In the midst of turbulent times in the farm economy, the federal government’s agricultural lender continues to make record profits and to promote its success as a reflection of an industry that is healthy, despite grim anecdotal evidence of despair.
“Agriculture is a highly successful industry, fundamental to the lives of all Canadians,” Farm Credit Canada president John Ryan said in the 2004-05 FCC report presented to Parliament last week.
The Regina-based crown corporation reported net income before taxes last year of $118 million, more than 11 percent higher than previous year returns and almost double earnings five years ago.
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In the 1980s, FCC typically ran deficits as it played the role of government lender-of-last-resort. It needed a government bailout of more than half a billion dollars to become solvent.
Now, often to the chagrin of corporate competitors, FCC competes for business and operates in a no-loss environment.
Last year, as realized net farm income remained below $2 billion – just 40 percent of government program payments to farmers, according to Statistics Canada – FCC raked in $352 million in interest income, 12 percent higher than year-earlier figures and more than double interest income five years ago.
During those years, the value of FCC loans outstanding has increased 61 percent to $11.1 billion on March 31, 2005. During the past year, FCC lent $3.1 billion with an average loan of almost $110,000.
In an otherwise rosy annual report about the state of Canadian agriculture, the FCC reported that last year it increased its provision for bad debt to more than $95 million, a 13 percent increase.
FCC president Ryan noted that BSE and avian influenza have been major industry setbacks but the crown corporation continues to support both poultry and beef industries.
“Since May 2003 and the border closure, we have loaned $884 million to more than 7,000 beef customers,” he wrote in the report
He said growth in FCC lending is “a clear indication of our customers’ success. Many savvy producers, processors and others are examining how they can capitalize on consumer and market trends, building partnerships along the value chain from inputs to outputs, increasing efficiencies, managing risk and intensifying marketing efforts.”
He said the trend to larger farm units is accelerating and it means more business for lenders.
“The gap between large and small operations is increasing,” Ryan wrote. “Bigger farms require larger capital investments.”
