to determine a suitable minimum equity rate for the producer based on default data from other government loan guarantee programs for producers.
Representatives of financial institutions noted that asking first-time producers for a 20 per cent equity contribution is very difficult for someone who is starting in the sector. They were supportive of allowing qualified beginning producers to obtain up to 90 per cent of the eligible rate of the loan amount under the program. Some participants also cited the Canada Mortgage and Housing Corporation (CMHC) mortgage program as an example of a program that offers a sliding scale of down payment percentages to allow new homebuyers an opportunity for ownership depending on the equity they bring to the purchase.
Others suggested that there should be some flexibility in the eligible rate of the loan amount for first-time producers by asset class: for example, a less risky purchase such as land might be financed at 100 per cent with a variable interest rate. However, some participants said that offering varying equity percentages depending on asset class could be challenging, since there have been many instances in the past of dramatic decreases in value for even a very secure asset such as land.
Participants also supported the current 95 per cent loan guarantee amount as it relates to beginning producers, although most agreed it should also be reviewed as part of the extension of the program to beginning producers and inter-generational farm transfers. Some participants said that before a decision was made about the appropriate level of a guarantee for beginning producers, more research would be needed to determine the impact on access to the program (i.e., the willingness of financial institutions to extend loans to beginning producers under a lower level of guarantee).
Most participants agreed that the level of guarantee should stay at the 95 per cent level for new producers, and that this level is appropriate to account for the additional risk that first-time producers carry. Reaction to varying the level of guarantee was mixed, with many participants arguing that there should not be rigid rules and that the program should allow financial institutions the flexibility to evaluate each applicant's risk level on a ‘case-by-case' basis, as they do with any loan application.
Participants at all sessions agreed on the merit of helping beginning producers by introducing more flexibility in repayment options. They agreed that offering a principal holiday for beginning producers for a set amount of time would greatly assist these clients in getting started. Many participants suggested that a principal holiday of two years for a beginning producer would allow that person to get established, reasoning that comparable options were available to small businesses in other sectors. Participants in some locations suggested that the timing of principal payments be linked to revenue, such that a beginning producer would begin to pay principal based on income generated rather than on an arbitrary schedule. These participants said that it may take up to eighteen months for a producer to start generating revenues due to the time lag between seeding crops and getting products to market. They noted that for cow-calf operations, the revenue may be further down the road than for dairy, while a new tree fruit grower sometimes requires five or six years before they are able to turn a profit.
Many participants were also supportive of implementing a one time principal holiday for all FIMCLA users, which could come into effect for a set period of time - perhaps up to two years - at any point during the life of the loan. They said this would allow producers a reprieve on paying the principal of the FIMCLA loan(s) during a difficult period (such as recently occurred with Bovine Spongiform Encephalopathy (BSE)), which sometimes causes significant hardship for farm families.
Representatives of financial institutions at all sessions saw the idea of a principal holiday as a reasonable option, although some said they would expect that parameters for such an option would need to be set such that it would come into effect only if there were an industry-wide misfortune, such as a drought. Some of these representatives said that the period of the principal holiday might be better left to the lender's discretion, depending on considerations such as the asset class (i.e., depreciable or non-depreciable), while others suggested that the length of time be limited to one or two years to ensure that a repayment problem would not simply be put off indefinitely into the future.
An additional option discussed by participants in one location was the possibility of a principal holiday for a set period of time (notionally, two years), after which the producer could move gradually to a full repayment program rather than having to ramp up to the full repayment amount immediately. They suggested that after the principal holiday period, a beginning producer could gradually increase the amount of the regular payment until he or she reached the “normal” repayment schedule. Representatives of financial institutions saw this as a feasible option, and agreed it could provide beginning producers with some welcome breathing room in the first few years of operation.
Participants across the country did not support the idea of the registration fee being increased for new producers in return for gaining access to the program. They said this would simply create another barrier to entry for beginning producers, and that such a move would be in direct conflict with the government's desire to ensure easier access to credit for this group. For their part, representatives of financial institutions said they did not see the value of increasing the fee for this group of users, saying that in their experience, the fee is already a deterrent to program uptake. In several locations, participants suggested that the program should not make any distinction between new producers, farm transfers, or any other type of operation, and stressed that accessibility and equality should be built into the program design.
There was discussion in two locations of removing the registration fee entirely. Participants who advocated this point of view said that producers provide an important benefit to society and should not be required to pay a fee to use a government program. Others said that it is reasonable to expect those who use a program to help pay for it to cover loan defaults, and that even the current fee of 0.85% of the loan amount was lower than business people in other sectors are required to pay for similar loan guarantee programs.
3.2 Expand the program to allow more flexible eligibility rules for co-operatives
All participants agreed that the FIMCLA should be expanded to allow more flexible rules for the types of co-operatives that can access program support. They were unanimous that co-operatives whose members include non-producers should be eligible, noting that many co-operatives struggle to obtain financing because of the limited availability of equity and resources in the producer community. They stressed that co-operatives must go beyond their producer base to obtain both financial and technical support, including from community members - including the public and local businesses - who have an interest in co-operatives as part of community economic development. Participants said that co-operatives should not be penalized for having brought on board local partners by being left out of government programs. Representatives of financial institutions agreed that co-operatives with non-producer membership have a larger skill set that could be beneficial to the operation, and that are often more viable and less risky as a result.
Most participants across the country said that for these reasons, the current eligibility rules of 100 per cent producer membership for co-operatives accessing FIMCLA loan guarantees should be changed. When asked what the percentage of producer membership should be, many suggested that 50 per cent plus one would be sufficient to ensure that co-operatives remain producer controlled, which many said is critical to ensuring that the agricultural community continues to be the main beneficiary of the loan guarantee program.
However, some co-operative representatives cautioned that the co-operative model is constantly adapting to new circumstances and that government support to help the sector develop should not be contingent on specific definitions of membership. These participants said that some flexibility is required in the definition of producer control. They cited the United States as an example where the requirement for a minimum of 50 per cent plus one producer membership in co-operatives is a requirement for only certain types of government support, whereas for others (such as limited liability corporations investing in bio-fuels), this percentage requirement is lower in order to encourage financial partnerships.
Many participants across the country agreed that while producer control can take many forms, the most effective measure of control is through membership. Others suggested that producer control stems from having a majority of producers as board members, and noted that in some provinces, legislation dictates that co-operative boards be composed of a maximum of 20 per cent non-producers.
Some participants suggested that only co-operatives in which all members are actively engaged (or intend to be engaged in, for start-ups) in the business of the co-operative should be eligible for the FIMCLA loan guarantees. These participants said that this criterion would take into account producers, investors, consumers and community members, all of whom have a relationship with the co-operative. However, a few participants raised concerns that this definition would exclude co-operatives who have retired producers as members. They said that in many cases, retired producers are a valuable asset to co-operatives because of their experience, and that co-operatives with such members may in fact be less risky than others and therefore more worthy of a loan guarantee.
A few participants said that agricultural co-operatives that are not necessarily focused on production, processing or marketing of agricultural goods should be eligible for FIMCLA. They gave the example ofa co-operative in which producers produce wind energy as a legitimate candidate for the FIMCLA support.
While most representatives of financial institutions said that a co-operative with 50 per cent plus one producer membership should be eligible for the FIMCLA support, a few noted that control also means liability. These participants cautioned that if there is a need for more capital, those who are in control have to take responsibility and that in many cases, producers are not in a position to take on additional liability. In short, they said that the implications of producer control need to be considered when determining the FIMCLA program eligibility rules.
A few participants said that the federal government should not create its own definition of an eligible co-operative under the FIMCLA, but instead rely on provincial definitions. However, it was noted that this would create discrepancies between eligibility of co-operatives in different provinces.
3.3 Increase the aggregate loan limits for producers and co-operatives
Participants at all sessions agreed that current FIMCLA loan limits for producers ($250,000) and co-operatives ($3 million) are too low, and that they do not reflect the current cost of operating a farm or developing a co-operative, which have increased significantly over the past decade.Having said that, there were varying viewpoints on what the new level of loan limits should be.
Many participants suggested that the ceiling for the aggregate loan amounts for both producers and co-operatives should be doubled, and perhaps tripled for certain more secure classes of assets (such as land). Some suggested that more analysis was required to determine the differences in risk levels across classes of assets in order to determine whether differentiated aggregate loan limits would be warranted.
In some locations, particularly where average farms are large, participants suggested quadrupling the current loan limits for both producers and co-operatives. Participants in these areas gave examples of a turn-key dairy operation costing $1 million for a beginning producer, and a small co-operative slaughter house costing a minimum of $8 million to get started.
A few participants questioned the need for a loan limit and suggested that it be left to the discretion of the financial institution, while others noted that it was a public program and therefore a limit was necessary in order to keep program costs at a reasonable level.
While financial institutions agreed that a limit of $8-10 million for co-operatives was reasonable based on the costs of projects they have reviewed in the past, many acknowledged that even this amount was not sufficient for some of the new types of large, value-added co-operatives such as bio-fuel operations. A few participants said that to take advantage of new opportunities for co-operatives in areas such as bio-fuels or nutraceuticals, the aggregate loan limit for co-operatives would need to increase to $30 million. Others suggested that different tiers of loan limits could be put in place, whereby a higher tier of loan limit would be allowed for a non-depreciable asset than for a depreciable asset.
Participants did not support the requirement for additional security as part of a move towards higher aggregate limits. Representatives of financial institutions agreed that additional security should not necessarily mean increased risk, and therefore did not think that either the eligible rate of the loan amount or the percentage of the guarantee should be affected by higher loan limits. Some of these representatives suggested higher-value assets are often less risky, which could in fact mean fewer defaults on high-value loan amounts. They said that regardless of the upper limit, the financial institution will carry out normal due diligence on the applicant to ensure the producer or the co-operative is capable of assuming the amount of the loan. That said, some representatives of financial institutions suggested that more research be done to quantify the impact on risk of an increase in the borrowing limit, so that the government could model how these changes would affect overall program costs.
3.4 Increase the eligible rate of loan amount
Most participants across the country agreed that an increase in the eligible rate of the loan amount for certain clients would be a positive development, and reiterated points they had made earlier in the discussion with respect to increasing this rate for beginning producers. The most common suggestion was to increase the rate to 90 per cent from the current 80 per cent eligible rate of loan amount for beginning producers and in cases of inter-generational farm transfers. There was broad acknowledgement among participants that a 10 per cent downpayment is still a significant investment for most producers, and that it represents a reasonable commitment by the producer to the operation.
Some participants suggested that the eligible rate of the loan amount could be as high as a 100 per cent in circumstances where the producer or co-operative has substantial equity to qualify for the loan and is buying an asset that is not likely to depreciate over time, such as land. A few participants said they could understand why current FIMCLA rules do not allow loan guarantees to be made available for intangible assets such as quotas, whose current value in the marketplace could decrease in the future depending on a variety of factors, such as government decisions. Participants had varying views on whether the FIMCLA program should include quota as an eligible use. Some said that it is an important asset for producers and should be recognized as such. However, others noted that there are other government programs available for this purpose and that there is a risk that including quota as an eligible use would simply increase its price, making it impossible for anyone but established producers to get into the dairy business.
Some participants suggested that there could be a sliding scale for the eligible rate of the loan amount depending on the type of asset purchased, although others said it would be difficult to establish variable rates that would make sense on a national basis. For example, they noted that while the price of land is currently high in British Columbia and Alberta, in other provinces, land may not be worth as much. Some representatives of financial institutions echoed these concerns and said they had negative experiences with land assets in the past depreciating in value over time. For this reason, and due to the complexity that variable rates of loan amounts might add to program administration, financial institutions were not supportive of the FIMCLA developing variable rates of loan amounts based on asset class.
While they acknowledged that it would likely be appropriate as an option for beginning producer loans, few representatives of financial institutions said that an increase in the eligible rate of loan amount to 90 per cent increases the risk of the loan. These participants also noted that 75 per cent is the current standard eligible rate for non-farm financial institution loans.
In all locations, however, representatives of financial institutions said that while the guarantee shores up their decision on whether to grant a loan, financial institutions lend on a business case basis, by assessing the applicant's risk level and cash flow.
3.5 Modify the registration fee to incorporate different risk categories/amounts of loans
Participants at many sessions asked about the purpose of the registration fee, and were informed by Agriculture and Agri-Food Canada officials that it covers future claims and the administration of the program. Participants observed that opening the program to beginning producers, inter-generational farm transfers as well as a broader range of co-operatives would increase the total amount of administration fees collected by the government.
Many participants were skeptical of the merit of applying variable registration fees based on the asset class, on different amounts of loans or on an applicant's risk profile. They noted the challenge inherent in knowing which assets will be more secure than others over time, and illustrated this point using the example of land prices dropping significantly during the 1980s in several parts of the country. In terms of registration fees paid by co-operatives, participants said that it might be feasible to have different registration fees based on different types of co-operatives, according to the risk profile of the project.
Some participants suggested that another approach would be to charge a flat administrative fee and not a percentage of the loan amount. These participants said that a flat fee option would be easier to manage and would not be a deterrent to program use for producers and financial institutions making large loan arrangements. Others said that in their experience, smaller farm producers find the registration fee of 0.85 per cent of the loan amount a deterrent to participating in the program. Some supported the concept of those users with a higher loan amount paying higher user fees, or some fee differences based on the type of asset class purchased. It was noted that in at least one province, the registration fee for the provincial loan guarantee program had recently been dropped to 0.5 per cent in response to producer concerns.
Some producers noted that if fees were increased for potentially high-risk users, those who most require the funds and cannot obtain them from financial institutions due to their high risk profile will not have access to the necessary capital for start-up or expansion. Other participants argued that different fees for different types of asset classes and different applications would introduce additional complexity into the process of accessing the FIMCLA, which could increase errors in program administration and decrease participation.
A few participants suggested that more research be done on what the market norm for registration fees for such programs in other sectors before a decision is made. For their part, representatives of financial institutions said that variable registration fees are more difficult to administer and add to the complexity of the program, including when they are talking to producers about how it works. These participants said it is simpler for financial institutions to work with a flat fee, or to stay with the current approach of a uniform percentage-based fee. Some said if there were no fee at all, they would also be comfortable with this approach.
4. Potential Changes to Modernize FIMCLA Delivery
In the afternoon, an AAFC representative made a presentation to participants on changes that AAFC is considering to reduce the administrative burden associated with FIMCLA by modernizing program delivery through the implementation of an on-line initiative. As part of the presentation, he reviewed recent feedback from representatives of financial institutions and producers on program delivery challenges and demonstrated how an on-line solution would address many of these issues.
All the participants who attended the afternoon sessions supported the changes put forward in the presentation. Participants raised a number of points, including the following:
- Participants asked whether the Farm Credit Canada (FCC) had expressed an interest in participating in the FIMCLA program. Agriculture and Agri-Food Canada officials said that currently the FCC cannot participate in the program since the FCC as a Crown corporation provides loans that are already backed by the government of Canada.
- They asked about whether producers could access their own account under the online FIMCLA program. They were informed by AAFC that they would be able to do so.
- Participants also questioned how the program would deal with the requirements of privacy legislation and were curious about the information a financial institution would see. AAFC advised that all privacy and personal information questions were being addressed in collaboration with the Privacy Commissioner.
- Financial institutions asked whether they would need to make an investment in technology at their end in order to use the FIMCLA technology. AAFC noted that there will not be a need for financial institutions to make a significant investment in the required technology.
AAFC officials noted that the FIMCLA on-line solution will be a paperless process and that the feedback from producers and financial institutions involved in a similar on-line solution for the Cash Advance programs has been very positive. It was also noted that the on-line system will be designed to facilitate the use of the web-based application by individuals with dial-up Internet access, so as to ensure that producers and financial institutions in rural communities have the opportunity to use the on-line system regardless of whether they have access to high-speed Internet.
5. Other Issues
Participants made some other comments related to the FIMCLA beyond the areas outlined in the discussion document, including the following:
- Participants said that new incorporations should be allowed under the FIMCLA, as it is often part of a strategy for succession planning.
- Participants expressed concern that on-reserve producers cannot access the program because the loan guarantee requires valid security, which is not available on reserves. They indicated that in their view, an Aboriginal person living on or off reserve should be eligible, as long as they are a producer. It was suggested that if land is the major issue for on reserve Aboriginals, perhaps other areas could be covered under the FIMCLA and land could be excluded. Participants said that the Department of Indian and Northern Affairs and Agriculture and Agri-Food Canada should work to address this challenge so that the program could be accessed by on-reserve producers.
- A few participants suggested that the FIMCLA look at offering split loans, with one locked in rate and one floating rate, to make the program more attractive to producers needing to access large loan amounts.
- Some representatives of financial institutions suggested that the requirement to have the client change financial institutions in the case of a loan consolidation of the FIMCLA and non-FIMCLA loans be removed, as it sometimes is an excellent solution for the client. These participants also noted that if loan limits are to be raised, the aggregate guarantee level for a lender's FIMCLA portfolio should also be adjusted.
- Some representatives of co-operatives said that if the program changes to open it up to more co-operatives, more information should be forwarded to financial institutions and to co-operatives about the program. They also said that financial institutions need more information in general on the co-operative model and successful operations, so they can develop a comfort level about them.
- A few participants suggested that the FIMCLA should split into two separate programs - one for co-operatives and one for producers.
- Some participants suggested that the FIMCLA may be more valuable to producers if it focused on providing financing for the 10 to 15 per cent of funding required for a project that financial institutions will not provide.
- A number of participants said that a cost-benefit evaluation of the FIMCLA should be done to assess impacts from a more global perspective, including on the social as well as economic well-being of rural communities.
- Some participants said in order for the FIMCLA to be worthwhile for financial institutions, there needs to be clarity on when the FIMCLA does and does not pay on defaulted loans.
- Some participants expressed concern that large companies could create dummy co-operatives in order to be eligible for the FIMCLA if the program is expanded to include a wider range of co-operatives. They cautioned that it would be important to ensure that this situation did not occur, since it would mean fewer opportunities for legitimate co-operatives to obtain needed credit.
- Some participants suggested that a wider range of farm-based businesses and other value-added businesses, such as marketing of farm grains and seed cleaning, should be covered under the FIMCLA.
- Some participants suggested that general farm organizations (GFOs) be able to administer the program in its entirety, as they do with the Advance Payments Program (APP). Other participants suggested that the length of the loan (normally approximately 15 years) makes the FIMCLA sufficiently different from the APP that GFOs would have a hard time as the sole administrator of the program. Instead, they suggested that farm organizations could be involved in an Advisory Board capacity to the financial institutions, reviewing loan applications and providing agricultural expertise to assist the banks with their due diligence and decision-making.
6. Feedback from Participants
At the end of each meeting, AAFC representatives thanked participants for their time and input, and noted that the report on the consultation session would be provided to them in the coming weeks along with the summary report capturing overall results from the eight consultation sessions across the country. AAFC representatives also encouraged participants (or others they know who were not able to attend the session) to make any further comments on potential changes to the FIMCLA by email, and provided their coordinates to participants.
Participants were asked to complete exit surveys on the session and to provide completed surveys to AAFC prior to leaving the session, as their comments would be useful for future consultation sessions. A few participants took the time on exit surveys to comment that sessions may have greater attendance by producers if they had been held in rural areas. They also said that they were interested in having further sessions and discussions around the changes to the program and legislation. Key results from the exit surveys are included below:
- 62.5 % responded that the sessions gave them a significantly better and 31% a good understanding of the potential changes to integrate, broaden, and modernize the delivery of the FIMCLA.
- 75% of participants indicated that the sessions provided them with an opportunity to fully express their views.
- 97% of participants responded that the sessions successfully brought together diverse stakeholder interests.
- 52% said that the sessions were excellent and 48% said they were good occasions to raise issues that were important to them.
Some participants took the opportunity on exit surveys to make additional comments on the design and/or delivery of the FIMCLA, including the following:
- If the banks are hesitant to participate in the program, the FIMCLA should consider a credit union or Business Development Corporation network.
- The program has a big vacuum to fill with the provinces pulling out of financial assistance programs for agriculture.
- It would help to introduce a pre-approval process that would determine eligibility for the program to reduce the uncertainty of future claims.
- The focus of efforts should be on producer loans for bio-fuels, packaging plants, and large scale co-operative loans.
- Housing which is set up for employees of the farm should be included under the mortgage section of the program, as well as upgrades to the principal residence which could receive partial funding.
- The FIMCLA must be focused on primary production as business can move to population centres and producers cannot.
Appendix 1 - Sessions Participants
Calgary:
| Name | Organization |
|---|---|
| Michele Aasgard | Alberta Community and Co-operative Association |
| Humphrey Banack | Wild Rose Agriculture Producers |
| Casey Bydevaate | Potato Growers of Alberta |
| T.M. (Teresa) Clouston | ATB Financial |
| Ed Kinzel | Credit Union of Alberta |
| Dale Kuly | Agriculture Financial Service Corporation |
| Eillen McElroy | Western Stock Grower's Association |
| Jeff Nielsen | Western Barley Growers Association |
| John Polegi |
RBC Royal Bank of Canada |
| Ross Purdy | BMO Bank of Montreal |
| Don Thompson | Cooptions Consulting Coop Ltd. |
| Ken Vincent |
Director of Cooperatives – Alberta |
| Henry Wierenga | Alberta Chain Co-op |
Guelph
| Name | Organization |
|---|---|
| John Ardiel | The Bay Growers' Co-operative Inc. |
| Jason Bent | Ontario Federation of Agriculture |
| Fitz Bharath | Ontario Soybean Growers |
| Heather Blanchard | Brier Run Alpacas - Edy's Mills Fine Fibres |
| Ron Bonnett | Ontario Federation of Agriculture |
| Michael Bouk | AG Energy Co-operative |
| Norma Collett | Newfoundland and Labrador Livestock Producer's Council |
| Alison Connell | BMO Bank of Montreal |
| Sante P. DeCarolis | CSEA Inc. (Canadian Sweet Potato Ethanol Alliance) |
| John Gillespie | Ontario Cattlemen's Association |
| Jim Grey | Ontario Soybean Growers |
| Ann Gulliver | ACC Farmer's Financial |
| Denyse Guy | Ontario Co-operative Association |
| Darren Hannah | Canadian Bankers Association |
| Matthew Holden | TD Canada Trust |
| Brian M. Hughes | ACC Farmer's Financial |
| Larry Huszczo | CSEA Inc. (Canadian Sweet Potato Ethanol Alliance) |
| Frank Kennes | St. Willibrord - The Credit Union |
| Don Ledrew | ACC Farmer's Financial |
| Ryder Lee | Canadian Cattlemen's Association |
| Angela Yee Loong | Royal Bank Financial Group |
| Norris McAuslan | Brier Run Alpacas - Edy's Mills Fine Fibres |
| Vicky Malcom | The Ontario Flue-Cured Tobacco Growers' Marketing Board |
| Lynne Markell | Canadian Co-operative Association |
| Jeffery Mitchell |
Canada Mink Breeders Association |
| Berry W. Murray | CSEA Inc. (Canadian Sweet Potato Ethanol Alliance) |
| Bob Norris | Ontario Federation of Agriculture |
| Kirk Rankin | Canada Mink Breeders Association |
| Helmuth Spreitzer | Ontario Pork |
| Paul A. Stewart | CIBC Mortgages & Lending |
| Lisa Thompson | Ontario Dairy Goat Co-operative |
| John Van Alten | Ontario Beekeepers' Association |
| Beth Wismer | Indian Agricultural Program of Ontario |
Longueuil:
| Name | Organization |
|---|---|
| Yvan Beaudin | National Bank of Canada |
| Pierre Beaudoin | Royal Bank of Canada |
| Amrane Boumghar | Agriculture and Agri-Food Canada |
| Gilles Bourget | Ministère de l'Agriculture, des Pêcheries et de l'Alimentation |
| Félix Bussières | Union des cultivateurs franco-ontariens |
| Marjolaine Carrier | Desjardins Fédération des caisses du Québec |
| Michel Clément | Ministère du Développement économique, de l'Innovation et de l'Exportation |
| Sylvie Cloutier | Council Food Processing and Consumer Products |
| Robert Gratton | Co-opérative Agricole D'Embrun |
| Donald Hains | Laurentian Bank |
| Ivan Hale | Quebec Farmers' Association |
| André Jalbert | Fédération des Coopératives de Développement Régional du Québec |
| Sylvain Martel | Nutrinor, Coopérative agro-alimentaire du Saguenay Lac-St-Jean |
| Bruno Montour | Conseil de la coopération du Québec |
| Myriam Parent | Desjardins Fédération des caisses du Québec |
| Josée Robitaille | Ministère de l'Agriculture, des Pêcheries et de l'Alimentation |
| Yvan Roy | Qualiporc Regroupement Coopératif |
| Harley Trudeau | Government of Yukon |
| Virginie Simard | La Financère agricole du Québec |
| Paul-André | Vallières National Bank of Canada |
Moncton:
| Name | Organization |
|---|---|
| Bruce Andrews | Atlantic Beef Products |
| Ian Blenkham | Chicken Farmers of Nova Scotia |
| Hans Bouma | Dairy Farmers of New Brunswick |
| Charline Cormier | Chicken Farmers of Nova Scotia |
| Mark Davies | Nova Scotia Turkey Producers |
| Michael Delaney | P.E.I. Grain Elevators Corporation |
| Melvin Doiron | Coopérative de développement régional - Acadie |
| Frank Foster | Nova Scotia Federation of Agriculture |
| Claire Gagnon | Registraire des coopératives, Ministère de la Justice |
| Shelly Higgins | Porc NB Pork |
| Donna M. Langille |
Nova Scotia Federation of Agriculture |
| Jennifer MacDonald | Chicken Farmers of Nova Scotia |
| Jonathan McClelland | Nova Scotia Co-operative Council |
| John Murray | Nova Scotia Farm Loan Board |
| Mike Nabuurs | Prince Edward Island Federation of Agriculture (PEIFA) |
| Laurence Nason | Nova Scotia Federation of Agriculture |
| Fred Pierce | Nova Scotia Co-operative Council |
| Janice Tait | RBC Royal Bank of Canada |
| Henry | Vissers Pork Nova Scotia |
Regina:
| Name | Organization |
|---|---|
| Virginia Coupal | Western Canadian Marketers & Processors |
| Jason Dean | Saskatchewan Cattle Feeders Association |
| Lanny Dewan | RBC Royal Bank of Canada |
| Judie Dyck | Saskatchewan Canola Growers Association |
| Laurel Feltin | Saskatchewan Association of Rural Municipalities |
| Lyle Frick | Credit Union Central of Saskatchewan |
| Dennis Fuglerud | Saskatchewan Stockergrowers Assocation |
| Jim Graham | Saskatchewan Agriculture, Food and Rural Revitalization |
| Shawn Hermanson | Saskatchewan Agriculture and Food |
| Tim Highmoor | Saskatchewan Cattle Feeders Association |
| Kerry Holderness | Agricultural Producers Association of Saskatchewan |
| Sylvain Lejeune | Conseil de la coopération de la Saskatchewan |
| Caroline Maze | Saskatchewan Indian Equity Foundation Inc. |
| Jim Parsons | Great West Beef & Bison Inc. |
| Don Ross | Western Farm Leadership Co-operative |
| Clem Samson | Farm Credit Canada |
| Kim Sanderson | University of Saskatchewan, Specialized Livestock Market Research Group |
| Pam Skotnitsky | Credit Union Central of Saskatchewan |
| Glen Snyder |
BMO Bank of Montreal |
| Lorne Tangjerd | Saskatchewan Agriculture, Food and Rural Revitalization |
| Veronica Wollmann | Credit Union Central of Saskatchewan |
St. John's:
| Name | Organization |
|---|---|
| Andrea Bourne | Agri-Adapt Council Inc. |
| Harry Burden | Dairy Farmers of Newfoundland and Labrador |
| Roger Churchill | Department of Innovation, Trade & Development |
| Norma Collett | Newfoundland and Labrador Livestock Producer's Council |
| Jason Collins | Egg Producers of Newfoundland and Labrador |
| Dwight Eveleigh | Newfoundland and Labrador Horticulture Producers Council |
| Brian Goldsworthy | Agriculture and Agri-Food Canada |
| Michelle Lester | Provincial Farm Women's Association |
| Glen Fitzpatrick | Newfoundland and Labrador Federation of Co-operatives |
| Lynn Kendall | Department of Forest Resources |
| Cynthia MacDonald | Department of Forest Resources and Agrifoods |
| Mark MacPherson | Government of Newfoundland and Labrador |
| Tony Marx | Newfoundland and Labrador Federation of Agriculture |
| Gordon McKenna | Farm Association Producer |
| Cle Newhook | Axis Consulting |
| Dave | Oliver Producer |
| Daxton Pinsent | Department of Innovation, Trade & Development |
| Frank Pye | Lake Melville Agricultural Association |
| Melvin Rideout | Newfoundland and Labrador Horticulture Producers Council |
| Gillian Skinner | Department of Innovation, Trade & Development |
| Winston Stanley | Newfoundland and Labrador Horticulture Producers Council |
| Karl Tee | Atlantic Canada Opportunities Agency |
| Ron Walsh | Sheep Producers Association of Newfoundland and Labrador |
| Ann Marie | Whelan Newfoundland and Labrador Horticulture Producers Council |
| Chan Wiseman | Newfoundland and Labrador Young Farmers |
| Mervin Wiseman | Newfoundland and Labrador Federation of Agriculture |
Vancouver:
| Name | Organization |
|---|---|
| Rick Buchanan | Credit Union Central of British Columbia |
| Joy Emmanuel | BC Institute for Co-operative Studies |
| Diane Fillmore | BC Ministry of Agriculture & Lands |
| Kerry Froese | B.C. Chicken Grower's Association |
| Martin J. | Frost PWC DevCo, The Co-operative Consultants |
| Trevor Kempthorne | First Nations Agricultural Lending Association |
| Glen Lucas | B.C. Fruit Growers' Association |
| Renee Umezuki | Agriculture and Agri-Food Canada (Regional Office) |
| Bob Richards | RBC Royal Bank of Canada |
| Stephen Thomson | B.C. Agriculture Council |
Winnipeg:
| Name | Organization |
|---|---|
| R. Peter Blawat | Manitoba Agriculture, Food and Rural Initiatives |
| Scott Clayton | Manitoba Agricultural Services Corp. |
| Alvin Depauw | Keystone Agricultural Producers |
| Tom Dooley | Aikins, MacAulay & Thorvaldson LLP |
| Joy Dornian | Souris & Glenwood Community Development Corporation |
| Wendy Friesen | Manitoba Pork Council |
| Vera Goussaert | Manitoba Cooperative Association Inc. |
| David Kerr |
Manitoba Agriculture, Food and Rural Initiatives |
| Marnie Kostur | Parkland Agricultural Resource Cooperative |
| Cam McIntosh | RBC Royal Bank of Canada |
| Dale Myhre | Tribal Wi-chi-way-win Capital Corporation |
| Gil Nelson | Granny's Poultry Co-operative Ltd. |
| Hugh Stephenson | Producer |
| Bill Swan | Dairy Farmers of Manitoba |
| Louis Tétrault |
Conseil de développement économique des municipalités bilingues du Manitoba |
| Ed Thomas | The Canadian Wheat Board |
Appendix 2 - AAFC Representatives at Sessions*
| Name | Organization |
|---|---|
| Albert Daoust | Agriculture and Agri-Food Canada |
| Bruce Langevin | Agriculture and Agri-Food Canada |
| Michel Massé | Agriculture and Agri-Food Canada |
| Rémi Massé | Agriculture and Agri-Food Canada |
| Rhiannen Putt | Agriculture and Agri-Food Canada |
| Alain Roy | Agriculture and Agri-Food Canada |
| Donna Seymour | Agriculture and Agri-Food Canada |
| Bob Shalla | Agriculture and Agri-Food Canada |
| Karine Tardif | Agriculture and Agri-Food Canada |
| Raymond Whelan | Agriculture and Agri-Food Canada |
| *Please note that not all the listed AAFC representatives were present at each session. | |