Canadian farmers stuck with last harvest scramble to plant next
Western Canadian farmers still stuck with last year's harvest are turning to the government for credit help in record numbers, and insiders fear problems could cascade through the agricultural economy as the new planting season gets under way.
A record-breaking harvest and harsh winter last year overwhelmed Canada's two big railways, backing up the flow of grain from western elevators to ports and leaving farmers with few buyers. Up to C$20 billion ($18.1 billion) worth of crops was stuck in storage as of late March, according to the Canadian government.
Dealers and lenders are softening terms for farmers caught in the unusually severe cash crunch, but some fear it won't be enough to stop a drop in fertilizer and machinery purchases that in turn could limit crop yields and weigh on land prices.
Under government order in March, Canadian National Railway Co and Canadian Pacific Railway Ltd have doubled weekly grain traffic, but that's not enough to end a massive glut by the time the next harvest arrives in the world's sixth-biggest wheat-growing country.
"You'll likely see some lasting impact of this transportation crisis," said J.P. Gervais, an economist at Farm Credit Canada (FCC), the country's biggest ag lender. "We're going to feel that into next year and the years after it."
Farmers face an unpalatable choice between deploying debt and savings to fund spring planting on the usual scale, or cutting costs on seed and fertilizer, thus risking smaller returns.
Will Dodd, who farms with his father near Lanigan, Saskatchewan, ran out of storage after being unable to sell or move nearly 90 percent of last year's harvest.
Until recently, Dodd had 20,000 bushels of barley piled on the ground, rising some 30 feet (9 meters) above the prairie.
"We've never had this kind of problem before," he said.
The farm has dipped into savings to pay for planting and general costs, and also bought two bins costing C$21,000 each. Planting his 4,000-acre farm will cost about C$750,000.
At times, Dodd has worried he may miss payments on a tractor he bought in the fall before the backlog's magnitude became clear.
"We figure we can make it through about a year, and after that if (cash flow) doesn't improve, we're going to be in trouble."
Farmers have turned to the government like never before. A record 12,739 Western Canadian grain and oilseed farmers used loan guarantees through the federal government's Advance Payments Program in the year ending March 31. The average cash advance was about C$128,500 for a total payout of C$1.6 billion, the highest ever.
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