A merchant bank that serves prairie farmers may be established if there is enough producer interest.
Ron Witherspoon of ACC Farmers’ Financial in Guelph, Ont., is working on the project and hopes that Regina’s Western Canada Farm Progress Show is the right venue to begin offering financial tools to farmers and gauge their response.
AgriFood Capital Corp. is not directly affiliated with Witherspoon’s ACC Farmers’ group but will offer some of the services that the organization does in Ontario.
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“We believe there are a lack of players in the agricultural industry in Western Canada to facilitate investment, foreign or domestic, and there are opportunities here that can assist farmers in growth and with export opportunities,” he said.
Brian Hughes heads ACC in Ontario and will be chief executive officer of the new western Canadian business, AgriFood Capital.
“Producers need to be in foreign markets. There are risks and they need a party that helps ensure they are going to get paid,” he said.
Hughes said potential changes and deregulation at the Canadian Grain Commission and the Canadian Wheat Board might create situations where farmers will need additional services that a merchant bank could deliver.
Witherspoon said he is aware of foreign investors who are looking to secure production contracts and potentially invest in prairie agricultural infrastructure but haven’t felt comfortable making those agreements because of a lack of financial systems.
He said merchant bank services support 20 percent of farm sales in Europe, including insurance services.
“(AgriFood Capital) would take 90 percent of the risk out of transactions between Canadian farmers and foreign buyers,” said Witherspoon.
He said farmers would be able to receive partial payments in advance and could arrange long-term production contracts with buyers with assurance that they would have a buyer in place, similar to Australian agreements that see up to three years of crops forward sold.
The new bank would also be involved in forward contracts that allow farmers to buy inputs for similar periods and create multi-farmer bulk discounts on products such as fertilizer and pesticides.
Other services would include assistance with mergers and acquisitions and new start-up development and financing.
Agrifood Capital’s first project brought together a livestock operation with a production insurance program that allowed the grower to access operations capital for an expansion.
“If there is enough interest from farmers, we will be going forward with the merchant bank model,” he said.
