The Lucknow Sentinel, 1985-03-20, Page 6416a - The Farm Edition, Week of March 20, 1985
Creditors will expect more elaborate financial iiiformation
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 farmers 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. 'limes are
Changing for another group of, farmers,
however.
Throughout the 70s, inflated land values
outraced the increased borxowjngs of even
the most aggressive borrowers. The ever
increasing line of credit cash flowed to the.
farmer whetheror not a tnie 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 fann
employment opportunities, is devastating a
large sector of the agricultural. community.
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 farm sales.
What do bankers 'expect from them? They
expel extensive plans, cash 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
1
would provide the detail. and explanation
necessary to justify the values given. Other-
wise,
therwise, the banker may question or discount the
values submitted to him. -
Supporting Schedule
All assets require extensive detail as shown
in the examples below. Unfortunately, space
will not permit examples on many of the
nomhal 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 farmer 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 agmlogist 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 $101,000.
B.C.A.: 174 milk - 193 butterfat, milk
marketed per cow 7,000 „litres; Ontario
average 5,700 litres. Bloodlines, Ned, '$eiling
Rockman, Citation R 1 excellent; 3 Very
Good; 20 Good Plus OR
Cum to -page /18a
Bank of Montreal sees moderate improvement in ' 85 farmincomes
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 farmers.
"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 turned the
corner on profitability in our industry," 'he
added. "However, to do so masks the very
real pressure on heavily financed farm's.';
"With only modest. revenue 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 restrueturing of
farm debt, and further erasion in the farm
equityduring the coming year."
Many . farmers have continued to earn
positive returns on their equity during the
1980s, while others have seen their equity.
eroded, Monaieff said. "Numerous factors
account for those extremes, but the degree of
financial leverage is among the 'mist
important."
He said he expels United, States competi-
tive pressure on Canada's export markets to
intensify as they attempt to move their stods.
Parsons Seeds Ltd.
Beeton, Ontario
SINCE 1890
QUALITY: Forage Seed Mixtures
Lawn Grass Mixtures
Ground Clover Mixtures
High. Quality Seed at Competitive Prices
WITH
Warehouses in Dungannon and Lucknow
IMMEDIATEDELIVERY
Harvey Culbert . Eldon Bradley/
R. R. # 6, GODERICH LUCKNOW, ONTARIO
529-7492 528-2214
"U.S. policy developments bear watching as
they will set the direction for our future."
1985 Forecast Highlights;
--Swollen by record production this year and
last, global wheat and coarse grainjstocks are
expected to reach 191 million tonnes by the,
end of the 1984-85 marketing year. Repres-
enting 15 percent 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 stods expected.to limb to 104 million
tonnes, representing.21 per cent of utilization
(unchanged from last year), equal to 2.5
months' consumption.
--As growth it trade is limited, competition
for wheat markets is expected to heat up: The
• IDC will replace Canada as the 'second
,largest wheat exporter.
--With drought - reduced wheat production of
21 million tonnes and reduced to carry -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 stools' 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
cop of 26 million tonnes this fall.
--A largerbailey cop this year (1984-85) than
last is expected to return off board prices tin
dun to page 17a
9ijeiA'w.ThYOU
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A New Home, or
Doing Work on an Old Home .. .
Cichnteie't C04i6
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