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JULY 25, 2013 | WWW.PRODUCER.COM | THE WESTERN PRODUCER
NEWS
ROT-FREE FENCING
FARM CREDIT CANADA | FINANCIAL RESULTS
Booming ag sector spurs FCC profits $7.7 billion in loans in 2012-13 | Loans worth $2.3 billion given to producers younger than 40 BY BARRY WILSON OTTAWA BUREAU
Darrell Hodges welds a section of pipe to a post as he and Jennifer Monk build a new perimeter fence on the pens at Hodges’ Feedlot near Albright, Alta. The pipe fence should provide a strong maintenance-free perimeter to the cattle pens. | RANDY VANDERVEEN PHOTO
AG MINISTERS SUMMIT | EU-CANADA TRADE
Ag ministers leery of EU deal Deal expected by year end | Some fear supply management may fall victim STORIES BY BARRY WILSON OTTAWA BUREAU
HALIFAX, N.S. — Provincial agriculture ministers remain uneasy about the outcome of a CanadaEuropean Union trade deal, despite federal assurances that supply management protections will be preserved, says Nova Scotia’s John MacDonell. As co-chair of last week’s federalprovincial ministers’ meeting, he was asked what assurances provincial ministers received from federal minister Gerry Ritz. “The minister’s been unequivocal in his support,” MacDonell said. But not even Ritz knows what “wrinkles” may arise as negotiators try to wrap up a deal this year. “We’re assured that when our fed-
JOHN MACDONELL NOVA SCOTIA AGRICULTURE MINISTER
eral colleagues are at the table that they’re actually standing behind supply management and in support of it,” he said. “That goes a long way but until the ‘i’s are dotted and ‘t’s are crossed, we’ll be concerned.” Ritz said provincial governments are in the loop with representatives receiving briefings from federal negotiators during the talks. There
should be no surprises for them. He said he expects a deal to be signed before the end of the year. “I know the Europeans are now fixated on negotiations with the U.S., but certainly they want to conclude the Canadian one,” he said. “It’s in their own best interest to conclude this one before moving on.” Ontario premier and agriculture minister Kathleen Wynne said despite assurance that the supply management system will survive in any deal, she understands there could be some controlled increase in the amount of European cheese allowed into the Canadian market. It is a demand that European negotiators are making in return for increased access for Canadian hormone-free beef.
Farm Credit Canada has reported its second largest profit in history: $514 million for the year ended March 31. Only the $565 million recorded the previous year surpassed last year’s results. The board of directors could decide to send as much as $51 million to the federal government as a 10 percent dividend. The remainder would be retained by the corporation for future loans or to act as equity to provide a capital base to offset future business risks. The corporation’s strong performance reflects an income and asset boom in much of agriculture. Set-aside for loan defaults was decreased, according to the annual report published July 19, reflecting an increased ability of most farmers to service their debts. The report said 47,000 loans worth $7.7 billion were made in 2012-13. The average loan was $162,000. With repayments, the corporation’s loans-outstanding increased almost $2 billion to $25.1 billion. Included in the total for last year was $2.3 billion in loans to producers younger than 40 and the launch of the $500 million Young Farmer Loan program. FCC describes the sector as booming and optimistic, which president Greg Stewart said is reflected in the loan numbers. “We believe in the strength of agriculture and the Canadians whose livelihood is food production,” he said in the annual report. “We’re proud that more than 100,000 choose to be our customers.” An FCC email said interest income increases as its loan portfolio expands year after year, which adds to the bottom line. In an interview at the Halifax meeting of federal-provincial agriculture ministers July 19, federal minister Gerry
Ritz said the near-record numbers reflect both a buoyant farm economy and a well-run crown corporation. “We point to these guys as examples of how to do it,” he said. However, the FCC numbers also reflect Canada’s record farm debt, which Statistics Canada says increased by $4 billion last year to $72.2 billion. Debt levels have more than tripled in the past two decades since the annual increase began. Every year has set a new farm debt record since 1994. Lenders and many economists see the increased borrowing as a sign of optimism in the industry. However, even some bank industry officials have warned recently that with current debt levels, the inevitable interest rate increases in future years from current historic-low levels could cause many producers debt-servicing problems. David Rinneard, director of agriculture and agribusiness for BMO, joined other senior bank officials in voicing concern dur ing a May appearance before the Senate agriculture committee. “Without question, debt is escalating and will continue to escalate in the sector,” he said. “In many respects, it has been predicated on a very low interest-rate environment. I remind people when I can that is was just six years ago that interest rates were twice as high as they are today.” He said many clients are shocked at the implication. “If you ask anybody, regardless of the industry they are in, whether they can tolerate an interest rate that is twice as high as they are paying today, the response more often than not is ‘no.’ ” Recently appointed chief risk officer Michael Hoffort said in the FCC report that the farm lender continues to apply “effective risk management” to ensure the financial strength of the corporation given the historic volatility of the agricultural economy.
AG MINISTERS SUMMIT | EU-CANADA TRADE
Ont. ag minister confident supply management safe HALIFAX, N.S. — Ontario premier Kathleen Wynne signalled last week that she expects European cheese companies to gain more access to the Canadian market if a Canada-European Union trade deal is signed. While she would prefer no change, she said her government could accept some increase in imports as long as it is small, does not affect tariff protection and does not destabilize the dairy industry, which is a significant factor in Ontario’s $34 billion agriculture and food sector. “I have had some concerns but I have been assured it is on the radar,” she said in an interview during the
KATHLEEN WYNNE ONTARIO PREMIER, AG MINISTER
annual federal-provincial agriculture ministers’ meeting. “Minister (Gerry) Ritz (federal agriculture minister) today reaffirmed his support for supply management, and that is something I can take back to our supply management folks in Ontario. It is a system that works.”