Farm debt is growing and that is good news, Farm Credit Canada president Greg Stewart said last week.
“Eight to 10 months ago, there was concern about the availability of credit,” he told the House of Commons agriculture committee June 9. “We continue to see very strong competition for higher quality, supply managed and larger loans and for the most part, the predictions regarding tighter credit have not materialized.”
Stewart said both private and public lenders have done “a good job of ensuring that credit is available to Canadian producers and agri-business operators.”
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The value of FCC loans grew 14 percent last year with $5.1 billion in new funds handed out.
He said loans increased to all sectors except the faltering hog industry.
And $1.6 billion of new loans went to farmers younger than 40, making up 30 percent of the total.
However, Stewart said the Regina-based crown corporation makes sure its approved borrowers are credit worthy.
“FCC arrears have been low for several years,” he told MPs. “Currently, approximately one quarter of one percent of principal due is in arrears, slightly lower than last year. Our customers are committed to following through on their loan repayment agreements even in challenging times.
“And when they can’t make payments, we offer our customer support program to help them make it through.”
Liberal agriculture critic Wayne Easter said he supported the crown lender but doubted its farmer-friendly record in tough times for many farm sectors.
“My experience in dealing with farmers in trouble is I’d rather deal any day with the chartered banks because when farmers are in trouble, the banks are willing to cut a deal,” he said. “Farm Credit is not willing to negotiate and come to some sort of settlement.”
Stewart said he would be disappointed if staff operated that way.
“Our mandate and goal actually is to clearly work with our customers through difficult times and we stand behind them.”
Meanwhile, agriculture minister Gerry Ritz said last week that those concerned about Canada’s record and growing farm debt are off base.
Since 1993, farm debt has grown by more than $30 billion to $58 billion on Dec. 31, 2008.
Debt servicing charges have become one of the fastest-growing input costs despite record-low interest rates.
Critics worry that with tens of billions of dollars in North American government spending underway to fight the recession, inflation and higher interest rates could result, leaving heavily indebted Canadian farmers exposed.
But there is “good debt and then the debt load you have” and farmers generally are doing fine, Ritz told the Senate agriculture committee June 11.
With rising asset values, the debt-to-asset ratio has increased by less than one percent in the past decade, said the minister.
“Farmers are handling this well,” he said. “Farm Credit is showing less than one-third of one percent of their files at risk where they are working with someone to foreclose.”
