Alfred Leblanc was prudent last summer when hog prices peaked above $180 per hundred kilograms.
Thirty years experience in the business warned him a significant slump was almost certain to follow the boom. He started scaling back his herd, from 60 sows to 28.
Now, as hog prices crash, he isn’t losing much money.
But when he reduced his herd, his bank cancelled his line of credit because it didn’t understand why he was scaling back.
“Right away the bank got nervous and put me in an out-of-trust position,” said Leblanc, who farms near Saskatoon. “It wasn’t sensible to the bank.”
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Leblanc has been operating without a line of credit for a year now.
Saskatchewan hog board manager John Germs said many hog producers face troubled times not only because the hog price cycle is in a low phase, but because farmers must rely on a banking industry where too many loans officers don’t understand pig production.
“It’s pretty hard to go to a financial institution these days,” said Germs.
No other options
Producers are experiencing more financial problems during this downturn than during other cycles because this downturn is happening just after the Agricultural Credit Corporation of Saskatchewan, run by the province’s agriculture department, stopped making new loans to hog producers in March 1996, Germs said.
Producers had good relationships with ACCS loan officers because most were former farmers who understood hog industry price cycles and were sympathetic during downturns.
But loan officers at private institutions are often not used to the hog industry and will not lend money to operations that appear unprofitable, such as hog farms, during a price downturn, Germs said.
“I think the government needs to put out a clear message to the banks,” Germs said.
The provincial government has encouraged expansion of the hog business for the past few years and it should now help producers facing a cash crunch, said Germs.
Leblanc said he doesn’t blame the banks for all the problems hog farmers face, but they are one part of the chain farmers rely on.
“I see a lot of people protecting their backsides,” said Leblanc. “The only one who is not protected is the farmer because he’s on the bottom.
“The federal and provincial governments need to get together with the banks and say ‘What are we willing to do and how far are we willing to go to do it.’?”
