Farm Credit Canada is reporting a larger loan portfolio for the 16th consecutive year, its largest-ever customer base and a healthy bottom line.
For the sixth consecutive year, the Regina-based crown corporation will send millions of dollars to Ottawa as a dividend for the 2008-09 operating year.
It also made headway in Quebec, the province with the company’s weakest customer base. Last year, FCC increased its loan portfolio in the province by $280 million to $1.85 billion and increased its share of Quebec farm debt to 13.2 percent from 11.8 percent.
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“It was a successful year,” FCC executive vice-president and chief operating officer Dan Bergen said July 24, a day after the corporation’s annual report was released.
“There was a lot of volatility in some sectors but overall, I think the agriculture sector absolutely showed itself to be immune to many of the problems of the recession.”
One factor helping FCC is that the majority of its loans go to the crops sector and dairy, both of which had good years.
“Looking ahead at this year, we obviously are keeping a close eye on those sectors that continue to struggle, like hogs, or that are dependent on export markets that may be affected by the recession,” Bergen said.
“But our business to date this year (beginning April 1) is running ahead of where it was last year.”
He said farm asset values remained steady, arrears increased only slightly to $42 million and 31,000 loans worth $5.1 billion were approved.
The total FCC loan portfolio grew by 14.1 percent to a record $17 billion last year.
Bergen said a portion of the $209.8 million in profit will be sent to Ottawa as a dividend and the remainder will be available to lend. Last year, with similar net income earnings, FCC paid a dividend to the federal government of $22.9 million
“The board will decide the level of the dividend this year,” he said.
Quebec has been one of the corporation’s growing success stories.
Traditionally, FCC’s share of debt in the province has been less than half of the 25 percent share it holds across the rest of Canada.
“Of course, that means we have a lot of opportunity to grow there,” Bergen said.
It has worked hard and spent money to raise its profile among Quebec farmers and food processors, he added. Last year’s increased lending was concentrated in value-added enterprises, poultry, crop farms and dairy.
“There is a lot of food processing in Quebec, especially in the Montreal area,” Bergen said.
“So on our agri-business side, there is a lot of potential for growth.”
FCC reported that $1.6 billion of its loans, almost one-third of the total, went to farmers younger than 40.
In a corporation statement, president Greg Stewart said loans to young farmers tripled during the year.
“Young producers and entrepreneurs tell us they want a lender who knows the industry and is going to be around for years to come.”
However, despite the upbeat financial report, FCC also found itself under intense criticism during its 50th anniversary year.
Liberal MP Wayne Easter repeatedly complained that farmers had told him FCC was more aggressive when they were having trouble servicing their debt than were private lenders.
“My experience in dealing with farmers in trouble is I’d rather deal any day with the chartered banks because when farmers are in trouble, the banks are willing to cut a deal,” he told Stewart at a parliamentary hearing in June.
“Farm Credit is not willing to negotiate and come to some kind of settlement.”
Replied Steward: “I would be disappointed if that was the way our staff was behaving.”
At the same hearing, credit union and bank representatives complained that FCC’s market share is increasing because it has an advantage as a crown corporation.
“We believe FCC is unfair competition,” said Pam Skotnitsky, associate vice-president of government affairs for Credit Union Central of Canada.
“The source of funds they have access to from the government of Canada is definitely something that credit unions don’t have access to.”
FCC officials insisted increased business came because of good customer service and being dedicated to agricultural lending and not because of a special advantage.
