BMO announced the new team approach Oct. 14, describing it as “a national team of agriculture banking specialists — team members with backgrounds in agriculture combined with technical finance expertise — with a deep understanding of local market challenges and opportunities.”

The ag-specialized team, BMO said, will “provide end-to-end support for agriculture and agribusiness clients across the country” and is “well positioned to provide comprehensive solutions for all types and scale of operation, including the bank’s digital and treasury payment capabilities.”

These offerings, BMO said, “have been built specifically for the agriculture sector to help clients obtain the banking they need, quickly and conveniently.”

BMO hears “time and again that our agriculture customers want to work with professionals and experts in their field who know their business,” Lynda Taylor, senior vice-president and national head, agriculture and agribusiness for BMO, said via email last week.

“The difference now is that their banker is solely focused on agriculture and agriculture clients,” she said, adding the team will also have its own analysts and credit managers so as to “align knowledge, experience and passion for the agriculture industry.”

The team’s leadership includes Taylor along with Ashley Salazar as national director of credit structuring, the latter being responsible for “managing the strategic direction and risk of the overall agricultural banking group.”

The national team approach, Taylor said, “is about us coming together to work as one team and sharing knowledge and experience.” That said, she added that BMO “has always been local and we will continue to be; no one knows agriculture better than the people living in the community who understand the sectors.”

Canada’s agriculture industry, BMO said in its release, is “evolving, with continual advancements in efficiency and sustainability influenced by changing market dynamics and the ongoing effects of COVID-19.”

Looking at the ag industry, Taylor said, “we find ourselves at somewhat of an inflection point. We are seeing a lot of advancements in the industry and now, with COVID, it’s worked to accelerate some of these changes.”

“Over the past two decades, productivity in the agriculture sector has increased five times faster than in the Canadian economy as a whole – and that trend shows little sign of letting up,” Aaron Goertzen, senior economist for BMO Capital Markets, said in the bank’s release.

Given the importance of the agrifood industry in Canada’s economy, accounting for over four per cent of last year’s gross domestic product, Taylor said BMO “recognize(s) an opportunity to invest more in agriculture experts and bring teams within the bank together to support this industry more effectively.”

The new ag group will also work with BMO’s retail, wealth, and capital markets operations “to support businesses in this segment with a full range of wealth and banking products and services,” the bank said. — Glacier FarmMedia Network

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Calgary consultancy Alvarez and Marsal, the court-appointed monitor for Morris, said Tuesday in its latest report to Court of Queen’s Bench in Saskatoon it recommends approval of a sale and vesting order, clearing the way for Morris’ sale to Superior Farms Solutions Ltd. (SFSL), the operator of Rite Way Manufacturing.

The report also recommends Morris’ creditor protection, which has been in place since Jan. 8 with several extensions and otherwise expires Friday, be extended again to Nov. 30.

Alvarez and Marsal said it expects the “transactions contemplated” in the proposed deal to close on or before Nov. 15, and has “continued to work towards satisfying the remaining conditions” of asset purchase agreements (APAs) with SFSL for Morris.

The monitor said it believes it’s appropriate to seek a sale and vesting order now, since it’s working to address those outstanding conditions on or before Friday (Sept. 18). The APAs, it noted, have the approval of BMO, Morris’ largest secured creditor.

The APAs, Alvarez and Marsal said, “represent the highest and best offer received for the assets” of Morris, and a deal with Rite Way “would be more beneficial to (Morris’) creditors than a sale or disposition under a bankruptcy given the offers previously received.”

Remaining conditions for a deal include SFSL reaching an acceptable financing arrangement with its lender — and for Morris to negotiate an “acceptable arrangement” with the union representing employees at its Yorkton, Sask. manufacturing plant.

On the latter, Alvarez and Marsal said a letter of understanding between Morris and the Retail, Wholesale and Department Store Union Local 955 was drafted and submitted to union members. The membership then approved the terms of the letter on Aug. 26 in a vote at an open-air meeting at a Yorkton baseball diamond.

That letter proposes setting up a fund to manage payments to an unspecified number of Yorkton plant employees “whose employment is anticipated to be terminated” once the sale closes.

Further details weren’t available; the monitor has also asked Queen’s Bench to place the letter under confidential seal along with the proposed APAs.

Apart from its plant at Yorkton, Morris also has a plant at Minnedosa, Man. The Saskatoon-based company’s businesses include manufacturing air carts, drills, seeders, harrow bars and bale carriers.

Founded in 1929 as Morris Rod-Weeder, the company was owned by the Morris family up until 2007, when it was sold to an ownership group led by then-CEO Casey Davis. Another ownership group, led by Ben Voss replacing Davis as CEO, took majority control in 2017.

Apart from BMO, Morris’ secured creditors include Avrio, Kubota Canada, Wells Fargo and the financing arm of fabricating equipment maker Trumpf, among others. Unsecured creditors include Western Economic Diversification Canada and various trade vendors.

Rite Way, founded by Regina machine shop owner Les Hulicsko, is today headquartered in Regina but has its main plant at Imperial, Sask., about 130 km north of the city. Hulicsko, who began building rock pickers in 1972, sold the business in 2012.

Apart from rock pickers and rock windrowers, Rite Way’s product lines today include land rollers, heavy harrows, rotary harrows, crimper rollers, bale carts, grapples and high-speed compact discs. — Glacier FarmMedia Network

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Kruger had initially asked for a $2 million loan to build a grain elevator. But the Chicago-based bank, one of the largest U.S. farm lenders, ended up selling him a $5 million loan for the elevator and another $7 million to finance crops, machinery and debt consolidation, according to documents in the Ohio foreclosure case the bank filed to seize Kruger’s farm (all figures US$).

When Kruger offered to supply receipts of sold grain and other standard documentation, his loan officer told him not to bother. “‘Don’t worry. We’ll make the numbers work’,” Kruger, 67, recalled the officer saying.

Five years later, after aggressively expanding its U.S. farm loan portfolio, the bank called in Kruger’s loans as corn and soy prices collapsed and the United States was starting a trade war with China. As the U.S. agricultural economy sours and farmers’ financial woes pile up, BMO Harris is leaving behind a trail of farmers such as Kruger who have lost nearly everything.

The bank, a subsidiary of Canada’s Bank of Montreal (BMO), has struggled to recoup some of its investments through a slew of bitter legal fights, according to a Reuters review of court documents and bank regulator data, as well as interviews with dozens of U.S. farmers, bankers, and former and current BMO Harris employees.

“BMO Harris did push for growth, and they’ve had some of those deals blow up spectacularly in their faces,” said John Blanchfield, founder of Agricultural Banking Advisory Services, a consulting firm.

The plight of BMO Harris and its customers reflects broader distress in the U.S. farm sector. Farmers are struggling to pay back their loans or obtain new ones. Shrinking cash flow is pushing some to retire early and a growing number of producers to declare bankruptcy, according to farm economists and legal experts.

BMO Harris may yet face more defaults, judging by its high level of delinquent loans. At the end of June, nearly 13.1 per cent of its farm loan portfolio was at least 90 days late or had stopped accruing interest because the lender doubts the money will be paid back — compared to 1.53 per cent for all U.S. farm loans at banks insured by the Federal Deposit Insurance Corporation (FDIC). BMO Harris had the highest rate among the 30 largest FDIC banks, according to a Reuters analysis of loan data the banks reported to the regulator.

Ray Whitacre, head of BMO Harris Bank’s U.S. diversified industries unit, said in a statement that the bank’s distressed loans do not represent “the overwhelming majority” of its borrowers’ experiences. The Bank of Montreal and its U.S. businesses have been in farm lending for more than a century, he said. The bank takes a long-term view of helping farmers through “all stages of the economic cycle,” Whitacre said.

BMO Harris spokesman Patrick O’Herlihy attributed the high delinquency rates to the bank’s lending in the upper Midwest, where dairy and grain operators have faced serious financial challenges. Sam Miller, BMO Harris’ managing director of agriculture banking, said the bank is keeping a closer eye on its customers with cash-flow shortages and lending to fewer mid-sized operators. “We have to be more vigilant in underwriting the risk,” Miller said in an interview.

The bank declined to comment on any individual loans or borrowers, or on the prospect that it could face additional defaults based on its delinquency rates.

Missing collateral

The bank’s exposure to the farm sector reached a peak of $1.59 billion in 2018. Most other major banks have been scaling back their farm-loan portfolios since about 2015, as prices fell due to a global grains glut, according to the Reuters analysis of FDIC data.

Among the BMO Harris deals that went belly-up was $43 million in farm operating loans to McM Inc, run by Ronald G. McMartin Jr. in North Dakota. The farm filed for Chapter 7 bankruptcy in 2017.

BMO Harris secured a $25 million loan with McM’s grain, cattle and other farm crops, along with other assets. McM agreed to use the sale of these crops to pay the bank back, according to a copy of the loan.

During the bankruptcy proceedings, BMO Harris’ attorneys told the court it was unable to locate all the crops backing its loans, alleging that McM had sold some of the crops to pay other creditors first. Court documents also show the bank had not audited some of the farm’s financial statements. An outside consultant later found McM’s accounts receivable and inventory was overstated by at least $11 million, according to court filings. Neither McMartin nor his attorney responded to requests for comment.

Some experts and bankruptcy attorneys representing former BMO Harris customers say the bank issued too many loans for too long that farmers simply could not pay back. The problems, they said, stem from the aggressive practices of some loan officers and a lack of oversight by bank auditors.

Michael and Byron Robinson borrowed $2.5 million in an agricultural loan and another $2.5 million on a line of credit in 2013 through their Indiana businesses, court records show. The bank sued the Robinsons in federal court as part of its foreclosure process in 2016 and later sold the farmland at auction. The property brought far less than the value the bank had estimated the properties were worth to justify the original loans, said their bankruptcy attorney, Maurice Doll.

Michael and Byron Robinson did not respond to requests for comment. Doll said BMO Harris had loaded his clients up with far more debt than they could reasonably pay.

‘Don’t worry. it’ll be fine’

The Indiana-based BMO Harris banker working with the Robinsons and Kruger, Thomas “T.J.” Mattick, found his customers through farm magazine advertisements, word of mouth, at church gatherings and from rural loan brokers who were paid a finder’s fee, according to interviews with 10 farmers and one loan broker.

“I thought I could trust him,” Kruger said. “We would talk about church and faith all the time.”

When the Robinsons were looking to expand their corn and soybean operations, Mattick convinced them to buy two new farms instead of one — with BMO Harris financing 100 per cent of the deal, said Michael Morrison, the Robinsons’ farm bookkeeper and a former agricultural banker.

Morrison told Reuters he was concerned by how the bank’s underwriters valued the family’s grain in storage, on the premise that its value would continue to rise — even as grain prices were starting to soften at the time.

“We used to say that T.J. never saw a loan he didn’t like,” Morrison said. “I kept telling them, ‘Don’t do this. Don’t take on the debt.’ But T.J. kept telling them, ‘Don’t worry, it’ll be fine’.”

Mattick, who no longer works for the bank, denied that he encouraged borrowers to take on more debt they could pay back. In written answers to questions from Reuters, Mattick said “extensive underwriting and analysis” were conducted on the loans for Kruger and the Robinsons, as with any other file.

Mattick denied telling Kruger that he would “make the numbers work” without standard documentation such as sold-grain receipts. And he said BMO Harris would not have given the Robinson’s 100 per cent financing on their farms unless they pledged additional collateral. BMO Harris declined to comment on Mattick’s statements regarding individual loans and bank policy, and Reuters could not independently verify them.

“I worked with clients to help them determine what they could afford and never would have counseled them to incur debt beyond what they could afford,” Mattick said.

— P.J. Huffstutter reports on agriculture and agribusiness for Reuters from Chicago; additional reporting by Jason Lange and Pete Schroeder in Washington.

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The Crown lending agency reiterated Monday it will work with customers “to come up with solutions for their operations on a case-by-case basis” in view of this spring’s weather worries and unrelated disruptions of farmers’ usual export markets.

Among said solutions, FCC said, it “will consider deferral of principal payments and/or other loan payment schedule amendments to reduce the financial pressure these pronounced circumstances may create.”

“While Canadian producers are among the most resilient in the world, this growing season has presented some exceptionally challenging circumstances for our customers,” FCC CEO Michael Hoffort said in a release.

“In some areas of the country it was too wet to finish planting, while in other areas the dry conditions are limiting crops and pastures.”

Apart from “adverse” weather that disrupted farming operations in parts of Canada last year and this spring, trade disruptions “have reduced access to some international markets, causing commodity price fluctuations and additional concern among producers,” the lender said.

More recently among such disruptions, Canada’s canola exports to China went off the rails this spring.

China had alleged pest problems when it blocked canola from two major Canadian grain firms in March, but diplomatic tensions have also risen between the two countries over the December arrest in Vancouver of a Chinese tech executive on a U.S. warrant.

“Trade tensions and the resulting market volatility have an overall detrimental impact on the world economy and can also be harmful to individual producers caught in the middle,” J.P. Gervais, FCC’s chief agricultural economist, said in Monday’s release.

Producers, Hoffort said, “deserve our support when faced with adversity and uncertainty due to circumstances beyond their control… We want them to know we will work with them to find solutions to any short-term financial pressure so they can focus on their operations.”

FCC in December reiterated it “offers flexibility to all customers through challenging business cycles and unpredictable circumstances on a case-by-case basis.”

The lender at that time announced such assistance for customers including crop growers in Ontario and potato growers in Prince Edward Island and New Brunswick, following unusually wet fall weather hampering harvests.

Among other lenders, BMO Bank of Montreal in April announced a financial relief program for crop producers in Western Canada hit by “lower commodity prices and external market forces.”

That program, for both new and existing customers, offered deferrals on principal payments scheduled from April 2019 to April 2020; flexibility on new and existing operating lines; waivers of loan application fees; and reduced fees for facility renewals. — Glacier FarmMedia Network

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Privately-held Mastronardi has hired Bank of Montreal (BMO) to run an auction process, the people said this week, asking not to be identified because the matter is confidential.

Mastronardi has annual earnings before interest, taxes, depreciation and amortization (EBITDA) of around $88 million, one of the people added.

Mastronardi Produce and BMO did not respond to requests for comment.

A fourth generation, family-owned company, Mastronardi was founded in the 1940s by Umberto Mastronardi. The Kingsville, Ont.-based company utilizes greenhouse technology in its facilities and sells its products under the Sunset brand.

Other competitors in the space include Delta Produce, Village Farms International and Pacific Tomato Growers.

— Reporting for Reuters by Lauren Hirsch and Greg Roumeliotis in New York.

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Farm Credit Canada (FCC) and BMO Bank of Montreal both recently announced they may grant affected customers some leeway on payments.

FCC said it “will work with customers to come up with solutions and will consider deferral of principal payments and/or other loan payment schedule amendments.”

Such solutions, the Crown ag lender said, would be offered to “customers directly impacted by the disease or by bird placement bans placed on farms in the proximity of the infected farms.”

BMO, meanwhile, rolled out a “financial relief program” for commercial customers affected by avian flu including “other impacted locations throughout Western Canada.”

The program, BMO said, will include deferral of loan payments, waiver of a new loan application and concessions on renewal fees, and “flexible terms” on existing and new lines of credit, to be developed “on a case-by-case basis.”

“While this is not a widespread issue, affected poultry producers are no doubt feeling a great deal of uncertainty around what the next few days, weeks and months will bring in light of the recent events surrounding avian influenza,” Mike Bonner, senior vice-president for BMO’s B.C. and Yukon Division, said in a release.

As of Dec. 21, about 245,600 birds at 11 turkey, broiler/breeder and egg operations in the Fraser Valley, mostly around Abbotsford, have been euthanized after cases of highly pathogenic H5N2 avian flu appeared in birds on the properties.

Another 85 ducks, geese, chickens and turkeys at a “non-commercial” backyard farm in the Aldergrove area were also euthanized after H5N2 was confirmed in birds at the site.

Federal restrictions have since been placed on movements of birds and related equipment within a designated disease control area in the region.

Countries including the U.S., South Korea, Hong Kong, South Africa, Mexico, Taiwan and Japan have also restricted or banned imports of B.C. and/or Canadian birds and/or poultry products since avian flu was confirmed in the province. — AGCanada.com Network

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