Farm Credit Canada is striding bullishly into 2020-21, despite the impact of the pandemic that hit its 2019-20 returns.
The agricultural lender and federal agency remains committed to boosting its loans to farmers and agribusinesses, according to its annual report.
It also remains a key element of the federal government’s agricultural policy efforts, channelling federal money and energy into the industry.
“The COVID-19 pandemic has cast a long shadow on our industry, but I remain optimistic. This industry has always been resilient and we will continue to be,” said Michael Hoffort, the president and chief executive officer of FCC, in the agency’s July 23 annual report.
The 2019-20 year was looking to be great for FCC before the pandemic bit in, but still it saw its lendings increase and development of a number of other initiatives, including venture capital investing and non-financial rural support and leadership.
Its loan portfolio grew by more than $1 billion to $38.59 billion, but its net earnings fell by more than $20 million and it fell $42.1 million short of its target. Much of that was due to increased loan loss provisions set aside for the possible impact of the pandemic, plus losses on venture capital investing and other non-core areas.
FCC’s return on equity fell but it boosted its “dividend” payment to the federal government to $394.8 million from $364 million the year before and $308.3 million two years ago.
“With the COVID-19 situation escalating in Canada in March, the impacts on the organization’s performance are limited, and we anticipate it to have a much more substantive effect in in 2020-21,” warned Hoffort in his report, written in April.
However, in its discussion of the agricultural outlook it is overwhelmingly positive for agriculture and agri-food, although it portrays farmers as the most challenged element of the sector.
Farm debt increased while farm income dropped as lower prices and production problems plagued 2019.
Farmers slowed purchases of equipment but continued to borrow to modernize their operations to “lower their cost structure and alleviate the impact of a tight labour market.”
For the long term, however, FCC sees agricultural production expanding and increasing due to Canada’s natural advantages.
“Canada’s agriculture and agri-food sectors are generally well-positioned to absorb headwinds while capitalizing on current and future market opportunities,” says the annual report.
That keeps it in line with the federal government’s hopes on dramatically expanding Canadian agricultural production and exports.
“FCC is also committed to helping the Canadian economy reach its full potential by supporting the Government of Canada’s goal to grow agri-food exports to $75 billion annually by 2025,” says the report.