Canadian hog producers trying to take advantage of a federal loan loss reserve program say they’ve run up against lenders’ tough criteria for granting the government-backed loans.
That’s according to Jurgen Preugschas, president of the Canadian Pork Council, who said Wednesday at the Manitoba Swine Seminar in Winnipeg that financial institutions appear to be using much the same criteria as before the program was put in place.
The program, including up to $400 million in guarantees offered by the federal government, is meant to allow hog producers to restructure their debt and stretch out their payments over longer terms.
“It’s been good for those who have been able to access it and it’s close to $300 million now that has been approved under that program and it’s only 113 producers,” Preugschas, a farmer from Mayerthorpe, Alta., was quoted as saying on the hog industry-sponsored program Farmscape.
“We expected a much higher uptake and I think there’s a combination of reasons for that and that’s the part that we’re disappointed in,” he said. “We feel that maybe the financial institutions need to put a higher value on the government guaranteed portion of the loan.”
Currently, however, the council is hearing that chartered banks and credit unions who are registered to lend under the program are “still lending with very similar criteria, even without the government-guaranteed portion,” Preugschas said.
Other producers, he said, don’t relish the thought of entering the loan loss reserve program only to have to pay off outstanding cash advances under the federal Advance Payments Program. Paying off APP funds owed is a first requirement for the loan loss reserve program.
Essentially, he told Farmscape, producers in the loan loss reserve program must choose to take a loan that is 100 per cent guaranteed by government (the APP advance) and replace it with a loan that puts some of the risk with the lender.
However, according to a report in the Jan. 28 Manitoba Co-operator, application figures for the loan loss reserve program suggest not that farmers are being rejected, but that they’re just not yet applying.
“It’s well below expected demand for sure,” Farm Credit Canada senior vice-president Remi Lemoine told the Co-operator’s Ron Friesen.
Lemoine also suggested that in FCC’s case, the federal farm lender had already restructured many hog farmers’ loans well before the loan loss reserve program was launched last fall.
Other farmers, he said, may have already shed assets and reduced their herds to try and ride out the current market conditions for hogs. Still others, he said, may have simply got out of hog farming altogether.
Andrew Dickson, general manager for the Manitoba Pork Council, told the Co-operator he expected final figures from the program, which ends March 1, will be much higher than they are now.
But he also granted that many producers are already too deep in debt to meet the viability test required under the program.