The Canadian farm economy may be showing signs of wear and strain but at Farm Credit Canada, one of the largest farm lenders, business is booming.
The Regina-based crown corporation last week reported that during the fiscal year ended March 31, 2006, it had a record profit, a record volume of loans and the largest loan portfolio ever.
Net profits rose almost 44 percent to $169.6 million, helped by a $36 million increase in income from interest payments. The corporation also helped the bottom line by reducing by one-third ($33 million) the amount of money set aside to cover bad loans.
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It reported that 97.5 percent of its outstanding loans are in good standing, up from 96 percent in 2004.
One percent of FCC’s profit is invested into community projects.
FCC president John Ryan made no apologies in the report for the fact that the farm lender is doing well while many of its customers are not.
“For many in agriculture, profit margins are small,” he said. “The marketplace is competitive and input costs are rising…. As a major player in the farm debt market, FCC strives to be financially viable to ensure we can continue to serve agriculture in the years ahead and to support customers who face unforeseen challenges through no fault of their own.”
Ryan said the FCC will continue to develop and offer loan programs that will help younger farmers replace an older generation on the land.
He predicted that Canadian farm numbers will shrink by tens of thousands over the next few years.
“By conservative estimates, there will be 25,000 fewer producers in Canada in the next five years,” the FCC president said. “Economics are at the heart of this. Costs of production such as fuel, fertilizer and equipment are going up while global trade issues and competition place downward pressure on the value of the raw commodities.”
He said value-adding enterprises will be key.
Federal agriculture minister Chuck Strahl added his own praise on the FCC performance.
“Farm Credit Canada does a tremendous job of helping to keep producers producing so that they can be profitable and their communities can flourish,” he said in the forward to his first FCC report since being named minister in February.
The corporation’s $12.3 billion in loans outstanding represents 24 percent of the $51 billion in Canadian farm debt. It is the major holder of mortgage debt.
The aggressive expansion and record profits are in sharp contrast to the state of the government farm lender in the late 1980s and early 1990s when it often acted as a lender of last resort, owned hundreds of thousands of acres of seized farmland and was running a large deficit.
The government of the day refinanced it but ordered that the corporation operate on a more business-like basis without losses.
Ryan joined the operation in 1997 as president and last November was reappointed to a new term by the former Liberal government.
The FCC employs 1,200 people across
Canada.
During the past three years, the number of clients has increased by 10,000 to more than 88,000.
