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Farm Borrowing Tapers Off

Forty-nine per cent of Canadian producers and agribusiness and agrifood operators surveyed by Farm Credit Canada plan to pay down debt in 2010, 29 per cent say they won’t spend much differently than in 2009 and 22 per cent will seek more financing, the Crown corporation says.

The numbers are from an FCC Vision Panel national survey of primary producers and agribusiness operators. This is the second year that Canada’s leading provider of financial and business services to the agriculture industry has completed the study. For survey results, visit www.fccvision.ca/InAction.aspx.

“We wanted to better understand how external factors such as the global economic situation impact spending decisions, and the results show that many respondents haven’t altered their plans much from 2009,” said Greg Stewart, FCC president and chief executive officer. “This is good news because it appears that respondents haven’t been as greatly impacted by the economic conditions as some might have believed they would be.”

The study completed in December, found that producers (50 per cent) are significantly more likely than agribusiness and agri-food operators (42 per cent) to report that they plan to pay down existing debt in 2010, while operators (44 per cent) are significantly more likely than producers (26 per cent) to report that they do not plan to make changes to their financing in the next year.

PROVINCIAL DIFFERENCES

When the results are analyzed by province, significantly more Quebec producers (38 per cent) report no change to spending than producers from British Columbia (14 per cent), Saskatchewan (24 per cent), Ontario (24 per cent) or the Atlantic provinces (nine per cent). Poultry producers (43 per cent) are significantly more likely to state they plan to seek more financing in 2010 than producers from most other sectors.

Producers and agribusiness and agri-food operators make important business decisions every day, says Mike Hoffort, FCC vice-president of Manitoba and Saskatchewan operations. He anticipates that cash flow management will be a significant challenge for those in the agriculture industry in 2010.

“Trade issues with canola and flax could impact delivery opportunities and worldwide supplies,” explains Hoffort. “Another challenge is the stronger Canadian dollar which is acting as a drag on commodity prices for crops, beef and pork. The overall downturn of the red meat sector cannot be understated – it is anticipated that Canadian hog and cattle herds will continue to shrink in the coming year.”

Hoffort suggests producers and agribusiness and agri-food operators attend courses and review their financial position in depth. “It isn’t a flashy idea, but taking the time to do a farm plan will be really important given the increasing complexity of today’s farms. Having a good understanding of your financial position, having a plan for cash flow to ensure commitments can be met as they come due and developing a plan for operations in 2010 that will optimize profitability are important tools for today’s farm manager.”

SPENDING PLANS

The FCC Vision Panel survey also asked about spending plans in five categories: storage, labour, transportation, inputs and equipment.

The biggest change from the 2009 results is producers’ and agribusiness and agri-food operators’ anticipated spending on inputs. Compared to 39 per cent in 2009, 44 per cent of respondents anticipate no change in spending for 2010.

Ontario (34 per cent) and Saskatchewan (30 per cent) producers are significantly more likely to report plans for increased spending on inputs, as compared to producers from Quebec (18 per cent) or the Atlantic provinces (15 per cent).

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