Slow grain movement that is affecting farm cash flows has prompted a call for greater flexibility among agricultural lenders.
Last week, the Agricultural Producers Association of Saskatchewan called on agricultural lenders to allow farmers extra time to meet their debt obligations.
APAS president Norm Hall said the current grain transportation backlog has slowed grain deliveries across the province and may be affecting farmers’ ability to meet their debt obligations.
APAS said some producers are facing delays of up to three months for delivery of grain that has already been contracted.
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“In a normal year, a guy might go out and get a December or a January delivery contract to make his (debt) payment for the end of February, but there are very few contracts out there right now,” said Hall.
“A lot of grain companies have pulled their bids on wheat until May, June, July or even August. They’re just not taking any more grain. Basically those December-January contracts just aren’t out there and … even contracts that were made earlier, October-November, haven’t been delivered yet.… And with canola bids where they are, there’s a lot producers holding back now.”
Some financing agreements impose heavy financial penalties if farmers’ do not settle their accounts before a certain date.
Other agreements stipulate that farm clients in default may be denied operating credit the following year.
Hall encouraged growers to contact their lenders rather than waiting for lenders to offer relief.
“Producers should take the initiative.” he said.
“They shouldn’t be waiting for that letter to come saying, ‘yes, we are going to (alter repayment terms).’ They need to go in and talk to their financing organization and let them know what’s going on.”
Hall said slow grain movement is also affecting farm input retailers, service companies and machinery dealerships who are experiencing slow or deferred sales.
Rick White, general manager of the Canadian Canola Growers Association, said the number of farmers requesting cash advances through the federal government’s Advance Payment Program has never been higher. Applications received so far in the 2013-14 program year are up 20 to 25 percent.
Under the program, producers who need immediate cash can apply for an advance of up to $400,000.
Repayment of advances taken during the 2013-14 program year, which ends March 31, are not due until Sept. 1, 2014.
Repayment is not due until Sept. 1, 2015, if growers can wait until after April 1 to apply for an advance during the 2014-15 program year.
“We know that farmers are having trouble getting their grain delivered and … they’ve got some big bills coming up here in February,” White said.
“We’re abnormally busy right now for this time of year.… Usually it starts to taper off at this time of year … but we’re going strong right now and I think it’s going to get even busier before it does slow down.… Farmers are starting to worry about their cash flow situation and so they are taking out advances like they never have before.”
Farm Credit Canada, has confirmed it will discuss flexible payment options with its more than 16,000 customers that may have been affected by delays in grain delivery.
“We are aware that this situation could impact our customers’ ability to run their operations, so we’re reaching out to inform them of the various options available to reduce the impact on their business,” said Rémi Lemoine, FCC’s chief operating officer.
