Canadian legislators are considering the use of letters of credit (L/Cs) in their efforts to persuade farmers in two dissident provinces to sign up to a controversial new federal agricultural programme.

Essentially, the proposals suggest that farmers could use L/Cs rather than cash in advance to obtain cover to ensure that whilst they operate in the programme they receive a stable income despite market conditions.

Federal versus provincial

Federal legislators have to overcome objections from two Canadian provinces - Saskatchewan and Ontario - in order to roll out the proposed Canadian Agricultural Income Stabilisation Programme (CAISP) on a nationwide basis.

In November federal agriculture minister Lyle Vanclief told Ontario agriculture minister Steve Peters he is willing to consider Ontario's demands for change, one of which would be to allow farmers to enrol in the proposed CAISP by presenting a L/C rather than stumping up cash in advance.

Safety net

Ottawa wants its farmers to gain entry to a proposed new safety net programming under CAISP by using a L/C from the bank or credit union that guarantees they will be good for their premium once payments are triggered.

This according to industry analysts would save farmers from having to contribute thousands of Canadian dollars in advance in a programme that may never trigger.

Enticement to sign

Federal legislators would have to face fierce opposition from federal officials before agreeing to Ontario's demand for L/C guarantees.

Some commentators are suggesting that Vanclief's office is making conciliatory noises about the L/C scheme in order to obtain Saskatchewan or Ontario's signature for CLAISP and that the idea will not be implemented. Other commentators say a federal concession on the concept of L/C usage in the programme is under serious consideration.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.