The Canadian hog industry is encouraging producers to share their views on a new federal loan program aimed at helping the industry through troubled times.
The hog industry loan loss reserve program was part of a three-pronged assistance package that federal agriculture minister Gerry Ritz introduced in August.
The loan program was designed to help cash strapped producers cope with immediate cash-flow problems.
To qualify, eligible producers must file a business plan that shows their operations are viable and have a reasonable prospect of repaying their loans.
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Under terms of the program, the federal government and private sector lenders share the financial risk involved in consolidating short-term debts into long-term loans.
Lenders are responsible for assessing the applications, determining eligibility and credit limits, and managing a federally funded reserve account that is intended to cover default-related losses.
Lending institutions must absorb losses that the reserve fund cannot cover.
Canadian Pork Council president Jurgen Preugschas said the industry is watching the program to ensure it is meeting its objectives.
He said lending institutions and government officials have only recently ironed out administrative details of the program, but already hog industry officials are hearing reports that some producers have been refused help because they cannot live up to their bank’s viability test.
“The CPC has been very supportive of the loan program and we feel that it will be quite helpful to producers across Canada,” Preugschas said.
“But some of the news that we’re hearing now is a little bit concerning in that producers are being turned down by banks. If that turns out to be true – that producers don’t have access to those funds – then we’ve got a very major problem.”
Neil Ketilson, general manager of the Saskatchewan Pork Development Board, echoed those concerns and is urging producers to come forward if they have been refused assistance.
Ketilson said the viability criteria that lenders are imposing is an area of concern.
“Typically banks look for debt to equity ratios, they look for other security in terms of land or other facilities that a producer could put up as (collateral), but this industry has lost a tremendous amount of equity in the last three years,” Ketilson said.
“There are a lot of farmers who are going to have some difficulty providing extra security. If the basis of those loans is extra security or large amounts of equity to use as leverage, I’m not sure that they’re going to be able to provide that.”
He said the next few weeks will be critical in assessing whether the loan program is meeting the industry’s needs.
