“The early indications are that there are definitely problems.”
– JURGEN PREUGSCHAS, CPC
Anxiety is rising among Canada’s hog producers amid signs that a federally backed loans program for the debt-ravaged industry is not working as planned.
A number of producers applying for loans are either being rejected or told not to bother, according to initial reports.
“Some of the early indications are that some of the guys are getting turned down flat,” said Andrew Dickson, Manitoba Pork Council general manager.
The Hog Industry Loan Loss Reserve Program is the cornerstone of a federal initiative to help credit-strapped hog farmers through their worst financial crisis in memory. Eligible producers with viable business plans can apply to have long-term debt restructured, enabling them to ride out the crisis until times get better. Ottawa is sharing the risk with a $400-million loan guarantee.
DEEP IN DEBT
But even federal backing isn’t enough to encourage banks to lend more money to producers already deep in debt, said Jurgen Preugschas, Canadian Pork Council president.
“The early indications are that there are definitely problems,” said Preugschas.
“It appears, from what we’re getting back, that the financial institutions are not prepared to really put a lot of value on the government-guaranteed portion. Those that are really in dire need of the money aren’t able to access it.
“The financial institutions are discouraging producers from applying and in many cases we’ve heard that they’ve been turned down.”
The loan program is still in its early days and trends won’t be known until early January. Reports of producers getting turned down are so far only anecdotal, Dickson stressed.
“It’s a little better grade than coffee shop talk and that’s about it.”
CPC held an emergency meeting Dec. 10 with federal Agriculture Minister Gerry Ritz to voice its concerns.
Preugschas said Ritz promised to look into the matter but he couldn’t say exactly what the minister should do. “All we’re asking is that our producers are able to access the funds.”
Dickson said he spoke to a major bank last week and was told farmers are having trouble producing viable future business plans because hog markets remain depressed and there’s no immediate sign of an industry upturn.
“It illustrates the difficulty lenders have at this moment in time because of the current market conditions and prices, said Dickson.
“There’s goodwill on the table to try and make the program work. It’s just when you get down to the nitty gritty, it’s not easy.”
Gerry Friesen, a member of the Manitoba Farm Mediation Board, said producers sometimes don’t realize how badly off they are financially until they sit down and work through the numbers.
“What producers are doing is, they’re doing two-or three-year projections for creditors. As they’re working their way through, they realize exactly how deep the problem is,” said Friesen, himself a former hog farmer.
“Some of them are actually wondering whether they even want the loan. You can’t borrow your way out of debt.”
INDUSTRY AT RISK
Preugschas warned producers must be helped through the current crisis for the industry to continue.
“There’s no question in my mind that the industry is at stake. Absolutely none. And we’ve always made that very clear,” he said.
“If we do not get the money, many more of our producers are going to go out of business and the total hog infrastructure will collapse.
“There’ll be packing plants laying off people and certainly all our suppliers will be in dire straits.” [email protected]