Michael Hoffart looks at an unsettled world economy and sees a glass half-full for farmers, which is why he thinks their ever-increasing overall debt load won’t be a problem.
“The total debt on Canadian farms is increasing but I would suggest remains sustainable if we manage it appropriately,” says Hoffart, Farm Credit Canada’s vice-president of prairie operations.
He told a meeting held during Manitoba Ag Days in Brandon that a recovering world economy and increasing demand for agricultural commodities will keep prairie farming profitable.
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Farm debt levels have increased steadily, despite higher crop prices of the last few years, rising from $35 billion in 1998 to $58 billion in 2008.
Hoffart mainly attributed the debt increase to higher land prices, which have increased at heady rates.
He said Manitoba farmland prices have increased one percent per month for the past 24 months.
Many older farmers have sold their land, taking advantage of higher prices, which has resulted in many younger producers assuming debt to build farmland bases.
The generational shift has led to a good situation for retiring farmers.
“There’s lots and lots of competition for the land that’s available out there,” Hoffart said. “It all shows up in the farm debt number.”
Less happy is the situation of younger farmers who have to carry the debt.
“For sure, you may feel a bit uneasy with this trend, and I would suggest if we don’t manage it appropriately, then it could create some challenges for sure,” he said.
“The other side of the debt story, though, is that this has been really an indication of some of the positive things that have happened in Canadian agriculture in the past 10 years.”
Many farms have been profitable, which has kept credit flowing to farmers even as the credit crunch has throttled other industries in the past two years.
“We continue to see very strong competition for your business,” Hoffart said. “For quality loans that are out there, for the most part the credit market is operating totally as it should, with Canadian banks, credit unions and organizations like FCC staying the course and investing in agriculture for the future and viewing it as a great place to do business.”
Agriculture’s strong position was reflected last week in the thousands of farmers who attended Ag Days.
Big, bright machinery drew the attention of many of the visitors, and taped onto many of the machines were signs saying, “FCC Financing available.”
Hoffart said farmers may have been rattled in recent years by the sudden escalation of crop and fertilizer prices and the subsequent slump, but he thinks the long-term picture is good.
“I think we’re going to have to get used to managing a much more volatile commodity market,” he said.
“Overall, though, the higher market values (for crops) are anticipated, although we’re going to have to get used to managing some of the volatility that’s going to be in place now.”
