As grain farmers begin seeding their fields, a new report from Statistics Canada highlights the squeeze they face – paying for this year's supplies while much of last year's crop remains unsold.
The amount of wheat stored on Western Canadian farms is up by 73 per cent this spring, following a record harvest and extremely cold winter that railways blame for delays in getting the crop to markets. More than 21 million tonnes of wheat and nine million tonnes of canola – a record for the oilseed – sit in elevators, storage bins and bags at the same time growers are buying seed and fertilizer for the next harvest. In Alberta, a record 5.2 million tonnes was stored on farms at the end of March.
The 2013 grain harvest was about 76 million tonnes – 30 per cent larger than the previous year's, thanks to good weather and improved planting methods. But farmers have been unable to take advantage of strong prices and demand from overseas markets as grain companies have had trouble finding enough rail capacity to take the grain to ships that have waited dozens at a time at the Port of Vancouver.
To alleviate the cash crunch farmers face, Bank of Montreal, the country's largest private lender to the agriculture sector, said on Monday it is offering a two-month repayment extension to growers who have taken commercial loans or crop-input cash advances. The bank will also waive fees on new or renewed loans and offer more flexible terms on lines of credit. Two federal agencies, Farm Credit Canada and the Department of Agriculture, have also offered easier terms on loans and cash advances to farmers this season.
BMO said the "troublesome year" for growers is trumped by the overall good health of the farming sector, strong prices and keen global demand for the crop.
"We've had a confluence of events that have really caused this cash flow hiccup," said Mark Shoniker, head of agricultural lending at BMO. "But when you stand back, the actual price of the commodities has weathered extremely well. It is going to be converted to cash. It's just a matter of when, not if. Farmers by their very nature – they're good clients. They're hard-working folks. They're honest people. This will work its way through and if everybody is a little bit patient … this will just be another issue that goes by in the normal course."
Mr. Shoniker said about 40 per cent of the bank's agricultural borrowers have asked for some sort of relief, from delaying loan payments to accepting the offer of a two-month extension on crop input loans, which are paid back yearly.
The grain backlog has sparked a war of words between the country's two major railways, farmers and the grain companies that buy and sell the commodity. The federal government has taken the unusual step of ordering Canadian Pacific Railway Ltd. and Canadian National Railway Co. to move a minimum amount of grain each week or face fines of $100,000 a day. Ottawa is also passing legislation that gives it the right to set weekly shipping targets, and gives grain shippers the right to choose another railway within a wider range of the nearest interchange.
Railways say the harsh winter hampered their abilities to move the crop, which was bigger than anyone expected. The grain companies and some farmers blame railway cost cuts and a focus on other lines of business.