On Monday, April 14th, 2014 Farm Credit Canada ("FCC")
released its 2013 analysis of farmland price trends across Canada by province.
In all provinces, farmland values either increased or remained stable.
Saskatchewan experienced the highest average increase at 28.5%, followed by
Manitoba at 25.6% and Quebec at 24.7%.
Despite record Canadian farm debt that rises annually with
ensuing increased debt-servicing charges and predictions of higher interest
rates, federal agriculture minister Gerry Ritz does not see a problem. “I compare
the debt to asset ratio and that is healthy. Farmers make decisions based on
their economy. Banks and lending institutions like FCC (Farm Credit Canada) are
smart, won’t stick their neck out too far (and) everything is covered well.”
But the C.D. Howe Institute says (ever-so-gently):
We find that all Crowns compete to some extent directly with
private financial institutions, and hence operate beyond any potential market
gap. FCC, whose share of total farm loans has grown from less than 15 percent
in the 1990s to 29 percent in 2011, appears to operate the farthest removed
from a complementary role. We also find that Crowns’ operations pose risks to
taxpayers and the overall economy – and that these risks seem to have grown in
recent years. In particular, the FCC has grown alongside a rise in the level of
farm indebtedness and a bidding-up in farm asset values, including
supply-managed farm quotas.
Ya think?
ReplyDeleteRitz says "I'm a firm believer in the marketplace". Since when? Or has he forgotten his government's unwavering support for supply management?
What a dink..
Hmmm....declining property rights due to growth of statist governments, sky-rocketing farmland values, buoyed by expansionary monetary policy, interest rate suppression, and artificial farm price stimulus (ethanol, supply management, etc.). Oh yes, this story HAS to have a happy ending.
ReplyDeleteThe other problem is that regular banks are caught in the trap of matching FCC's terms and lending restrictions (or lack thereof) if they wish to remain competitive. So the risk is set by FCC, but certainly not restricted to FCC.
ReplyDeleteThe taxpayer will be screwed for sure. First the FCC is a crown corporation whose loan portfolio is backed by the Canadian government. Secondly, when the shit hits the fan the farm organizations will be screaming for a bailout for the sorry bastards who took on too much debt. Do you think Ritz will be able to resist the squeals for government money? I doubt it.
ReplyDelete