Farm Credit Canada, the Regina-based federal crown corporation and largest Canadian farm lender, has reported net income of more than half a billion dollars for the last fiscal year.
The money will divided between a dividend to the federal government and reinvestment in the corporation.
The corporation’s strong performance reflects an income and asset boom in much of agriculture.
Set-aside for loan defaults was decreased.
The FCC numbers also reflect Canada’s record farm debt, which Statistics Canada says increased by $4 billion last year to $72.2 billion.
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Farm cash receipts in the first half of the year were up 3.3 per cent over the same period last year buoyed by livestock receipts. Overall receipts between January and June totalled $49.6 billion, up $1.6 billion from the same period last year, Statistics Canada reported.
Debt levels have more than tripled in the past two decades since the annual increase began. Since 1994, every year has set a new farm debt record.
Although lenders and many economists see the increased borrowing as a sign of optimism in the industry, even some bank industry officials have recently warned that with current debt levels, the inevitable interest rate increase in future years from current historic-low levels could cause many producers debt servicing problems.
However, for now the sector is generally booming and optimistic, and FCC president Greg Stewart said that is reflected in the loan numbers.
“We believe in the strength of agriculture and the Canadians whose livelihood is food production,” he said in the corporation’s annual report. “We’re proud that more than 100,000 choose to be our customers.”
Recently appointed chief risk officer Michael Hoffort said the farm lender continues to apply “effective risk management” to ensure the financial strength of the corporation.
The FCC annual report for the year ended March 31 said 47,000 loans worth $7.7 billion were made in 2012-13. The average loan size was $162,000.
With repayments, the corporation’s loans outstanding increased almost $2 billion to $25.1 billion.
Included in the total for last year was $2.3 billion in loans to producers under the age of 40 as well as launch of the $500 million Young Farmer Loan program.
Customers looking for alternative financing also received $73.4 million in venture capital investments last year.
Stewart used the annual report to say the FCC is willing to work with rival private sector lenders, including banks and credit unions that at times complain about what they see as an unfair advantage for the crown corporation because it can borrow at lower government interest rates.
“We’ll continue to partner with other financial institutions for the benefit of agriculture,” he said.
