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Give Your Banker A Call

Whether it is good times or lean times, financially speaking, Prairie producers are urged to keep in touch with their lenders, says an ag lending specialist with the Royal Bank of Canada (RBC) in Alberta.

With a mostly cool, dry growing season on the crops side, and poor markets in the livestock sector, it could be tough for some producers to make payments heading into 2010. But lenders are anxious to work with producers provided they have a business plan in hand, says Rob Whitfield, vice-president commercial and agricultural markets with RBC in Medicine Hat.

Whitfield was speaking at a summer field day organized by the Chinook Applied Research Association.

Banks and other lenders don’t want to end up owing livestock or land, he says. Even if a producer is facing a cash-flow crunch, provided they have developed a realistic plan to manage debt, the bank is willing to listen.

“Communications is so important,” he says. “Lenders like hearing from producers to learn how the year is going. It is important to communicate effectively. Tell your banker if there are economic factors you are concerned about, and we will do our best to help you work through them.”

Whitfield says the bank’s lending policy and approach to dealing with agricultural customers is based on both national and local conditions. The bank looks at the economy and strength of the industry globally and across the country, but also takes into account regional factors such as weather and local markets as it considers the business plan of individual producers.

Here is general advice he had for producers in dealing with their local ag lender:


Knowing how much it costs you to produce a bushel of wheat or to achieve a pound of gain on cattle are fundamental figures when it comes to discussing the financial health or future plans for your farm business.

And a have a three-stage business plan. As you sit down with your agricultural lender, develop a business plan that considers the short term — next few months to a year — in terms of revenue and expenses; also have a mid-term plan — looking ahead to the next two or three years — that factors in costs such as new equipment or projected income; and have a long-term plan — covering the next five to seven years — that projects not only revenue, but bigger changes such as farm expansion or retirement.

As you develop a farm business plan, also look to have off-farm investments to help spread business risk. But invest in industries or businesses you are familiar with. Whitfield says it makes more sense to buy stock in John Deere, rather than invest in a new restaurant, especially if you don’t know anything about running a restaurant.


A producer’s expertise is likely in producing crops or livestock, so it makes good business sense to use the services of a crop advisor or livestock nutritionist to help you fine-tune your management. As well, make an accountant, lawyer, and banker all part of your business management team.

Develop a business and management plan that allows you to be “nimble” in responding to economic and market changes. Using a cattle feeder as an example, Whitfield says as feed costs and market prices change, it may make sense for the cattle feeder who has always bought 850-pound calves to finish, to switch over to buying lighter calves and making use of cheap feed supplies. Have enough flexibility in your business plan so that you can change your practices to reduce costs or improve profit margins.


As part of effective communications, keep your ag lender posted not only on the current state of affairs — strengths and weaknesses of current markets — but also show them your track record. Tell them what sort of yields and returns have you achieved over the past five to 10 years.


Work with your accountant to develop a thorough statement of assets and liabilities, and determine your debt-to-equity ratio, which is prime indicator of your ability to repay debt.

“A bank can be flexible, but lending money needs to make sense,” says Whitfield. “You need to have a proper plan, not a few numbers scribbled on a napkin, but a proper and realistic plan, and your banker will be willing to work with you.”

While the objective is to work with producers to develop a stable, profitable farm business, some farmers also have to face the possibility that the economics of their operation just aren’t there. “There isn’t always a pie in the sky solution that’s going to fix everything,” says Whitfield. “Sometimes we have to face the worst case scenario, which means we need to develop an exit strategy for the farm business. And that requires a proper plan as well.”

Lee Hart is a field editor for Grainews in

Calgary, Contact him at 403-592-1964 or by

email at [email protected]

About the author

Field Editor

Lee Hart

Lee Hart is editor of Cattleman’s Corner based in Calgary.



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