August 29, 2008

 

Financial crunch time approaches for many Canadian farmers

   

   

While a lot of money was required to get this year's crop into the ground, a representative from Farm Credit Canada (FCC) said he fears the real effect of higher input costs has yet to be felt.

 

"To my knowledge, there has been an increase, but the bigger bang is coming next year," said Roland Kirouac, FCC representative for the Steinbach district.

 

The impact of higher crop expenses was softened this spring because many producers had pre-bought or pre-paid for their inputs before prices began climbing so sharply.

 

"The capital requirements will be even more significant next year. It is hard to say what they will be until we're there but certainly the expectation is that they will be higher than they were this year," Kirouac continued.

 

In the high-price environment that the agriculture sector has been for the past year or so, farm lenders, he said, are taking the view that while many producers need to borrow more money, they are likely to be making more money as well.

 

"That is what the lenders would look at. Yes, you require more money this year, but we're expecting that your profits will be greater as well," Kirouac said.

 

Glenn Blakley, president of the Agricultural Producers' Association of Saskatchewan, or APAS, said the fall months will be "crunch time" for many producers because short-term revolving loans are often due once the crops have come off the fields.

 

The number and amount of cash advances required this year were higher than ever before and there were plenty of stories around about producers having to move from one lender or supplier to another because their lending caps had been exceeded, Blakley said.

 

A lot of industry financing was available to help with operating costs, but most of those deferred payments will have to be paid back this fall as well, he said.

 

"I suspect October is going to be when see the major price impact, whatever that happens to be. If the prices stay at decent levels, I think we will be alright, but with the amount of money that has been injected into this crop, it will still be an issue," Blakley said.