Viterra's Cattle Financing Program Will No Longer be Available


With last weeks expected sale of the Viterra Livestock Division to Hi-Pro Feeds LP the feed industry in Canada has changed in Western Canada.  Hi-Pro will be owned by Birch Hill Equity Partners and the employees of the company.  In the press release Viterra said that the sale was initiated for strategic reasons.

Viterra is focused on growth and the livestock industry is not growing but instead shrinking across North America.  Although I have no idea if the Viterra livestock division was profitable, I would suggest that due to the opportunity for limited growth, the whole division was sold.  Based on Viterra’s growth objectives, if you are not growing you are for sale.  This is similar to the strategy executed by General Electric under the leadership of Jack Welch in the 1980’s.

At first glance this sale really creates no challenges for Canadian producers……. but…….. This was until the bigger shoe dropped.  This larger shoe is that the new company has decided to no longer offer feed advances or cattle financing, which was tied to feed sales.  Customers have been informed that after March 31, 2012, Viterra cattle financing will no longer be offering cattle purchase financing or the $1 per head per day feed financing program.  This will remove an estimated $50-150 million dollars of cattle financing from the finger tips of feedyards and back grounders in Western Canada.

When you listen to my Feb 2010 interview with Viterra CEO, Mayo Schmidt, you really shouldn’t be surprised by the sale.  He doesn’t really sound committed to the livestock feed business at all.

I have no idea why Birch Hill Equity Partners will no longer be offering the finance product, but the impact on producers will be very large.  With schedule one banks (RBC, CIBC, TD, Scotiabank, BMO, and ATB Financial) playing hot and cold on the cattle industry at times, the Viterra Livestock Finance provided feedyard owners with financing options.  It will be left up to AFSC, Farm Credit Canada and Feeder Associations Alberta to pick up the slack to make sure that feedyards have financing when the schedule one’s get cold feet.  The opportunity for Feeder Associations Alberta and Farm Credit Canada (through independent brokers) is definitely real without the Viterra finance offer as a competitor.  With the increased cost of feed and feeder cattle, feedyards need a level of financing that is more per head than ever encountered before.

If Feeder Associations Alberta and Farm Credit Canada don’t step up to fill this financing gap, there will be real concerns for Western Canadian livestock producers.

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