We’re not seeing a host of people lining up at the door because the bank has kicked them out. “
– Lyndon Carlson
Credit will continue to flow to Canadian farmers despite a global credit crunch that has decimated stock markets and triggered a global recession, says Lyndon Carlson, Farm Credit Canada’s senior vice-president of marketing.
“When I look at our (FCC) situation we’re going to have another record year for new credit extensions,” Carlson told CropLife Canada’s annual meeting last month. “And when I look at our competitors – the banks and the credit unions – they’re also very active today in the agricultural market. We’re not seeing a host of people lining up at the door because the bank has kicked them out.”
But Carlson said interest rates will rise to reflect tighter credit internationally, even though it appears that the Bank of Canada will continue to cut the prime lending rate.
Financially shaky businesses, including farms, will have more trouble getting credit, he said. But the reverse will also be true.
“Banks will be looking for quality opportunities to make loans,” Carlson said. “If you’re a very strong company or individual you might actually find yourself in a great position in terms of access to credit and in terms of price because everybody will want a piece of that credit.”
FCC, which has $16 billion loaned to farmers and agricultural companies, said more than 99 per cent of its files are current. Meantime, the struggling red meat sector is getting a helping hand from the lower Canadian dollar.
“We’re competing on price (with the banks and credit unions) so that’s a good sign,” Carlson said in an interview. “We’re still seeing
robust competition, which is nice. We’re very optimistic.”
In fact, Canadian agriculture is considered by most lenders as a good place to invest, with the risk ranked as “low” to “medium-low.”
But the main reason for Carlson’s optimism is, unlike in the United States, Canadian banks are financially rock-solid and the government and citizens are less indebted.
Canada has fewer banks, but they’re large and more heavily regulated than their U. S. counterparts.
Several American banks have gone broke, while the American government has invested trillions of dollars trying to keep others and the financial sector as a whole, afloat.
“Canada is a totally different story,” Carlson said. “We are ranked No. 1 by the World Economic Forum in Switzerland in terms of the health of our Canadian banks.”.
Canada is literally, a different country, and that’s a positive thing, Carlson said.
“When you look at our national debt versus the American debt we’ve got the ability still, as a nation, to respond,” he said.
“Even the Risk Management Association, which is a well regarded North American institution, looks at the risk profile of agriculture as being good. We believe those fundamentals remain in play and off we go.”