Firm tests ‘mortgage streaming’ contracts for canola

A Regina-based company that buys unharvested canola from farmers through so-called “streaming contracts” is dipping its toes into the farmland mortgage market.

Input Capital Corp. announced Jan. 30 that it has launched a new “mortgage stream” on a pilot project basis.

Western Canadian canola growers who require financing for farmland real estate purchases will have the option of entering a mortgage contract with Input Capital and making subsequent mortgage payments with canola.

“There are still some edges to be figured out on this, but we’ve done a couple of (these agreements) and they’ve been pretty straight forward so far,” said Input Capital president Doug Emsley.

“It’s like a traditional mortgage product… We would be the finance company … but with our product, the idea is that you (the borrower) would pay us off with canola.”

As with other mortgage products, amortization periods and mortgage terms would be negotiated.

Borrowers would be required to make an initial downpayment, probably in the range of 20 to 30 percent of the farmland ‘s value, in order to qualify.

Borrowings by the farmer would be repaid over a number of years with canola prices fixed over the term of the mortgage.

Emsley said the concept is appealing to farmers because it allows them to lock in the price of canola and reduces their exposure to market fluctuations.

Input would also assume responsibility for picking up canola at the producer’s farm.

Input’s interest rates would be “competitive” with those offered by other commercial lenders, Emsley said.

“But because we’re going to assume that price risk on the canola, our (product) might be a little bit more expensive from an interest rate standpoint,” he added.

Input has already negotiated its first “mortgage stream” contract in the amount of $400,000 with an existing client in Saskatchewan.

Other growers have also expressed interest.

“There’s been a fairly decent interest level,” Emsley said.

“We’re going to do it as a pilot test first … and if it works, we’ll carry it forward and make it one of our company’s … (standard offerings) to the market.”

Input is an agriculture commodity company that buys and sells canola, the largest and most profitable crop in Western Canada.

The company enters into multi-year canola streaming contracts with canola farmers in the prairie provinces and buys a fixed volume of canola annually for the duration of each producer’s contract.

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