In a letter issued to customers by Farm Credit Canada (FCC) on July 29th, 2014, Crop Production Services (CPS) has notified FCC that it will no longer offer the FCC Crop Input Financing to CPS customers. The total amount of loans that was issued by FCC through CPS has not been publicly noted. One can assume that with CPS being the largest agriculture retailer in Western Canada that the amount is substantial, although not very significant to the overall FCC loan portfolio.
Todd Klink, FCC Vice President of Partners and Channels stated to RealAgriculture.com:
“Out of respect for customer confidentiality, we won’t comment on specific business relationships or decisions. There are several options available to producers who finance their crop input purchases and FCC believes choice in the agriculture financing sector is good for everyone.”
Klink noted that other products, such as the FCC Credit Lines, are still available to producers who want to finance their purchases through FCC, even when a supplier doesn’t offer FCC’s Crop Input product.
“With FCC in the mix everyone wins. Rural Canada wins because a strong agriculture industry leads to a healthy economy. Producers and the industry win because we provide a stable source of credit and knowledge products to keep the industry thriving.”
Twenty-two year old farmer Kevin Steeves tweeted the following when he got the letter.
CPS dropping FCC’s crop input financing. Not the best phone call to get.
— Kevin Steeves (@steeves11) August 6, 2014
The reality is that the FCC Crop Input program is still available if you require it through other retailers. According to above mentioned customer letter, FCC encourages farmers to possibly use their FCC Credit Line if purchasing through a retailer like CPS that does not offer the Crop Input Financing program directly.
The reason why CPS dropped the FCC program has not been confirmed by RealAgriculture at this time. CPS could not be reached for comment on the reason for this decision.
A couple of farmers RealAgriculture spoke with, speculated it was because the competitive Scotia Bank program currently offered by CPS is likely much more financially lucrative for CPS due to the higher interest rate offered. With the CPS / Viterra merger this was one of the Viterra legacy offerings that was kept by CPS. CPS had the prior relationship with CPS while Viterra offered the Scotia Bank program.
One farmer suggested to RealAgriculture that this was a good thing because FCC holds too much of the Canadian agriculture loan portfolio already. According to the FCC annual report, the federal Crown corporation’s market share decreased 0.7% to 29.3% in 2013. Charted banks continue to have the largest share of farm debt at 35.9%. As Todd Klink notes in the statement above competition in the agriculture lending space is good for everyone.
How this impacts farmers in Western Canada this fall is yet to be determined. If you were an exclusive CPS customer your financing options are less but there are many different choices in the market. CPS still has the the Scotia Bank program as well. CPS competitors likely look at this decision as a strengthening of their relationship with FCC if they are also offering the FCC program.