Farm Credit Canada is on its way to a record lending year in 2004-05.
FCC president John Ryan told MPs on the House of Commons agriculture committee that last year, the federal crown corporation loaned a record $3.4 billion to farmers and agribusiness.
“We expect by year-end this year (March 31), we’ll have loans of $3.5 billion, another record,” he said March 10.
Ryan acknowledged that because of the BSE crisis, the number of beef sector loans in arrears is significantly higher than the general problem rate of less than 0.4 percent.
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But he said the overall portfolio is healthy and that FCC will continue to finance beef producers because “we see viability long term.”
While the FCC president saw record lending and an $11 billion portfolio as a good thing, Saskatchewan Conservative MP Gerry Ritz wondered if it is not part of the problem. Canadian farmers are trying to service a debt that is greater than $48 billion even as they face almost record low farm income.
“The whole question of debt risk is a good one,” said Ryan. He then proceeded to insist that FCC debt is healthy and the corporation’s customers are diligent in trying to make their payments.
Ritz wondered if the FCC still was the lender of last resort, a designation it once held.
“The short answer is no,” said Ryan. Since 1993, when Ottawa paid off FCC debt and put $900 million into the government lender, the Regina-based crown corporation has been profitable and must pay its own way.
It does not specialize in taking clients who cannot get credit elsewhere.
“We were given a clear guidance in 1993 that we would have to stand on our own two feet,” he said.
Ritz then wondered where the most vulnerable farmers could turn if the FCC would not help them in the midst of a farm income crisis.
“Do we have to build another FCC from the ground up?”
Ryan said that is not necessary and FCC tries to be flexible with farmers but it also insists that its clients be viable before money is lent.
He told MPs the FCC has been supportive of the beef industry since the U.S. border closed May 20, 2003, after one BSE case was announced in
Alberta.
More than 10,000 loans have been given to 7,200 beef producers for a total of $884 million in new loans.
Ryan said FCC also has loaned $15.3 million to seven small packing plants and is looking at 11 additional applications.
Last week, the government announced that FCC is the first lending institution to agree to lend money with some loss protection under the federal loan loss reserve program.
It is designed to encourage lenders to support new packing plant proposals. Under the program, the federal government will guarantee to cover a portion of any losses faced by lenders if the plant does not succeed.
