Strategies for challenging times
Agriculture is among the most cyclical of industries in the Canadian economy.
Over the past decade, most sectors within the agriculture industry have experienced
some good years and also some difficult years.
When times are good, producers have an opportunity to build up a capital reserve
to help see them through the challenging times. When clients are in the midst of
a sectoral downturn, our account managers will meet with these clients to review
their situation, share ideas and discuss options going forward.
During a challenging period, it’s important to ensure that cash flow remains as
strong as possible. We will ask our clients whether they've applied for CAIS or
their CAIS advance, or any provincial program that might be available to address
their short-term income needs.
For the livestock sectors, feed is a large and variable cost. We’ll typically ask
whether clients are in a position to pre-buy some grain and protein over the next
six to eight months and so secure a predictable and possibly advantageous price.
In these discussions with clients, we’ll explore whether the producer has a precise
understanding of their cost of production, and whether they can identify areas
where cuts could reasonably be made.
Since risk management will be top of mind during this period, we will discuss
with our clients whether any risk management programs could be used over the
next six to eight months.
Some farm operations maintain physical assets, such as machinery, equipment
or even land, that are surplus to their immediate requirements. Liquidating
non-essentials could provide some of the breathing room the producer might
be looking for.
Over RBC Royal Bank’s 40 years of providing specialized services to Canadian
farmers and ranchers, almost all sectors have faced difficult years. As always in
such situations, our commitment is to work with producers on an individual
basis to weather the current storm and ensure their business is sustainable for
decades to come.
If you have any questions or concerns about your own farm’s short-term and
long-term sustainability, I invite you to discuss these with your account manager.
On behalf of RBC Royal Bank, all the best for farm and family in 2008.
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