Canadian Farmers Encouraged to Be Prepared for Higher Interest Rates

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Farmscape for June 30, 2021

Full Interview 9:22 Listen

Farm Credit Canada is advising the agriculture sector to be prepared for higher interest rates. Canadian farm debt increased by 5.9 per cent to 121.9 billion dollars in 2020, the smallest increase since 2014 while farm cash receipts climbed 8.3 per cent but a rise in interest rates could impact the ability of farms to service that debt. Farm Credit Canada Principal Economist Craig Klemmer says revenue has varied by sector and there are signs of higher interest rates but things are looking positive.

Clip-Craig Klemmer-Farm Credit Canada:
When we think about western Canada right now, commodity prices are really strong right now so that’s going to continue to support revenue, providing we do get a fairly really good crop here. From the grains and oilseeds side of things, we’ve had really good growth in 2020 and with current commodity prices we’re looking at extremely strong revenues here in 2021 again.

One of the things that that we did see on a challenge side of things for the industry is on the livestock sector. We’ve had plant closures impacting cattle and hog prices in western Canada and the returns that we’re getting there. As the economies reopen, as COVID becomes less of an issue, we haven’t had those same disruptions. We’re current in terms of processing and those are all good news stories. There’s still fairly strong or good demand for beef and pork domestically and in the international market.

I think those are all going to be positive things that we see improvement on the industry. The big questions going to be on the input costs. We are see rising input costs, whether it’s fertilizer prices coming in for the grain and oilseed sector and obviously these high commodity prices for grains and oilseeds means high feed costs for livestock producers. So, there’s a bit of caution there that people need to be considering going forward but overall, I think we’re in a good spot right to weather these challenges and, depending on which part of the industry you are, there’s some reasons to be optimistic but I think there’s going to be that cautiousness that we need to think about as we’re making future investments and the potential impact of higher interest rates on those investments as well.

Klemmer says, at the end of the day, Canadian agriculture has always been agile and resilient and we continue to see that.

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