The government last week floated the idea that Farm Credit Corporation may start investing ownership funds in new farming operations, rather than merely loaning start-up money to beginning farmers.
However, an FCC official says it would be impossible under existing legal restraints.
To make it possible, the government would have to change the law and such changes are not likely in the foreseeable future.
FCC Act amendments have not been proposed. Even if they were, this Parliament is expected to be dissolved in spring or summer for an election and the legislative agenda for the remaining few months is crowded.
Read Also
Research looks to control flea beetles with RNAi
A Vancouver agri-tech company wants to give canola growers another weapon in the never-ending battle against flea beetles.
“We will come forward with proposals but in order for us to undertake equity investments, we would have to have our act changed,” FCC executive vice-president Max Pierce said Feb. 19.
The government had floated the idea the previous day in its budget.
Agriculture minister Ralph Goodale said new FCC “equity instruments” would be one answer to the problem of financing beginning farmers.
“It may be that a young farmer just getting started might be better off if part of the assistance he is seeking comes in the form of an investment, an equity position, rather than just repayment of debt,” Goodale said during a budget night news conference Feb. 18. “The FCC is developing ideas along that line right now.”
The finance department, in budget background papers, also announced that “consideration will be given to the development of new equity instruments as potential financial tools to augment existing loan programs for farmers.”
Goodale said FCC equity financing would reduce the debt load for beginning farmers with little collateral and meagre revenue prospects. The crown corporation’s ownership share could be bought out once the farmer was better established.
It would be one way to “ease the hump in the early going.”
Pierce confirmed ideas are being discussed.
However, he said new “equity instruments” or other imaginative plans to help beginning farmers are not on the immediate horizon.
Arrangements not allowed
At present, he said, the law limits what the FCC can do to help beginning farmers.
It is not allowed to set up “lease-to-own” agreements with farmers because it is not allowed to deliberately buy rental properties.
It is loath to offer easier credit terms to beginning, higher-risk farmers because FCC legislation requires it be financially self-sufficient and high-risk borrowers will produce higher-than-average losses.
The best the FCC can do under existing rules is to offer education, management training, counselling for business plans and possibly loan guarantees, he said.
Pierce said FCC will be making some suggestions for more creative programs but those proposals will be accompanied by the advice that the corporation must be given more legal room to manoeuvre if new ideas are to be implemented.
Meanwhile, the federal musings about FCC holding an ownership share in some farms drew a cautious response from a farm leader.
Canadian Federation of Agriculture president Jack Wilkinson said the idea has been proposed before and farmers are nervous about the implications. What influence would FCC have in the farm operation or business planning and how easily could the corporation’s share be purchased?
Nonetheless, he said new programs are needed for the financing of beginning farmers and he was interested in pursuing the idea.
