EDGELEY, Sask. – Flanked by his agriculture minister and people who might benefit from the announcement, prime minister Stephen Harper made good May 1 on a budget promise to extend more credit to farmers.
Harper chose the backdrop of a Saskatchewan farm to announce amendments to the Farm Improvement and Marketing Cooperative Loans Act (FIMCLA).
The move will provide farmers and co-operatives an estimated $1 billion in loans over the next five years.
The amendments, promised in the 2009 budget, will increase the amount of guaranteed credit available to farmers, allow new farmers to access loans under the act, make it easier for intergenerational farm transfer and change the criteria for agricultural co-operatives so that more can receive funding.
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“Today’s farmers are feeling the strain and those who wish to enter the industry face tough choices,” Harper told about 40 invited guests and reporters. “If we don’t take decisive action to bolster the sector, the 84,000 farmers expected to retire over the next 15 years will not be replaced.”
Agriculture minister Gerry Ritz said new farmers don’t have financial track records and the assets that lenders want to see before they extend credit.
“FIMCLA has been around for some 20 years,” he said. “Farmers and co-operatives told us it no longer met their needs. We listened and we’ve acted.”
Farm leaders lauded the decision.
Canadian Federation of Agriculture president Laurent Pellerin called the changes a positive first step toward providing adequate capital to co-operatives.
“Young farmers and co-operatives are a vital part of the agriculture sector, and these changes to the FIMCLA tool are an important step toward enabling their long-term viability,” he said in a news release.
Greg Marshall, president of the Agricultural Producers Association of Saskatchewan, agreed.
He said APAS identified changes to FIMCLA that included beginning farmers and supporting intergenerational farm transfers.
“Farmers always say they don’t want more loans but obviously new farmers need to have a loan,” Marshall said. “That’s part of getting involved in agriculture. You have to incur a lot of risk.”
Relying on credit
One of the farmers invited to the announcement, Palliser riding association president Lorne Ridgway of Avonlea, said farmers are more reliant on credit than ever before. Young farmers today can’t rely on their parents and family as much as previous generations.
“We’ve used up a lot of our equity and a lot of our savings,” he said.
Ritz said the amendments, once passed, would double the amount of guaranteed credit available to farmers.
“The aggregate amount a farmer can now borrow has gone from $250,000 to $500,000, with a 90 percent loan rate, so 10 percent down for beginning farmers,” he told reporters. “From a co-operative standpoint, the co-operatives used to have to be 100 percent farmer controlled. The new rules will say 50 percent plus one.”
New farmers who had no access to this money will now qualify as long as they present a good business plan, he added.
Asked if farmers were taking on too much risk, especially during a time of recession, Ritz said farmers would make those decisions based on their own operations.
“Farming is a business that is going to carry debt,” he said. “What they have to do is take on good debt, manageable debt.”
The prime minister said it was essential to make more credit available now.
“Credit conditions remain stressed and we think it is important that we do what we can, obviously in a fiscally responsible way, to make sure credit continues to flow in the farm sector,” he said.
