With cattle markets in turmoil because of bovine spongiform encephalopathy, many livestock producers might wish they could put off difficult meetings with their lenders.
But financial institutions say producers will probably get a more sympathetic hearing than they expect and are urging their clients to meet with them.
One farm business adviser recommends the meeting will go even better if the farmer goes in with good financial data and a strategy to weather the storm.
“We have a customer support program so we are contacting customers and are encouraging them to contact us if they are in need of assistance and if they need payment deferrals, whether it is interest or principal and interest,” said Greg Stewart, a senior vice-president at Farm Credit Canada.
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It’s an offer echoed by Don Wither, a senior manager at the Bank of Montreal.
Even if the border reopens tomorrow, he said, there will be lingering effects on cattle prices and supply likely to affect producers’ financial well-being.
“There are going to have to be some longer term solutions come out of this. Maybe we can work it out with them in three months and maybe it is going to take six months and maybe it is going to take a little longer,” said Wither.
“But if you’ve got a producer doing the best he can, we are going to do the best we can for him.”
Last year the Bank of Montreal had a drought assistance program for agricultural borrowers, but this year it and other financial institutions contacted said variability among cattle producers means each must be handled independently.
Terry Betker, a partner with Myers Norris Penny, said the strategy that cow-calf producers adopt this fall will vary according to their situation. Important factors include the strength of their balance sheet, when payments come due and whether they have feed and facilities needed to keep cattle longer.
“But no matter what situation, you have to talk to your lender … and I am strongly of the opinion that no matter what your situation, the sooner you talk to these guys the better,” he said.
“And I would really recommend that they go in with an idea of what they want to do, as opposed to saying ‘I don’t know what I’m going to do,’ because that isn’t going to instill a lot of confidence in the lender.”
When visiting a lender, the farmer should have his basic inventory of cattle and weights, said John Arnold, the Royal Bank agricultural market manager in southern Alberta.
“Beyond that, you should have some idea of what price you will sell at.”
If the producer is considering backgrounding calves until the market recovers, he should be able to confirm that he has feed and provide the cost per head of retaining them, Arnold said.
With that information the lender can help figure out the impact on the loan repayment schedule and provide options on how to handle it.
Stewart said producers should be prepared and open to new ideas to handle an uncertain period in the industry.
“The better understanding you have of your own situation and what exactly it is you need or what will make the difference to your operation, the more able we are to work with you and make it work for you.”
Betker said producers should also talk to their creditors, those who hold their equipment leases and fuel and input bills. They might be willing to accept a smaller amount up front with followup payments.
He also noted the Farm Consultation Service program has expanded and is now called Canadian Farm Business Advisory Services. Under it, the federal and provincial governments help pay consultant fees for farm business planning. For more information on the program, call 866-452-5558.
