Credit- To easy for farmers to get?

[bgmb]

Got a letter in the mail from FCC the other day opened it and WOW I am pre approved for $100,000 in money to finance my inputs!!! Kinda starting to get like the credit card companies. Maybe we will be able to go interest only on our inputs soon!!

It bothers me.. money is so easy and cheap this is why we are seeing land prices out of this world and input companies are convincing farmers to commit earlier every year.

[caseman]

yep,its easy. went to a dealer looking at a sprayer,said i would take it if financing was approved.

did a credit application before lunch,by 4pm fcc approved the loan.

the nice thing about fcc loans is there was no loan fees,a similar loan at my bank would have cost $1800.00

[oldjim]

I think FCC will end up being the Canadian farm version of the sub prime mortgage mess down south. They can't seem to throw money out the door fast enough and with their interest-only payments, voila! no arrears. Looks good on the annual financial reports they flaunt. Wish it had been so easy to get credit 30 years ago - they wanted your left nut and your first-born, plus you couldn't have an off-farm job. Oh yeah, and you had to wait 6 months before they'd disburse the money (at 12 - 18% interest).

[cottonpicken]

Its the bond market,they are trying to staiblize
things,mix up some good debt with bad,re-
package,re-sell.

[bgmb]

Yes Caseman and your equip dealer got a nice kickback from FCC out of the deal too.

Went to buy a new vehicle for the family the other day. At a couple used dealerships the price was actually 1000 bucks lower if you financed the vehicle. They would not budge on that policy either so I refused to buy from them.

Here I thought I would get a better deal by being able to pay for something I was going to buy. Silly me...

[bgmb]

This has really been bothering me lately. Cotton you are big on owning sound real assets like oil gold farm land ect. I agree with you but What happens when Interest rates start going up and guys can't afford 70-150 dollar an acre interest payments?

How about these investment funds that bought land and are probably leveraged. Which force is bigger the cash chasing inflation hedges or those forced to liquidate due to high cost of their borrowed funds?

Maybe land doubles again before we have to worry about that and what is highly leveraged now isn't any more??

[btjadenlepp]

my impression is that the land investment
funds are not leveraged. whatsoever. pure,
clean cash looking for a home.

[Hopperbin]

Probably 50 percent or more of the land purchased here in the last 5 years is from Alberta origin investors is cold hard cash from sold land or equity in land. Out bidding us local of course, cause we have been flooded, frozen, drouted, gouged, cwb abused, OK that was low, have a niehgbour just sold out hopefully so can ditch accross land so can rent him some more. Not saying land is not a good investment, I am done investing in land, christ just got a rent offer that makes all my payments I keep land and have no more worries. Guys if you can swing it and buy land now is the time to buy. Last I checked could only get about 30 percent loan with 70 percent clear capital, so not sure where you get easy money from, possibly you should farmer are stupid to borrow more.

[SASKFARMER3]

BGMB your missing the point on all the Equipment loans their 5 to 7 to 10 and are locked in for 5. If a farmer is using variable today he is a idiot. At these low rates why not lock in. So as for credit bubble in Ag I don't think so. Where the problem happens is when guys come in for equipment in 10 years and interest is 10% then wont be able to make those so this equipment that they have today will have to last.

[TOM4CWB]

Folks,

If you do NOT need the money... then that is why it is being offered to you.

If you make all your payments and honour your loans/purchases... because you intend to pay them... THEN folks will lend to you.

All farmers are NOT treated the same.

When FCC becomes a low cost lender... then they will get more business... now they charge too much... BECAUSE they are required to... BANKS make too much profit NOW because FCC interest rates are too high.

[bgmb]

Sask I am missing "the" point? or a point that you are now making? Anyway you basically made the same point as I did except you used machinery as an example instead of land.

I agree that type of machinery lending is bad business. However in the inflationary nightmare some are predicting it won't matter cause tractors will be worth 3 million in ten years instead of 300k so who cares if you never make a payment in ten years your ten year old tractor will be worth a million bucks. Whats a 50,000 payment on a tractor when canola is $50 a bu?

[SASKFARMER3]

You wouldnt have got that letter if you didnt have a decent balance sheet. Or read at bottom subject to final approval.

[cottonpicken]

This is why i follow bond action so much.

Interest rates should already be higher.

If they goto 20% and real inflation is low,sell
everything you have and get into paper,this is the
deflationists dream come true.

But this isnt what is happening,we need to inflate to
clean out this debt this time.This isnt the early
eighties.

Global currencies are burning against tangibles.

And the fact a few bubble/debt fueled asset classes
are collapsing doesnt mean we are in deflation
mode.

I have the same position as i did 7 years ago.

[bgmb]

Just one thing I might add. Interest rates don't need to go to %20 to get some guys into trouble. %7-%10 would cause quite a few trouble I suspect. Farms are in general allot higher leveraged than they were in the 80s.

[charliep]

Actually farmers are not getting more leveraged on average. From the farm finanicial survey (2008), the total asset value of Canadian farms is $1.6 mln. Debt 300,000. Net worth - $1.3 mln. This has to be put in the context of the average age of farmers being 57 years old.

Will put the general web link for the farm financial survey in and you can look at information specifically for you province.

[URL="http://www.statcan.gc.ca/pub/21f0008x/2009001/tablesectlist-listetableauxsect-eng.htm"]farm financial survey[/URL]