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Province Wary About Hog Loan Payment Extension

“We can pay this in the long run. But the long run has to be at least 10 years.”

– ANDREW DICKSON, MPC

The Manitoba government is close to easing repayment conditions for special loans to financially strapped hog farmers but it may not be the kind of relief producers want.

The province may temporarily delay interest charges for payments due this fall on over $40 million in hog producer loans, Manitoba Agriculture Minister Stan Struthers hinted last week.

But delaying payments themselves for two years, which the Manitoba Pork Council wants, may be a tough sell, given the province’s own budget crunch, Struthers suggested.

“We’re looking to try to find if we can find some relief there in terms of interest on their loans,” Struthers told reporters after speaking to the April 13 MPC annual meeting in Winnipeg.

“I don’t want to rule anything out. But if we could move forward on that, the most likely way to do that is to deal with interest first and try to provide relief that way.”

NOT ENOUGH

That’s not quite what debt-ridden producers are looking for, since many can’t even afford to pay their operating loans right now, said Karl Kynoch, MPC chairman.

“We need those payments pushed back a couple of years just to allow producers a chance to make some profitability,” Kynoch said during a break in the meeting.

MPC also wants the program reopened to admit new producers under the original terms, he said.

The province introduced special hog assistance loans in February 2008 to give hog and weanling producers some cash flow during their worst market downturn in memory.

The program through the Manitoba Agricultural Services Corporation allowed producers to borrow up to $10 per weanling and $35 per slaughter hog for losses on animals sold between October 2007 and May 2008. Loans were for eight-year terms and capped at $5 million per operation. The application deadline was June 20, 2008.

As of January 31, 2010, 150 loans had been approved for $45.3 million. Of those, 137 loans for $42.8 million are still outstanding.

DEFERRED

According to MASC, interest rates for the first year were 2.25 per cent on the first $1.5 million and 4.5 per cent on an additional $1 million. Interest for the second and third years were 4.5 per cent up to $2.5 million. Loan portions above $2.5 million were set at six per cent for the full eight years.

Producers under 40 years of age at the time of application received a further interest rate reduction of one per cent in the first three years.

Principal payments were deferred for the first three years. Starting in the fourth year, loans will be amortized over the remaining five years at six per cent with principal and interest payments.

But with principal payments looming this fall, the Manitoba Pork Council says producers aren’t able to make them, given the industry’s severe financial stress over the past three years.

Although market prices are recovering, producers need even higher prices before they can begin to pay off debts accumulated during that time, said general manager Andrew Dickson.

“We can pay this in the long run. But the long run has to be at least 10 years.”

EXTENSION REQUESTED

Dickson said the pork council began asking the government for the extension last fall. MPC had hoped for some indication in the recent provincial budget but didn’t see it.

Struthers said the province has to be careful about new spending because of a predicted $555 million deficit in its 2010-11 budget.

“We have a cabinet and a finance minister who are very concerned about the budgetary balance in this province, so I need to be aware of that as we move forward.”

But Dickson said this isn’t new money, just a debt repayment extension.

“This is loans. This is money the province is going to get back.” [email protected]

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