A successful farm input financing experiment conducted at a cluster of central Saskatchewan co-ops has caught on and is spreading to 50 co-ops across the West.
Gord Dmytruk, general manager of the Naicam, Spalding and Lake Lenore, Sask., co-ops, said last year’s trial run at the three farm service centres led to millions of dollars in increased sales.
“Banks do a hell of a lot better job at marketing and merchandising loans than we can,” said Dmytruk.
The financing program was made possible through a partnership with the Toronto Dominion Bank. Dmytruk first pitched it to a local credit union, but he said it wasn’t able to tackle such a program.
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The Agriculture Input Management program gives co-op shoppers access to credit between $10,000 and $250,000. To get an AIM account, farmers have to fill out an application form that is sent to the TD Bank in Toronto. The approval process takes about two days.
Once the credit is in place, producers can charge their crop inputs to their AIM account. The program covers inputs ranging from seed to soil testing. Interest rates vary from prime plus one half percent to a maximum rate of prime plus three percent.
Producers have one year to pay off their accounts.
Repayment is not based on a production contract. Instead, farmers can sell their grain anywhere they want.
“It (gives) back to the farmers the freedom to market their grain,” said Dmytruk.
Darrin Qualman, executive director of the National Farmers Union, said it sounds like a good program, but he also said it’s a sad statement about the shape of the prairie farm economy.
“(Farmers) are almost forced to do business where they can get credit and I think the co-op has realized that and that’s where this comes from.”
Co-ops used to have a deferred payment program similar to what grain companies offer but Dmytruk said he thought there must be a better way of getting inputs into farmer’s hands.
Last year, 135 farmers signed up for AIM loans, amounting to $6 million at the three pilot co-ops. Dmytruk expects that number to top $8 million for the 2000-2001 crop year.
He said the input financing program has had a dramatic impact on sales at all three co-ops he manages.
Sales for the 1999-2000 crop year at the Lake Lenore store rose 28 percent to $6 million from $4.7 million the previous crop year.
Spalding had a 10 percent increase in input sales and saw its position with Federated Co-operatives Ltd. change from a $400,000 line of credit to a prepaid account of $400,000.
And sales at Naicam Co-op rose 11 percent, or about $600,000, last crop year.
Aside from increased sales, the big advantage for the co-ops is that they get their money right away. And with the ability to set farmers up with loans as high as $250,000, the co-ops are able to attract large customers.
“We could never do that in-house.”
