HomeMy WebLinkAboutThe Wingham Advance-Times, 1985-03-20, Page 7616a The Parry MOW Week QI Mardi 20, 1985
Creditors will expect mode elaborate financial information
In the past the banker was satisfied with a
modest balance sheet such as the one shown
below, along with a copy of the previous
year's tax return. Fbr many farms just a
signature on a note for temporary financing
was adequate, and it will continue to be in the
future for two thirds of the farmers. Tines are
changing for another group of fanners,
however.
Throughout the 70s. inflated land values
outraced the increased borrowings of even
the most aggressive borrowers. The ever
increasing line of credit cash flowed to the
farmer whether or not a true profit was made.
Absolute equities ever increased as well as
equity ratios.
Now inflation has gone, there is actual
deflation of Some assets, and this, coupled
with reduced net incomes and off farm
employment opportunities, is devastating a
large sector of the agricultural oonanrmity.
One third of all farms are experiencing some
financial stress, ranging from moderate to
severe. They represent a large number of
fanny, cany 85. per cent of all the debt and
produce 53 per dent of the total farm sales.
What do bankers exp from them? They
expect extensive plans, cash flow projections
and an elaborate balance sheet. What is an
extensive balance sheet? Me balance sheet
shown below is quite adequate provided a
suporting schedule is attached. That schedule
would provide the detail and explanation
necessary to justify the values given. Other-
wise, the banker may question or discount the
values submitted to. him.
Sapporthig Schedule
All assets require extensive detail as shown
in the examples below. Unfortunately, space
will not permit examples on many of the
normal farm assets.
livestock
The amount of detail needed on livestock
depends on whether or not your livestock are
typical or normal for the area. 1f a fanner has
breeding stock, some degree of the following
example of two different situations should be
provided. This will justify the value given.
The banker may not fully understand the
details, but he con check with bis local
contacts or his apologist in regional office.
The balance sheet can show as little as: 43
Holstein cows -- $101,000 OR 300 Fleeding
heifers --$184,500, as long as the supporting
schedules show such information as; 7 at
$3,000 for21,000, 20 at $2,000 for 40,000, 1 at
$15,000 for 15,000, 15 at $1,700 for 25,000,
total 43 at $101,000.
• B.C.A.: 174 milk - 193 4utterfat, milk.
marketed per cow 7,000 litres; Ontario
average 5,700 litres..Bloodlines, Ned, Selling
Rodman, Citation R. 1 excellent; 3 Very
Good; 20 Good Plus OR
tun to page 18a
Bank of Montreal sees moderate improvement in' 85 farm incomes
The Bank of Montreal forecasts further
moderate growth in Canadian farmers'
incomes during 1985 but little relief from
credit and surplus production pressures for
some fanners. -
"While there may be minor relief in several
areas -- improved revenues and lower interest
rates -- pressure on operating margins will
Continue," Patrick M. Monaieff, the Bank's
Senior Agriculture Manager, said recently at
the annual FirstBank Flinn Profit Outlook
conference held in London.
"With total realized net income for 1985
projected up for the second year over the
recent low point in 1983, we might
optimistally state that we have turned the
comer on profitability in our industry," he
added. "However, to do so masks the very
real. pressure oar heavily financed farms."
"With only modest reventue improvements
likely, we, expect the current farm financial
difficulties, particularly those of highly
leveraged farms, to continue in 1985. The
adjustment process currently under way will
likely entail additional declines in land
values, a reduction in and a restructuring of
farm debt, and further erosion in the farm
equity during the Doming year."
Many fanners have continued to earn
positive returns on their equity during the
1980s, while others have seen their equity
eroded, Moncrieff said. "Numerous factors
account for those extremes, but the degree of
financial leverage is among the most
important. "
He said he expects United States competi-
tive
mpeti.tive pressure on Canada's .export markets to
intensify as they attempt to move their stocks.
• 1.1
Parsons Seeds Ltd.
Beeton, Ontario
SINCE 1890
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r,
"U.S. policy developments bear wattling as
they will set the direction for our future."
1985 Forecast liilghlights;
--Swollen by record production this year and
last, global wheat and coarse grain stocks are
expected to reach 191 million tonnes by the
end of the 19$4-85 marketing year: Repres-
enting 15 percent of utilization, less than two
months' consumption, this would not be
burdensome except that most stocks ale held
in the U.S.
--A buyer's market exists in wheat, with
global supplies in 1984-85 now estimated to
reach 606 million tonnes, 3.5 per cart above
1983-84 and 7.5 per cent above 1982-83, and
global stods expected to limb to 104 million
tonnes, representing 21 per Cart of utilization
(unchanged from last year), equal to 2.5
months' consumption.
--As growth in trade is limited, Competition
for wheat markets is expected to heat up. The °
MC will replace Canada as the second
largest wheat exporter.
--With drought - reduced wheat production of
21 million tonnes and reduced to cavy -in,
1984-85 supply is 18 per cent below last year.'
Because of reduced supply, total exports of
17.9 million tonnes are unlikely to mater the
21.8 million tonnes of last year.
—As a result the Canadian stocks use -ratio
will fall to 31 per cent, a new record low. We
believe fanners will be signaled to increase
wheat production, with the Canadian Wheat
Board raising the initial price, for a forecast
clop of 26 million tonnes this fall.
—A larger barley crop this year (1984-85) than
last is expected to return off board prices on
tum to page l7a
9ijeuJheB
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