Bank of Montreal is allowing cash-strapped Western Canadian grain farmers to delay loan payments, joining a growing list of lenders responding to the transportation backlog that has left growers with full storage bins and shrinking bank accounts as planting season approaches.
The bank said on Thursday it is also offering flexible terms on the lines of credit that growers rely on to buy seed and fertilizer for their fields.
“We want to provide immediate support to any grain producers and other related businesses that may be experiencing cash flow disruptions as a result of the backlog, which can hamper their ability to finance crop expenses for the up-coming season,” said Steve Murphy, BMO vice-president of commercial banking.
Farmer associations have been telling members to talk to their lenders about extending lines of credit or delaying payments. Crown lender Farm Credit Canada and the Department of Agriculture began offering loan extensions and cash advances of up to $400,000, respectively, in February, which is when the bulk of agriculture loans are due.
The record 2013 harvest of wheat, corn and canola has strained the transportation system and sparked a war of words between the agriculture sector, politicians and the railways.
Railways blame the harsh winter and massive amount of grain for the delays in getting the crop to ports and buyers in the United States. But growers and the companies that buy and ship their crops say the poor service preceded winter, and that railways cuts and competition for locomotives and train crews from the oil sector are compounding the backlog.
Farmers get paid when the local elevator buys their grain. But the elevators, which are owned by such companies as Cargill and Viterra, are not buying. They are full and say they cannot get ample train service to the West Coast ports.
So about 5.5 million tonnes of grain – 60,000 railcars – is sitting in bins and storage bags. And dozens of ships are at anchor of the B.C. coast awaiting grain.
Farmers complain they have not been able to capitalize on a crop that is 40-per-cent bigger in a time of relatively strong prices.
Saskatchewan Premier Brad Wall took his fight for better rail service to Ottawa last week, asking Ottawa to “take whatever steps they need to take” and warning that major food processors such as General Mills are running low on ingredients such as oats.
Federal agriculture minister Gerry Ritz, a former farmer, has threatened railways Canadian National and Canadian Pacific Railway with legislation to eliminate the backlog.
“They are a service industry that does not care much about service,” Mr. Ritz told CBC last week.
Alberta Premier Alison Redford has called on Ottawa to hold the railways financially accountable.
CP placed an ad in the Globe and Mail on Thursday in which chief executive Hunter Harrison conceded his company’s service was falling short. But he noted there were 49 prairie winter days with temperatures of at least minus 25 degrees, a number he called the “tipping point” for railway operations. In extreme cold, railways run shorter trains to improve stopping distance. Switches and machinery are more prone to failures in extremely cold and snowy conditions.
“CP is moving more grain than ever in its history,” said the ad. “This crop year CP has moved more grain than the previous year, itself a record for grain movements in Canada. In February alone, despite the weather, we managed a 15-per-cent increase in grain shipments.”
It costs about $200,000 to plant and fertilize a typical prairie farm of 1,300 acres. This is money the growers won’t get back until they harvest and sell the crop, which usually happens throughout the fall and early winter. Not this year.
Doug Chorney of Manitoba’s Keystone Agricultural Producers estimates about half of that province’s crop is in bins, at risk of spoiling due to weather and pests.
Total liabilities of Canadian farms grew by 21 per cent to $67.3-billion between 2008 and 2012, Statistics Canada said. The asset value of these farms grew by 33 per cent during the same period, driven largely by gains in real estate prices.