Canadian farmers stuck with last harvest scramble to plant next
Farmers have long been big borrowers. Total Canadian farm debt has increased every year since 1993, hitting nearly C$73 billion in 2012. That trend, based on Statistics Canada data, reflects a long-term rise in land values fueled by low interest rates and strong grain prices in recent years.
But this winter, Farm Credit's Gervais said he has often heard farmers say they will scale back plans to buy additional land or machinery. Farmland values, which have risen 21 straight years, are likely to slow their ascent, and machinery demand will likely cool by the second half of the year, Gervais said.
Cash-strapped farmers may be scouring auctions for more affordable buys, said Manitoba auctioneer Bill Klassen. On April 19, he sold a 35-year-old tractor for C$22,000, nearly twice what he expected. A new tractor with similar horsepower costs about C$100,000.
Ritchie Bros Auctioneers Inc has seen the prices of used seeding equipment dip while demand for grain storage equipment rose, said Simon Wallan, vice-president of agricultural sales.
Rocky Mountain Dealerships Inc, which sells CASE IH farm equipment made by CNH Industrial , is waiting to see if the cash crunch causes lost, or just deferred sales, said chief financial officer David Ascott.
"We think there is enough liquidity in Western Canadian farms to mitigate any short-term cash flow problems. But on the other hand, a lot of equipment demand is related to customer confidence," he said.
'Some Unique Things' to Help Farmers
The problem hasn't resulted yet in a noticeable number of bankruptcies, as most farmers have an abundance of grain to act as collateral against credit, said Randy James, manager of agriculture in Manitoba for Bank of Montreal, the largest Canadian agricultural lender among chartered banks.
Both FCC and BMO rolled out programs this year to aid farmers against the cash crunch, such as foregoing fees and deferring payments.
But then, it's early to say what will happen.
"The repercussions usually come long after the event takes place," James said.
Some farmers will scrimp on fertilizer and other costs, but others remain in good financial shape after years of strong prices, said Manitoba farmer Doug Chorney, president of the province's Keystone Agricultural Producers association.
The crunch has led Cargill Ltd, the Canadian arm of the global agribusiness giant, to take the unusual step of teaming with Farm Credit Canada to allow farmers to buy farm supplies now and pay for them after the harvest.