Andrew Dickson, the general manager of Manitoba Pork says the financial institutions are expressing an interest in providing the capital to renew the province’s pork production infrastructure.

In April 2015, the Manitoba Government launched a pilot project under which pork producers could apply for permits to build new or expand existing swine barns. Dickson says the industry is seeing a renewed interest among the financial institutions in working with producers to finance the construction of new facilities.

“I would encourage producers to go for the longest terms they can get,” he said. “For a building that’s going to last 25 years or 30 years you should be looking for a mortgage that’s at least 15 years. One institution is offering that. You’re going to have to get them to lend against your actual construction cost not just market value.”

Dickson says Farm Credit Corporation, for, example is prepared to step forward and he fully expects the major banks will come forward as well.

What’s helping, he says are the last two years and going forward, to be in a period where there’s some margins in the business, some repayment of debt, balance sheets look a little better a lot of financial institutions are taking another look at the industry, they’re seeing some prospects and they’re prepared to finance operations.

“But I’ve got to emphasize here it’s absolutely critical producers can show they have the capacity to service any debts they take on,” adds Dickson.

Darren Howden, the Senior Vice President Operations for Prairie with Farm Credit Canada says, when assessing applications for financing the construction of new swine barns, the management capabilities of the applicant is the primary consideration.

Pork processors in western Canada are looking to access increased volumes of hogs resulting in opportunity for the construction of new hog finishing barns. Howden says when adjudicating new loan applications for building a barn, the first consideration is the management capability of applicant. “As we’ve seen, the industry can be quite volatile so there’s some producers that, even in that volatile environment, have done very very well,” he said. “If you’ve been able to be successful and you’ve got strong management capabilities, you know how the market runs, you know how to handle the U.S. currency swing. That would be the first thing we’d look at, would be more the applicant themselves.”

Howden says other than that, they look at what are they building, what’s the overall cost and then how are they planning on cash flowing that.

“Then what we would be looking for is somebody that, after they have constructed, obviously you’re putting out a significant amount of capital in the first part both to construct the barn and then to fill the barns and there’s a lot of upfront costs that you have to have in play,” he said. “So what we look for is, after all that money is outlaid is there still some margin or is there some capital left that if things don’t go as planned that they weather those storms,” said the senior v-p with Farm Credit Canada. “As you know, the hog sector, it can be at the top where there is lots and lots of money to be made and there’s also a time when that’ll turn down where margins can get tight or even negative for a short term.”

Howden says they’re looking for producer’s weather and have the financial wherewithal to make sure that, when things do go a little tight, that they’re able to manage their way through that. •

— By Harry Siemens