Feeder Assoc Alberta Expands its Program to Include Equity Draws

[shaney]

[BFW]

Interestingly one of the causes of the subprime mortgage crisis in the US was the lack of proper documentation and financial information in the issueing of mortgages to people who had no business whatsoever in receiving them. So how does making more credit available to people who in many cases do not have the equity in their businesses for whatever reason, help make them more competitve with better capitalized neighbors who do? Higher levels of debt do not increase your competitiveness. I think that is more than apparent with what is happening around the world today.

[ALLFARMER]

Nilsson bros has been doing this for a few years already. Once u get the calves they give u money for feed.

[smcgrath76]

I understand the need for liquidity and
cash flow to make this all work, but it is
tough to borrow your way out of debt...

[kato]

That's what I was thinking.

[Sawbones]

I am supportive of this move by the AB government and the Feeder Association of Alberta. Cash flow especially in the last few years has been a major problem with primary producers and the "whatever the reason" expressed by BFW is frequently that the Schedule 1 banks have frozen the operating loans at a level that does not allow the producer the flexibility of retaining ownership. Most primary producers have an equity investment in excess of $4000 per animal unit while most major feedlots have an equity investment of 1/10 that amount in their lots. Cow/calf producers will carry that investment for 2 years from conception to consumption while the feedlot ususally retains ownership for 6 months. The another reason is that there is a time lag from slaughter to payment usually 45 days and payment for slaughter, transportation of product and storage also have to be accounted for. This can add an additional $500/animal depending upon point of sale.
The financing that is provided allows the producer the option of retaining ownership and taking advantage of the added protocols that should "add value" to the end product. Having the security of financing rather than reacting to the whims of the marketplace should allow producers to concentrate on their method of production. True value chains can become established where the producer actully benefits from the added value of the animals they produce. I agree totally that just adding debt is no solution but when I can access funds to gain an additional $150 profit/ animal, that makes sense to me.

[smcgrath76]

I don't disagree with you Gary, as long as
the funds are used to extend ownership
into retail...not sure they will be
though.

[DaneG]

The livestock cash advance would likely work just fine.