Price Pooling Program: Step 1. What this program offers
Step 1. What this program offers
The Price Pooling Program provides a price guarantee that protects marketing agencies and producers against unanticipated declines in the market price of their products. Program participants use the price guarantee as security in obtaining credit from lending institutions. This credit allows the marketing agency to improve cash flow of producers through an initial payment for products delivered. It also provides equal returns to producers for products of like grades, varieties and types.
This program is designed to assist and encourage cooperative marketing of eligible agricultural products, including processed products.
Under the Price Pooling Program, the Minister of Agriculture and Agri-Food enters into an agreement with a marketing agency (associations of producers, processor or selling agent) for the marketing of agricultural products under a cooperative plan. The agreement provides a price guarantee for products delivered and enables the marketing agency to make an initial payment to the producers for products delivered. This guarantee also covers the marketing agency’s eligible costs of: storing, processing, transportation and selling, to a fixed maximum. The price guarantee is set at a percentage of the expected average wholesale price of the product.
The agreement is valid for the length of the crop year during which the agricultural product will be produced. Once all of the agricultural product is sold, the actual average wholesale price received by the marketing agency is determined. If the calculated value is less than the guarantee value (the initial payment plus the eligible costs), the program allows for a payment for the shortfall by the Government of Canada. If the calculated value is greater, the surplus is retained by the pool for future use or is distributed by the marketing agency to the producers according to the grade, variety and type of the product that they delivered to the pool.
As the program is delivered through marketing agencies on behalf of their members, a producer can only receive an initial payment through a marketing agency and not directly from Agriculture and Agri-Food Canada.
Benefits of the Price Pooling Program
- Improves cash flow position of producers through the provisions of an initial payment for the product delivered, allowing them to meet their short-term financial obligations, and through better returns resulting from cooperative marketing of the product.
- Provides equal returns to producers for products of like grade, variety and type.
- Helps improve the producers' farm income by allowing the marketing of their crops over an extended season when market conditions are better thus achieving orderly marketing of these products.
- Encourages producers to form marketing agencies, to take advantage of marketing opportunities.
- Helps marketing agencies lock-in a minimum rate of return for their members and protects them from unexpected price declines in the marketplace.
- Provides marketing agencies with a price guarantee that can be used as security when obtaining credit from lending institutions to finance the initial payments to producers.
- Enables the marketing agency to profit from economies of scale.
- Facilitates single-desk selling with a pooled price.
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