A rash of business failures in the special crops industry has bankers
sharpening their pencils and reviewing loans, say some industry
analysts.
Naber Seed and Grain Co. Ltd. is the third pulse crop business to go
under in recent months. The pulse processor was placed into
receivership on June 10. Earlier this year Cancom Grain Company was
placed into receivership and Agritrans Logistics filed for bankruptcy.
Canadian Special Crops Association president Kevin Dick said the
banking community is getting jittery about lending money to special
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crops firms.
“I don’t want to use the word panicking, but they are being overly
cautious right now. Because of the Cancom situation, they are looking
at all of their big clients quite closely.”
Dan Bergen, vice-president of prairie lending operations with Farm
Credit Canada, said he can’t speak for the rest of the lending
community but FCC remains committed to funding special crops ventures.
“Are we pulling back from that industry? No, we’re not.”
He said the value-added processing industry is still a viable one on
the Prairies and the federal government agency plans to “hang in there”
through the tough times.
Bergen said there are specific reasons for each of the recent business
failures related to those individual firms.
“I think it’s dangerous to paint the whole industry at this time and
say it’s only heading one way and that’s down. I don’t believe that.”
Volatile price swings and a shortage of crop caused by last year’s
drought are the cause of most of the pain in the industry right now,
said Bergen.
“In the long run, I think that we need to have this industry here and I
think there’s a demand for the product internationally.”
Industry rationalizing
In the meantime FCC will give no “special attention” to loans involving
the special crops industry.
Dick said he thinks the industry is going through a much needed
rationalization in a time of overcapacity and shrinking margins.
“I believe that this kind of survival of the fittest needed to take
place in the special crops industry and I think this will make our
industry stronger in the future.”
Saskatchewan Agriculture special crops specialist Ray McVicar doesn’t
think the processing sector is overbuilt or in need of downsizing. He
said it’s a shame the province is losing good companies like Naber
Seeds.
“I think we’re overbuilt for a drought year, yes. I don’t think we’re
overbuilt for long term. I think the industry can expand even more yet,
maybe not in terms of numbers of companies, but certainly it can expand
in acres, production volume and processing.”
