Bank Support

[crossfield_beef]

I have been looking at the actions that the banks have been taking during this beef crisis. When cattle prices were really low it appeared that the banks were helping the farmers hold on. Now that cow prices are picking up it seems that banks are putting more preassure on the farmer and beef producer to sell assest and foreclose.
I deal with the Alberta Treasury Branch.
I can not really say that they are giving me the kind of support that I need to prosper in the future. I wonder which banks are really supporting the farmers and beef industry.

[crossfield_beef]

Sorry about this second post. I must have quickly clicked the button twice.

[cowman]

It seems more cow herds are starting to hit the market right now. The rumors are that they are "bank" cattle, where the bank is pulling the plug on the farmer. Actually some pretty good young herds showing up.
And yet they are finding willing buyers and lots of people in attendance! At Innisfail on Friday they had around 600 cows and although I only dropped in briefly there seemed to be lots of bidders even though prices were not exactly good! Registered Char cows were anywhere from $500 to $720 and they were pretty fair cows weighing in that 1500 lb. range. Also saw some pretty decent bred black heifers sell for $840 which I thought was fairly poor for 1200 lb. heifers? Surely they would have made more money if they had been sent to slaughter?
Unfortunately, quite a few of these cow herds going under are the younger producer with a high debt load. The old guy with no debt and lots of equity seems to have adjusted to the new reality of low prices? For many people going back into grain is not an option as the grain business is not exactly real rosy either? Hay is also fast becoming a joke? The going rate seems to be around 2 cents/lb. for fairly decent stuff and 2.5 to 3 cents for "no rain" hay? Now if you have it in small squares...then it is a different story as the "horsey set" isn't too concerned about price!
I do see another exodus of young farmers as there just isn't enough money in agriculture to keep them there. It is sad because pretty soon all that will be left is old men.
And yet close to home 480 acres were put up for rent and the winning bidder paid $82 cash rent! He intends to grow silage on it, so I guess someone still has some money and is optomistic.

[crossfield_beef]

Thanks That is useful information. The new reality of economic uncertainty has created new risk factors for agriculture. Also some new opportunities are being presented.
Interest rates are still low. Land values are still increasing.
The bank that a person deals with may very well determine the success they have in the future.
I am not so sure about the treasury branch.

[whiteface]

$82 AN ACRE COWMAN!?! Holy #$#%! Who on Earth pays these kinds of prices and to grow silage yet! I rented my land at $70 an acre not that long ago and thought that was too much but still took it back when hay was costing me too much to haul in here. Now my land is back in hay for my own cows but I should consider giving it up again for that kind of money! That's insane!
Have a good day all.

[cowman]

There is a fair bit of quality hay land that rents in that $80 range around here, but this was cropland. Most of the hay land that rents high is for export timothy production and I'm not just to sure what that market is like right now. But growing hay for the horse market can be profitable if you can get it off in good condition...even at $80/acre! They key phrase here is " in good condition"...otherwise it is cow feed and we all know what a loser that can be...especially this year?
Is this guy crazy for paying $82? I guess it's all how you look at it? The locals told me they grew around 11 tons/acre this year on good land with lots of fertilizer. So the gross return of 11 tons times $27(Cattlemans magazine) would be in that $300/acre range? Now maybe 11 tons might be fairly optomistic(2004 was an awful good year) but on a one third crop share deal would be right in that kind of ballpark figure?
The renter has about 600 cows and feeds out his calves to shortkeeps and this land is fairly close to his homeplace, so I expect he did his homework and has come to the conclusion this can work for him?
Another way to look at it is this way: This land would probably sell in that $2200/acre range so if he was paying 5% interest to buy it it would cost him $110/acre just in interest! Throw in the land taxes and it makes a lot more sense to rent? I believe a person should always figure out how much their own land is costing them...just so we all realize just how much money we are losing to farm! I doubt there is any land in Central Alberta that is actually returning a real profit on our investment, other than appreciating land values?
On a side note some of the oil trusts realized a profit of close to 31% this year! How would you have liked to have all your money in one of those?

[dalek]

I think what we expected all along here, and what I'm hearing from some in the banking biz, is that they're going to be very patient as long as cattle prices are low enough that they can't get their money back by foreclosing. There have been a few here, mainly dairy heifer exporters with no hope of recovery and a few beef farms that were already in trouble, but I think if prices recover more this year, they'll be waiting until the calves come off pasture in the fall, then they can lower the boom and ship the animals straight to market in their prime and have the summer's worth of feed to boot. There's no use in a bank foreclosing in the spring, then paying somebody to do the work in the summer, or selling animals when they aren't ready, when they know perfectly well the farmer will work all spring and summer for free.

[gwf]

Cowman:
What Oil Trusts are paying 31%?

[dolin]

trust unit fmo.un was at 10.15 last year go up to 35.73 now it is at 28.55 for gain of plus 232per cent.dont buy it now to expensive.

[pmckenna]

From what I've noticed so far - and this is by no means scientific - the banks will pull the net from the water when the stock has some recovery value. I think that's been said before, and it sure makes sense to me. What's the point of going to court action, with all its' costs, if the inventory isn't worth it. I sincerely hope that each and every one of you aren't in that situation, many will though, and unfortunately R-CALF will benefit for a while, while others lose a multi-generation enterprise.

[WRAPper]

I'm not sure if this is of any use but I was in my bank a couple weeks back< I deal with the commercial side of one of the bigger chartered banks and they have an ag. division there, while I was in, my former account manager who now is the head guy for all that banks ag. types came along and we had a pretty good visit. I of course asked him what the ag. portfolio was looking like and he said it was really quite current he said that there are very few not making the payments in fact they worry a lot less about the ag sector loans than other sectors as farmers are usually among the best at meeting their payments etc. Just thought I'd throw that in to this thread whilst keeping in the back of my head that farm debt is at record levels, so it remains to be seen how this crisis on top of the last three years plays out. Sprinkle the outlook for grain prices on top and will we see a major meltdown I hope not and I'm frankly surprised more haven't been sidelined than their have been.

[pmckenna]

I appreciate the input WRAPper, it feels a bit warmer if most can mitigate with banks. Every year, regardless of conditions, some farms have trouble. If the majority are stronger, as you allude to, then perhaps a few weaker enterprises may be saved through partnering. Is this out of the question? Is it more complex/complicated than that? How bad could it get before the loss of the operation is worse than doing some kind of cooperative deal (assuming you have found good partners).