A buoyant farm economy translated into a memorable year at Farm Credit Corporation.
And 1997-98 is shaping up to be even better, said corporation president John Ryan.
“We’re ahead of last year,” he said in an interview last week. “Because there’s such optimism in the agricultural community, because farmers are taking this opportunity to acquire more land, to upgrade their equipment, that means a further increase in activity for FCC.”
In the fiscal year that ended March 31, 1997, the federal lending agency approved a record 12,910 loans in 1996-97, up 27 percent from the previous year and the most ever in a single year. Those loans had a net value of $1.4 billion, up from $1 billion the previous year.
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When the year ended March 31, FCC’s total loans portfolio stood at $4.7 billion (up from $4.1 billion) on 65,318 accounts. The agency is projecting a portfolio of $5 billion by the end of this year.
Ryan, who took over the helm of the lending agency on Sept. 2, said strong commodity prices and interest rates that were at a 40-year low are behind the record performance.
“Those two things are converting into optimism in the agriculture community and among our farmer clientele,” he said. “They’re using this opportunity to gear up for the future.”
FCC increased its market share during the year to 16.5 percent of the total agricultural debt in Canada, up from 15 percent. And it reported its seventh consecutive profitable year, with net income of $40.6 million, up slightly from the year before.
Expanded lending
The agency has over the past couple of years expanded its lending activities to include value-added ventures and agriculture-related businesses, but loans to individual farmers remained the backbone of FCC’s activities.
Ninety-seven percent of the agency’s loans went to individual primary producers, with 41 percent directed toward cash crop operations, 25 percent to beef, eight percent to dairy and seven percent to hogs. The average loan was $109,000, up from $101,000 the previous year.
Ryan said while the agency is serious about expanding into new areas, there’s no disappointment over the fact that value-added lending made up just three percent of last year’s lending activity.
Many of the traditional loans to primary producers to buy land or equipment may eventually be used for value-added purposes, so that three percent could be closer to six or 10 percent.
“In time, value-added will become more important and we want to be ready to respond, but we will not step away from the primary producer as our focus,” he said.
A priority during the coming year is to develop lending programs that will help beginning farmers, by structuring loans to reflect the realities faced by new entrants to the business.
“The main goal is to provide relief in the early days, so that he or she is not burdened with heavy debt repayment right off the bat,” he said. Payments would be lower in the early stages and higher later on, better reflecting the borrower’s ability to pay.
Other details from the 1996-97 annual report:
- Net income of $40.6 billion was 55 percent ahead of the budgeted $26.2 million. Increased interest and lease income offset a sizable jump in administrative expenses.
- The corporation sold 77,582 acres of land to farmers for $17.8 million. That’s down sharply from the previous year’s 218,000 acres. Seventy-seven percent of the sales were to former owners.
- Ontario farmers were the biggest borrowers, with a portfolio of 15,409 loans valued at $1.4 billion. Saskatchewan was next with 21,336 loans valued at $1.1 billion. Alberta was at $805 million, Manitoba $431 million and British Columbia $246.9 million.
