Lessons learned from the last farm crisis are helping farmers and financial institutions this time around, says one lender.
Armand Leclerc, assistant vice-president of farm financing at Farm Credit Corporation, said no one wants to re-live the experience of the late 1980s.
“I believe that there’s been a culture change both with our clients and our financial institutions on how they deal with arrears,” he said.
Then, farmers with cash flow problems waited too long to discuss their situations with lenders. The lenders themselves were more rigid, and ended up acquiring large amounts of land.
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Today, troubled farmers are taking a positive approach, Leclerc said. Financial institutions are more flexible, dealing with clients on an individual basis.
Together they are looking at options, like whether total payment restructuring is needed or if making payments over a longer period will do. The key, Leclerc said, is communication.
“We really encourage the people who feel they will have problems to talk to us,” he said. “And financial institutions should deal with their clients rather than encouraging their clients to go shopping across the street,” which only results in an exchange of problems.
Leclerc said FCC still holds quite a bit of land. He hopes the change in attitude will mean the corporation won’t acquire more from the latest financial difficulties some farmers are experiencing.
“On the average, the people that we’re dealing with this time are much better leveraged, have a stronger equity position and have more alternatives.”
Leclerc added he believes governments also learned a lesson.
The government approach used to include moratoriums on foreclosure instead of dealing with cash flows, he said. Governments are now more willing to get involved at an earlier stage.
