A federal farm loan program established in 1945 is now deemed irrelevant by auditors at the Department of Agriculture. Blacklock's Reporter says the loan guarantees, once crucial for supporting farmers, have not kept pace with rising costs and land values, according to a recent report.“Loan limits were found to be insufficient for farmers and participation rates continued to decline during the evaluation period,” the auditors noted. “If the current trend continues, the program risks having no loans registered by 2025. Farmers, agricultural cooperatives, and lenders had low awareness and declining participation in the program.”Originally passed by Parliament in 1945 as the Farm Improvement Loans Act, the program guaranteed up to 95% of loans for land and equipment. The Canadian Agricultural Loans Act, which succeeded it in 2009, capped guaranteed loans at $500,000.Auditors highlighted that the program, which may have once “filled a gap in access to affordable credit,” has become irrelevant in today’s market. “The program has operated in a deficit in recent years due to declining uptake,” said the report, Evaluation Of The Canadian Agricultural Loans Act Program. It also noted that nationwide farm equity currently averages more than $3.6 million per operator.“The loan limit has not kept up with either the average price per acre or the average value of land and buildings on owned farms,” the report continued. “The price of land nearly tripled from $1,681 per acre in 2011 to $4,899 per acre in 2021, reducing the number of acres that can be bought under a program loan from 300 to 102 acres. As a result, only 14 percent of loans were used for land purchases.”Equipment loan limits of $350,000 were also found to be inadequate. “In 2023, a beginner grain farmer in Saskatchewan may need to pay between $497,900 and $664,700 for a new four-wheel drive tractor,” the report stated. “Between 2016 and 2021, the value of all on-farm machinery and equipment increased by 32%.”Currently, $322.9 million in loans are taxpayer guaranteed, which is a fraction of the billions in farm lending managed by entities such as Farm Credit Canada of Regina, which has $47 billion in loans under management.Of the 3,561 borrowers under the Canadian Agricultural Loans Act, 72% were in Saskatchewan (2,567 borrowers), followed by Manitoba (622), Alberta (147), Ontario (84), and British Columbia (63). “Given the abundance of credit available over the reference period, favourable economic conditions for the agricultural sector, and current design limitations such as loan limits that were reported to be insufficient, the program is no longer relevant for the majority of its client base,” the auditors concluded.The report indicated that 89% of guaranteed loans were issued by credit unions. “The program was generally not needed by established farmers and agricultural cooperatives,” it noted.Credit unions and banks have recommended increasing loan limits to $2 million. Agriculture department managers said a final decision on this recommendation will be made by April 1, 2025. “Increasing the loan limits to respond to increased costs faced by farmers and improving outreach activities to lenders could result in increased uptake of the program,” the report stated.
A federal farm loan program established in 1945 is now deemed irrelevant by auditors at the Department of Agriculture. Blacklock's Reporter says the loan guarantees, once crucial for supporting farmers, have not kept pace with rising costs and land values, according to a recent report.“Loan limits were found to be insufficient for farmers and participation rates continued to decline during the evaluation period,” the auditors noted. “If the current trend continues, the program risks having no loans registered by 2025. Farmers, agricultural cooperatives, and lenders had low awareness and declining participation in the program.”Originally passed by Parliament in 1945 as the Farm Improvement Loans Act, the program guaranteed up to 95% of loans for land and equipment. The Canadian Agricultural Loans Act, which succeeded it in 2009, capped guaranteed loans at $500,000.Auditors highlighted that the program, which may have once “filled a gap in access to affordable credit,” has become irrelevant in today’s market. “The program has operated in a deficit in recent years due to declining uptake,” said the report, Evaluation Of The Canadian Agricultural Loans Act Program. It also noted that nationwide farm equity currently averages more than $3.6 million per operator.“The loan limit has not kept up with either the average price per acre or the average value of land and buildings on owned farms,” the report continued. “The price of land nearly tripled from $1,681 per acre in 2011 to $4,899 per acre in 2021, reducing the number of acres that can be bought under a program loan from 300 to 102 acres. As a result, only 14 percent of loans were used for land purchases.”Equipment loan limits of $350,000 were also found to be inadequate. “In 2023, a beginner grain farmer in Saskatchewan may need to pay between $497,900 and $664,700 for a new four-wheel drive tractor,” the report stated. “Between 2016 and 2021, the value of all on-farm machinery and equipment increased by 32%.”Currently, $322.9 million in loans are taxpayer guaranteed, which is a fraction of the billions in farm lending managed by entities such as Farm Credit Canada of Regina, which has $47 billion in loans under management.Of the 3,561 borrowers under the Canadian Agricultural Loans Act, 72% were in Saskatchewan (2,567 borrowers), followed by Manitoba (622), Alberta (147), Ontario (84), and British Columbia (63). “Given the abundance of credit available over the reference period, favourable economic conditions for the agricultural sector, and current design limitations such as loan limits that were reported to be insufficient, the program is no longer relevant for the majority of its client base,” the auditors concluded.The report indicated that 89% of guaranteed loans were issued by credit unions. “The program was generally not needed by established farmers and agricultural cooperatives,” it noted.Credit unions and banks have recommended increasing loan limits to $2 million. Agriculture department managers said a final decision on this recommendation will be made by April 1, 2025. “Increasing the loan limits to respond to increased costs faced by farmers and improving outreach activities to lenders could result in increased uptake of the program,” the report stated.
