Farmers face a working capital crunch

Tyler
Tyler Clarke
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Full grain bins don’t buy seed or fertilizer -- a problem some cash-strapped Saskatchewan farmers are facing this spring.

 

Rail delays

Last year’s grain crop was a record-breaking one for Saskatchewan. Coming in at 38.4 million tonnes, the rail system struggling to keep up, with many farmers left holding their product.

“At this point, really, it’s a delay in their ability to move the grain that they’ve contracted and harvested last fall,” Farm Credit Canada district director Garnett Volk explained.

“At this point, there’s a glut of inventory on the farm and they’re unable to turn that crop into cash, and as we move to the spring -- cash buys inputs for the spring, and makes payments, so there’s a working capital crunch.”

Earlier this week, Prince Albert Farm World sales representative Brent Kaar told the Daily Herald that a strong majority of his customers are “riding out” the transportation delays.

This same sentiment applies to Farm Credit Canada’s clients, Volk said.

“We sent 16,000 letters to producers across Western Canada encouraging them to come forward, have a discussion with FCC, and we would then work with them to see what solutions we can put in place,” he said.

In January, Farm Credit Canada deferred crop input payments from Feb. 15 to March 15, which Volk said assisted some farmers.

“We also have other initiatives that we’re taking forward, and we’re just encouraging our customers to be proactive, give us a call, and work through different solutions based on this delay in cash.”

“At this point, we’ve talked to literally hundreds of producers across Saskatchewan,” he said, noting that every farmer’s situation varies.

“It varies from those who have different staged payments, different dates, different farm structures -- it really is so varied. But, what I can say is that people are very confident -- we’re very confident -- and for the vast, vast majority, there are certainly options available.

At this point, there’s a glut of inventory on the farm and they’re unable to turn that crop into cash, and as we move to the spring -- cash buys inputs for the spring, and makes payments, so there’s a working capital crunch. Garnett Volk

Although Volk said that he doesn’t want to belittle what farmers are currently going through, he said that too much grain on-hand is “in many, many ways … a good problem to have.”

“There have been years where farmers didn’t have inventory and certainly, it’s a challenge. I don’t want to underestimate the challenge that’s there, but we have the inventory. The frustration is converting that crop to cash, which we need to run our businesses.

“When you need to purchase your seed or fertilizer for next year, it doesn’t help you a whole lot if there’s no cash to buy it.”

Volk said that he’s happy to hear the provincial and federal governments express interest in tackling the issue of working with rail and grain companies to improve rail traffic capacity.

“Let’s hope that we can work through a solution, here, rather than finger-pointing,” he said.

In the interim, he said that Farm Credit Canada will continue working with farmers to get seed in the ground this spring.

“FCC understands the challenges that grain producers are going through and as we have been over the years, we continue to be there through the ups and downs and everything in-between,” he said.

“We just encourage people to connect with us and we’ll work through it together.” 

Organizations: Farm Credit Canada, Daily Herald

Geographic location: Saskatchewan, Western Canada

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  • MG
    February 28, 2014 - 10:35

    It is hard to imagine that after 4 excellent years farmers are in a cash flow crunch after only 4 months of a tight market. FCC is a crown corporation so their lax lending standards put our tax dollars at risk. Sell off FCC, get the government out of agriculture and strengthen the indusrty by eliminating the subsidies which primarily prop up the overly aggressive operators.