Management Key When Assessing Loan Applications for New Hog Barn Construction

CANADA - 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, writes Bruce Cochrane.
calendar icon 24 March 2016
clock icon 3 minute read

Pork processors in western Canada are looking to access increased volumes of hogs resulting in opportunity for the construction of new hog finishing barns.

Darren Howden, the Senior Vice President Operations for Prairie with Farm Credit Canada, says when adjudicating new loan applications for building a barn, the first consideration is the management capability of applicant.

Darren Howden-Farm Credit Canada:

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.

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.

Other than that, then we would 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 up front costs that you have to have in play 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.

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.

So we need to have the producers that we're looking at that can whether and have the financial where with all to make sure that, when things do go a little tight, that they're able to manage their way through that.

Howden says anyone looking for more information can visit any of Farm Credit Canada's offices across the country or the Farm Credit Canada web site.

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