FARM2026: FCC helps finance the country's farms

BY SCOTT STEPHENSON

Successful farms are the heart of every strong rural community, but even the most well-run operations don’t exist in isolation. Agriculture is a capital-intensive endeavour, and when farmers are looking to expand, transition to the next generation or invest in new technology, they often rely on financial partners to help make those changes possible.

 

That’s where financial organizations like Farm Credit Canada (FCC) come in. To the uninitiated, the wild world of farm lending can seem formidable, but rather than remain intimidated, The Citizen decided to sit down in Clinton with FCC District Director Michael Menzi. If anybody could  demystify the situation, it’s Menzi - he’s been with the company for over 20 years! Menzi also grew up on a farm, so he knows firsthand just how important financial stability is to local farmers.

 

Understanding the agricultural sector helps lenders build financing structures that reflect the realities of farming. “Farm lending is probably a little more traditional because of the large assets that are behind it,” Menzi explained. “There’s probably a little more predictability on the farm side because you have specific industries you get to know well.”

 

In southwestern Ontario, those industries include a mix of traditional and emerging sectors. “You have the traditional ones like beef farming, cash crops, dairy and poultry,” he said. “We also have sheep and goats.” In recent years, new agricultural sectors, like vineyards, have also begun developing in the area.

 

But what is it that makes FCC different from other lenders? “We’re a Crown corporation, so the government is our shareholder, and that allows us to do a few unique things that some traditional financial institutions can’t,” Menzi explained to The Citizen.
Those differences allow FCC to focus specifically on the needs of Canadian agriculture, including programs designed to help family farms grow and transition successfully. “We really try to focus on programs and loans that help the next generation come into the operation and keep that family farm going,” he said.

 

That kind of support is increasingly important as the cost of farming continues to rise. “The cost of land, new buildings and equipment has really skyrocketed,” Menzi pointed out. Even just making a major purchase for one’s farm can require significant financing. “If you want to buy a combine, you could be looking at a million dollars right from the start,” he noted.

 

For new farmers, those costs can create significant barriers to entry. Even established producers face financial pressures as they expand their operations to support the next generation. “Most farmers want to grow for their family, especially if they have kids who want to take over - they’re trying to grow the operation to a size where two or three kids could potentially work on it,” he elucidated.

 

That kind of growth often requires careful financial planning. “Farmers often have very strong equity because land values are high, but cash flow is always tight,” Menzi told The Citizen. “The challenge is structuring debt in a way that allows the cash flow to work while the operation grows.”

 

While some industries may be new to a region, FCC’s national network allows the organization to draw on expertise from across Canada. Vineyards like the nearby 2nd Streetlight Estates Winery may be a newer addition to Huron County, but being a winery is already a long-established industry in areas like the Niagara region. “Sometimes it’s not completely new - it’s just newer to the area and we have to get familiar with it,” he said. “Because we’re a company that spans the whole country, we can rely on partners who have dealt with those industries before.”

 

One of the biggest financial challenges facing agriculture today is the impending transfer of farms from one generation to the next. “The average age of farmers is about 58 years old,” Menzi pointed out. By 2030, about a third of those farmers are expected to retire - that means a significant amount of farmland and farm businesses will soon change hands! “Rough estimates suggest about $500 billion worth of farm assets will change hands over the next several years,” he calculated.

 

Managing that transition can be complicated and expensive, particularly when farms have grown significantly in value over time. “Farm financing helps bridge that gap so the next generation can get involved while the retiring generation can still enjoy the lifestyle they’ve worked for,” Menzi informed The Citizen.

 

To support that process, FCC offers specialized tools such as transition loans, which allow financing to be spread out over time. It helps with farm succession by allowing loans to be dispersed over several years, which helps stagger cash flow and provides tax benefits for the seller and relief for the buyer.

 

Beyond lending, FCC has expanded its role to support producers through advisory services, training programs and technology tools. “In the last couple of years, we’ve really tried to shift our focus toward supporting the industry as a whole,” he noted. That support includes offering business advisory services for farm families working through succession planning. “Our team can sit down with family members individually and together to help identify where to start. We help connect them with experts like lawyers and accountants to keep the plan moving.”

 

Programs are also available to help producers strengthen their business planning and decision-making skills. “We’ve partnered with a western company called Maverick Ag - it’s a subsidized program where we cover 80 per cent of the cost,” he highlighted. This program helps farmers develop and work through a business plan over the course of a year.

 

Menzi believes that the most important tool a farm lender has in their toolbox is a sense of humanity. “For me, relationship-based lending is extremely important,” he divulged. “If the farmer feels comfortable with the lender they’re working with, communication becomes the key piece.”

 

Agriculture is an industry in which uncertainty is part of the job. “It’s farming; things can be unpredictable,” he said. When challenges arise, strong communication helps producers and lenders work through them together. “If something doesn’t go according to plan, communication allows us to work with them to preserve cash flow and get through tough times,” Menzi explained to The Citizen. “If farmers trust that you’re working together through good times and bad - that’s what really counts.”