Canada’s farm debt, now a record $52 billion and hitting a new historic high each year, will jump sharply over the next decade.
As farmers retire and tens of billions of dollars worth of farm assets transfer between generations, much of the action will be financed by debt, say senior Farm Credit Canada officials.
Incoming FCC president Greg Stewart wants to make sure the government lender gets a significant and growing share of that action. He replaces John Ryan as president and chief executive officer Nov. 22.
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“Where I’d like to take it is to continue the progress and growth that John and the rest of us have already started at Farm Credit,” he said Oct. 18 during a visit to Ottawa to meet agriculture minister Gerry Ritz.
“We have the right direction. We intend to continue to grow the portfolio.”
Stewart said the current boom in grain and oilseed prices will help attract people to invest in the industry, speeding up the intergenerational transfer of assets and the consolidation of farms.
“I’m seeing a lot more interest in investing in agriculture than I have seen for years.”
Since FCC specializes in the mortgage end of the farm loan business, rather than the operating credit side, the Regina-based lender expects to be a prime player.
In recent years, FCC’s percentage of Canada’s farm debt has increased to more than 23 percent after being in the mid-teens a decade ago.
However, Stewart said when farmers are looking for financing, FCC will continue to insist that they have a business plan that ensures they will be able to carry debt service charges and eventually pay down the debt.
Outgoing FCC president Ryan said lenders have to be particularly careful in their judgments during boom times when asset values are rising.
“In good economic times, can you actually cash flow this?” he said. “It’s fine to say there is a certain value in the assets, but can you handle the financing? If in boom times you forget about good business planning, you are asking for trouble.”
Stewart, 47, said he expects the corporation to continue on the track that has pulled it out of debt and financial chaos during the past 15 years.
He is a 20 year veteran of the government lender, currently chief operating officer, who was hired in the 1980s when FCC was a lender of last resort.
Through the 1990s, he was a key management leader as the crown corporation rebuilt, expanded its role and portfolio, developed a more flexible mandate and increased the financial options it could offer to farmers and agribusiness.
Stewart said he wants the corporation to continue to grow, to become more involved in financing businesses that benefit farmers including biofuel plants, offering business management training and counselling to farmers and promoting agriculture throughout society.
Stewart said living through the difficult high debt and high interest period of the late 1980s helps him keep today’s grain price boom in perspective.
“As challenging as the times were in the late ’80s and early ’90s, they also were very rewarding times,” he said.
“We were dealing with people in very difficult situations, often at risk of losing their farms but we got the opportunity to meet them, find out what was going on and in many cases help them retain ownership. We allowed many, many people to remain farming, some of whom are still there to reap the benefits of this boom.
“But I don’t want to do it again, by the way. I don’t need that reward again.”
