Farm lenders are countering a suggestion that they may tighten their credit terms for producers because of the challenges in agriculture.
The president of Keystone Agricultural Producers said recently that his farm group polled financial institutions and got the impression farmers can expect less leniency from lenders.
David Rolfe said banks indicated they still would work with producers one on one but some difficult decisions would have to be made.
“That begins to tell the story. They’ve run out of patience. They’ve run out of time.
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“The banks made it very clear when we were talking with them that they wouldn’t force a decision on a farmer. What they would do is they just would refuse any more credit. Then where do you go?”
Lenders, however, said they recognize that agriculture is cyclical and some of the present difficulties, such as poorer grain prices and high input costs, have not shaken their confidence in the industry. They said they have not changed the benchmarks used to assess how much to lend individual producers.
“There’s no changes in strategy or leniency at all,” said Brian Little, the Royal Bank’s national manager of agriculture and agribusiness. “It’s pretty much business as usual. We’ll size up each situation as it comes along on its own merits. That’s the way we’ve always done it.”
The Royal Bank is increasing its overall operating credit to farmers in Canada, rather than pulling back, said Little. The banker said he has not seen a dramatic rise in farm loans in arrears.
The Canadian Bankers Association echoed the view that farm credit is not being clawed back. The association pointed to a Statistics Canada survey that showed agricultural lending by chartered banks has been going up rather than down.
“Canadian banks are longtime partners with the Canadian agricultural industry,” Maura Drew-Lytle, a media relations manager for the bankers association, said in an e-mail.
“We know the agricultural industry well and have worked together in dealing with challenges in the past including poor yields, price shocks, trade disputes and BSE and we will continue to make every effort to help our clients.”
Clem Samson, vice-president of prairie operations for Farm Credit Canada, said there are some sectors of agriculture in difficulty, including the grain sectors in Manitoba and Saskatchewan. Frost was a problem for many growers in those provinces last year and excess moisture hit Manitoba producers hard last year and this.
However, arrears on Farm Credit loans are at a “very acceptable level,” Samson said, and FCC remains comfortable with the overall state of the agricultural industry.
“We expect to face challenges in the different sectors from time to time. This really hasn’t changed our view toward agriculture or the way that we look at accounts.”
Unlike banks, FCC does not have a mandate to provide operating loans to farmers. Samson said the impression FCC is getting from its customers is that operating credit is getting harder to secure. He said there are producers in some sectors of agriculture this year confronted with difficult choices.
“Some of them are cutting back on inputs, fertilizer and so on, which is cutting back on potential yields. It’s just come to a point where people are making difficult decisions.”
