The Farm Credit Corporation unveiled a new loan program May 31 to help cushion hog producers against downturns in their industry.
The program, called Flexi-Hog, allows producers to take three one-year “principal vacations” during the term of a 15-year loan with FCC.
During a principal vacation, the producer would pay only the interest on the loan but would not make payments on the principal.
“This is a loan that FCC developed for producers based on suggestions from producers,” said Gordon Earl, an FCC account manager based at Morden, Man.
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“The idea behind taking a payment vacation comes from producers who know what it’s like to work in a very cyclical industry.”
Flexi-Hog loans are amortized over 15 years, but payments are based on a 12-year term. The three principal vacations can last for up to one year each, but cannot be taken in consecutive years.
Producers who do not use the principal vacations save on interest payments.
FCC, a federal crown corporation, expects hog barn expansion to continue across the Prairies and in Ontario for the next few years due to the growth in pork processing.
Flexi-Hog loans are available across Canada. The loan program is designed for independent and smaller producers.
The loans are available to producers who want to re-invest in their hog ventures by building and improving barns or by buying new livestock or equipment. A producer might use a principal vacation during a sharp downturn in hog prices, a sudden jump in feed costs or when there is a herd health problem.
Earl said there are no extra fees attached to taking the principal vacations.
Jerome Warick, general manager of Sask Pork, said he was encouraged by the attention FCC gave to independent and smaller producers in its design of Flexi-Hog.
“I think that’s an important message we need to put out here, especially in Saskatchewan,” Warick said.
“We need to demonstrate there is a place for those producers in the industry.”
Warick said the program may encourage other lending institutions to also be innovative in their services to hog producers.
“It’s got a lot of good value in it.”
