The next two months will begin to reveal the extent of the impact of the BSE crisis on beef producer bottom lines, says the president of Farm Credit Canada.
During November and December, $55 million in payments are due, John Ryan told MPs on the House of Commons agriculture committee Oct. 2.
“I think we need to wait to see that before we have a full appreciation (of the financial hurt from bovine spongiform encephalopathy),” he said.
Already there are some signs of trouble.
Ryan said the Regina-based farm lending crown corporation has outstanding debt of $1.7 billion to farmers affected by the export and price catastrophe.
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“It adds up to a very significant exposure for Farm Credit,” he said.
Arrears on that debt is higher than it was a year ago – 0.674 percent of the portfolio compared to 0.490 percent last year. That could rise substantially by the end of the year.
“I think the difficulties, quite frankly, will be amplified quite extensively, many times over, if there’s a significant delay in that border opening for live cattle,” said Ryan.
The corporation is offering affected customers repayment flexibility, Ryan said. And despite the uncertainty, it is making new loans to beef producers – $68 million worth between May 20 and Aug. 31.
“The overriding message that we wanted to convey is that we believe in the underlying strength of the sector and that we are taking the long-term view and we’ll continue to do business with the beef operators.”
Still, FCC is bracing for some financial trouble in the sector and other livestock affected by the glut of beef.
“Rebuilding businesses will be a long-term process,” he said. “It won’t be overnight.”
FCC chief operating officer Janet Wightman said in the cow-calf sector “people are hanging in. They are trying to service their debt load.”
“If the situation continues on, cow-calf operators will see decreased revenues and tightened cash flow and will be at risk whether or not they can service their debt.”
This week, the committee is hearing evidence from the chartered banks.
