As Canadian farm debt continues to climb to a record $66.3 billion last year, Farm Credit Canada is happy to be one of the engines for that growth.
In its annual report to Parliament, the Regina-based crown corporation said its loans outstanding in the fiscal year ended March 31, increased almost eight percent or $1.6 billion to $21.3 billion.
It loaned money to more than 42,000 farmers and agri-businesses and saw the income earned from interest soar 21 percent to $738.5 million.
Net income increased 63 percent to $459 million.
As the farm economy and commodity prices have improved, the corporation said the number of outstanding loans that are at some risk fell to just over two percent.
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FCC cut its set-aside for bad debt to $28 million from $91.4 million the previous year.
President Greg Stewart said in the report that the $5 billion in new lending is a sign of optimism and growth in the sector. The total included $1.6 billion to young farmers.
He said farmers are optimistic.
“Despite the challenges, we believe there are opportunities and the future looks bright for agriculture, a view that is shared in the industry,” he wrote.
“Three-quarters of the 9,000 producers and agribusiness operators we surveyed believe that their operations will be better off in five years. Their expectations for future growth are also higher.”
FCC walks a fine line between its obligation as a government entity to help farmers and its position as a commercial lender.
Last winter during a House of Commons agriculture committee meeting, representatives of Canadian banks resurrected their longtime complaint that because it is backstopped by government, FCC has an unfair advantage in the marketplace.
FCC argues that it plays by the same rules all lenders do but because agriculture is its only business, it has an advantage.
Unlike in the 1980s when FCC played the role of the lender of last resort and regularly lost money through bad debts that the government picked up, it now makes a tidy profit and pays an annual dividend to Ottawa.
In its annual report, it indirectly dealt with industry complaints about unfair competition.
“Access to short-term credit, long-term mortgages and venture capital is essential to the viability and success of the entire agriculture value chain,” said the annual report.
“FCC interest rates should be competitive with those offered by other financial institutions, neither the lowest nor the highest, in order to serve as a fair participant in the agriculture financing marketplace.”
However, it also acknowledged its position as a part of government by insisting that it should be one of the players involved in designing the next generation of farm programs through Growing Forward 2, scheduled to take effect April 1, 2012.
And FCC said it is bound by government attempts to control spending. “Budget 2010 set out a clear direction regarding spending restraint including a freeze in operating expenses at 2010-11 levels.”
The report noted that through its annual food bank drive organized in communities where FCC has offices, more than 5.2 million pounds of food have been collected since 2004 for local food banks.
