HomeMy WebLinkAboutThe Wingham Advance-Times, 1985-03-20, Page 961616 - The nirm Editiono Week of March 20. 1985
Creditors will expect more elaborate financial information
In the past the banker was satisfied with a
modest balance • such. as the one shown
below, along wi :c a copy of the previous
year's •- Fbr many fanners just a
signature on .. , e for temporary financing
was adequate an it will continue to be in the
feature for o of the farmers. Tones are
changing f another group of farmers,
however.
Throughout the 70s. inflated land values
outraced the increased borrowings of even
the most aggressive borrowers. The ever
increasing line of credit rash flowed to the
fanner whetherornot 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 opportanhities, is devastating a
large sector of the agricultural cunanunity.
One third of all farms are experiencing some
financial stress ranging from moderate to,
severe. They represent a large number of
farms,, carry 85 per cent of all the debt and
produce 53 per cent of the total faun sales.
What do bankers expect from them? They
expect extensive plans, rash flow projections
and,an elaborate balance sheet. What is an
extensive balance sheet? The 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 hien.
Supporting Schedule
All assets require extensive detail as shown
in the examples below. Unfortunately, space,
will not permit er&nples 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. If 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 can check with his local
contacts or his agnvlogist in regional office.
The balance sheet can show as little as: 43
Holstein cows -- $101,000 OR 300 Feeding
heifers -- $184,500, as long as the supporting
schedules show such information as:: 7 at
$3,000 for 21,000, 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 butterfat, milk
marred 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 fanners'
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. Moncrieff, the Bank's
Senior Agriculture Manager, said recently at
the annual FirstBank Farm 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 tuned the
'corner on profitability in our industry," he
added. "However, to do so masks the very
real pressure on heavily financed fans."
`With only modest reventme-iYihprovements
likely, we expect the current farm financial
difficulties, particularly thosei. 'o# highly
leveraged farms, to continue in 1985. The .
adjustment prods 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 corning year."
Many farmers have continued to eam
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 eikpects United States eonnpeti
five pressure on Canada's export markets to
intensify as they attempt to move their stocks.,
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Beeton, Ontario
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R. R. # g, GODERICH
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Eldon Bradley
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528-2214
"U.S. policy developments bear watching as
they will set the direction for our future."
1985 Fbrecast Highlights;
—Swollen by re4ord production this year and
last, global wheat and onarse grain stocks are
expected to ready 191 million tonnes by the
end of the 1984-85 racketing year. Repres-
enting 15 per cent of utilization, less than two
months' consumption, this would not be
burdensome except that most stocks are 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 cent above
1983-84 and 7.5 per cent above 1982-83, and
global stow expected to climb to 104 pillion
tonnes, representing 21 per cent 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
EEC will replace Canada as the second
largest wheat exporter.
Wim reduced production of
-gtcarry-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 match the
21.8 million tonnes of last year.
—As a result the Canadian stods use -ratio
will fall to 31 per cent, a new record low. We
believe farmers will be signaled to increase
wheat production, with the Canadian Wheat
Board raising the initial price, for a forecast
crop of 26 million tonnes this fall.
—A larger barley crop this year (1984.85) than
last is expected to rtietum off board prioes;on
turn to page i,7a
9ijttuJUceBui&ligg.. .
A New Home, or
Doing Work on an Old Home .. .
Coo
• POLE BARNS • FRAMING • TRIMMING
• INSULATING • ROOFING • DRYWALLING
MILDMAY 367-2487
R.R. 2, Mildmay Roger Eickmeier
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